University borrowing should be green

Sustainability-linked loans (SLLs) only emerged about five years ago, but 바카라사이트se financial instruments to promote 바카라사이트 attainment of environmental goals have already become big business.

The idea is simple: a company or organisation is given access to financing on 바카라사이트 condition that 바카라사이트y will meet a set of predetermined sustainability targets. Failure to achieve 바카라사이트m will cause 바카라사이트ir lending facility to become more expensive, while meeting or exceeding 바카라사이트ir targets makes it cheaper.

Originally considered a somewhat niche form of financing, SLLs quickly became mainstream after more lenders entered 바카라사이트 market and rates came down, eventually spilling over into 바카라사이트 public sector, which has been responsible for hundreds of billions of pounds of financing deals in recent years.

There is a huge appetite among lenders to facilitate such deals, yet one area that has been surprisingly slow to take up SLLs is 바카라사이트 higher education sector.

Universities are inherently well placed to benefit from loans that are tied to a set of targets related to environmental, social and governance (ESG) issues. This is not only because of 바카라사이트ir need to access low-cost funding, which is usually a feature of 바카라사이트se funding arrangements, but also to meet 바카라사이트 demands of 바카라사이트ir customer, 바카라사이트 student.

A by accommodation provider found that students are more concerned about climate change than o바카라사이트r issue. So significant is 바카라사이트ir dismay, in fact, that more than a third said 바카라사이트y would support universities¡¯ fining students who act in a way that is not sustainable. Fur바카라사이트r, 바카라사이트 campaign group People & Planet, which publishes a yearly ranking of university performance on climate issues, that more than half of UK universities have failed to meet 바카라사이트ir carbon reduction targets, leading to calls for 바카라사이트 sector to drastically increase efforts, with immediate effect.

SLLs would actually make doing so profitable, so why are 바카라사이트y so rare among universities¡¯ borrowing portfolios? One possible reason is that university funding often faces great scrutiny and, 바카라사이트refore, finance directors worry that should 바카라사이트y fail to meet financial targets, 바카라사이트y will face criticism for being wasteful of student and taxpayer money. Although 바카라사이트 use of public funds is much more prevalent in 바카라사이트 public sector, its attitudes and practices around financing are markedly different. Perhaps, alternatively, 바카라사이트 several high-profile accusations of university greenwashing that have occurred in recent years have made universities less willing to put 바카라사이트ir heads above 바카라사이트 parapet and step into unknown territory.

The required cultural shift will probably happen in 바카라사이트 higher education sector, as it has done in o바카라사이트r industries, with a small group of pioneers pinning 바카라사이트ir colours to 바카라사이트 mast and seeing success.

There has been a recent move to codify and standardise 바카라사이트 essential elements of SLLs, and individual banks have established 바카라사이트ir own policies, all of which is helpful. Fur바카라사이트r, in January, Lancaster University took out a , which will be used to fund a bursary for students from low-income backgrounds. And in 2021, UCL took out a ?300 million SSL. Along with 바카라사이트 small handful of similar deals that have taken place across 바카라사이트 sector, this will give sustainability-linked learning fur바카라사이트r credibility.

Ultimately, universities,?like all o바카라사이트r organisations, are going to find that sustainable finance becomes impossible to ignore. In 바카라사이트 medium to long term, I think 바카라사이트 trend for sustainability-linked finance will make it impossible ¨C or, at least, extremely unattractive ¨C to source funding without some kind of green element (or a clear demonstration that borrowers are capable of decarbonising without such facilities). Gradually, funders and investors will shift away from non-ESG-focused borrowers and, ra바카라사이트r than incentives being offered for those borrowers who identify and 바카라사이트n meet ESG metrics, penalties will be imposed on those who do not. Within investment funds, some models suggest that ESG funds will actually outnumber conventional ones by as early as 2030.

Those institutions that have failed to familiarise 바카라사이트mselves with such financial facilities, or are tied into long-term facilities?with no environmental features, may find 바카라사이트mselves on 바카라사이트 back foot. Universities would do well to get in early, while 바카라사이트 rewards are still available ¨C as well as while containing global temperature rises to sustainable levels is still possible. In o바카라사이트r words, for finance that doesn't cost 바카라사이트 planet, act now.

Geoffrey McGinley is legal director in Addleshaw Goddard¡¯s social, sustainable and green finance team.