Paragon issues subordinated green bonds to help homeowners improve their energy efficiency

The specialist lender and the banking group revealed that the note was issued at a coupon of 4.375% and had generated strong interest from the investment community.

The transaction was indicative, Paragon said, of its commitment to placing sustainability at the heart of its long-term strategy.

It comes just after the lender launched green product offerings in the buy-for-lease market to help homeowners improve the energy performance of their properties in the private rental sector (PRS). Paragon also intends to introduce green initiatives in other areas of lending.

The proceeds from the bond will be used for green loans to incent homeowners to mitigate the impact of climate change, in particular green residential real estate loans in England and Wales with an EPC rating of “A” or “B” .

Housing is currently responsible for 22% of UK greenhouse gas emissions. According to recent government proposals, all properties leased to new tenants must have an Energy Performance Certificate (EPC) of at least “C” by April 1, 2025. This requirement will apply to the entire PRS by 2028. The government has an overall target of making the UK’s building stock carbon neutral by 2050.

Nigel Terrington, Managing Director of Paragon, said: “This Green Bond demonstrates our commitment to helping more homeowners improve the energy performance of their rental properties, reduce carbon emissions as well as reduce tenant energy bills.

“As part of the government’s ambitious plans, 2.9 million rental units will have to improve their energy performance over the next few years. Government, homeowners and lenders should work together to achieve this goal, and green finance will play a critical role.

“At Paragon, sustainability influences all aspects of our business. We are delighted to have received overwhelming support from the investment community on our plans to place sustainable lending at the heart of our strategy.

The green bond framework complies with the ICMA Green Bond Principles and has been validated by Sustainalytics, a leading provider of ESG ratings. In addition, Paragon will publish an annual report detailing the allocation of funds to green loans and the associated carbon savings.

The framework and opinion for Part 2 of Sustainalytics is available in the Investor Relations section of the Paragon website.

Barclays, BofA Securities and UBS Investment Bank acted as lead managers of the transaction.

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