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By Helene Durand
June 24 (IFR) - Lloyds Bank is hoping to raise its firstEnvironmental, Social & Governance (ESG) bond, the latestinstitution to use the bond market to fund good causes.
The issuer will meet with investors in London and Edinburghthis week and early next week and will look to launch a sterlingdenominated senior unsecured ESG transaction afterwards.
The market for Green and socially responsible bonds hasgrown substantially over the last 18 months. Public sectorissuers have so far dominated activity, but Lloyds is aiming todevelop a new branch of this market and align it to its "HelpingBritain prosper" agenda.
"This is different from outstanding Green bonds, there is avery defined audit trail and our independent auditor will ensurethat the proceeds go to an appropriate place," said a banker."We hope this will be the beginning of a more robust frameworkfor these bonds."
There will be a quarterly use of proceeds report which willbe reviewed and endorsed by Lloyds' external auditor, currentlyPwC. The review process is expected to be ongoing for the lifeof the bond.
The new benchmark is expected to have a 4.5- to 5-yearmaturity and will be held in eligible liquid assets until Lloydsfinds a project to invest in.
RANGE OF OPTIONS
There are a wide variety of projects that the ESG bondproceeds can by routed to, although Lloyds is planning to focuson four key areas: agriculture, a regional growth fund,healthcare and regional SME lending.
The regional growth fund for example is focused on the UK'smost deprived areas as indexed by the Bank of England.
"The bond features a robust and transparent reportingframework, designed to meet the needs of the growing sociallyresponsible investment community," said James Garvey, managingdirector, head of capital markets and portfolio management atLloyds Bank.
The bank will try to allocate the biggest part of the bondto SRI and ESG investors. According to Lloyds, the UnitedNations Principles for Responsible Investment has attracted over1,200 investor signatories, representing USD34trn assets undermanagement. The signatories have agreed to integrate ESG factorsinto their investments.
Lloyds said the decision to launch this bond would not onlysupport its Help Britain agenda but also help to develop thisgrowing market. (Reporting By Helene Durand, editing by Julian Baker)
