Aviva Investors commits to GBP1bn of real estate climate transition loans by 2025

Climate change

Aviva Investors, the global asset management business of Aviva, has commited to originating GBP1 billion in sustainable transition real estate debt over the next four years, supported by the launch of its proprietary Sustainable Transition Loans Framework.

The Framework will be used by Aviva Investors to seek out sustainable real estate loan investment opportunities in line with the United Nations Sustainable Development Goals. It will focus on key sustainability targets such as energy efficiency and green initiatives including on-site renewables. Vigeo-Eiris (VE), the ESG rating and research agency, has provided second-party verification and accreditation for the framework, to ensure that the loans comply with the LMA’s sustainability-linked loan principles.

As part of the initiative, Aviva Investors will embed measurable ESG commitments into its lending programme, setting out specific requirements for real estate borrowers to adhere to, in order to reduce carbon emissions from buildings, as it continues to support the transition to a low-carbon economy.
 
Gregor Bamert, Head of Real Estate Debt at Aviva Investors, says: “We believe that by directly linking long-term financial incentives to measurable improvements in the environmental performance of the buildings we lend against, we can incentivise and engage borrowers to consider sustainability factors in a more meaningful way. Our target of originating £1 billion of sustainable transition loans reflects a commitment to reducing the carbon footprint of our clients’ portfolios.”
 
Through the framework and loans programme, Aviva Investors will instil long-term sustainability-linked incentives for borrowers, to ensure measurable environmental and energy improvements on buildings it lends against. Borrowers can benefit from a marginal reduction in the cost of debt, awarded when predetermined sustainability improvements have been made.
 
Ed Dixon, Head of ESG, Real Assets, at Aviva Investors, says: “Our new proprietary framework is designed to specifically address the climate transition of buildings, which is an area of increasing focus across the real estate market. This is a critical challenge in the fight against climate change, with the built environment responsible for over 40 per cent of carbon emissions globally. We are thrilled to have the support of V.E as part of this initiative, who will independently verify our framework to ensure a consistent industry best-practice standard is adhered to.”
 
Benjamin Cliquet, Head of Sustainable Finance Business Development at VE, says: “With this Sustainable Transition Loan Framework, Aviva Investor is adopting a supportive approach towards sustainable finance. It shows their willingness to engage their clients in improving the environmental performance of buildings, thus contributing to global efforts to fight against climate change.”

The commitment follows a GBP154 million refinancing provided by Aviva Investors to CLS Holdings in September, with the facility structured to include KPIs explicitly linked to sustainability targets, including a reduction in margin on the loan dependent on meeting specific targets assessed annually throughout the life of the facility.
 
Bamert adds: “We see this as a win-win situation. As borrowers meet these requirements, they will benefit from more favourable terms on their financing agreement, whilst our investors gain reassurance that the assets we lend against are more resilient to physical and transition climate risks and with a lower environmental impact. Ultimately this should result in better outcomes for all.”