Kensington becomes first UK lender to complete green bond securitisation

Rozi Jones
11th June 2021
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"The majority of the UK housing stock is energy inefficient and responsible for one-fifth (21%) of all UK carbon emissions."

Kensington Mortgages has priced its latest securitisation, upsized from £480 million to £750 million.

The transaction is the first labelled green bond from a lender within the UK ABS market and makes Kensington the third lender in Europe to issue a green bond.

The green bond aligns with the ICMA Green Bond Principles, contributing towards meeting the United Nations’ Sustainable Development Goals. The Green Bond has been formally accredited and recognised by ISS ESG, a provider of corporate governance and responsible investment solutions.

Kensington will use the unallocated proceeds raised from the Green senior notes to continue developing its range of green products in the next years, with targets to allocate more than £800 million to green loans by 2026.

The decision to develop a Green Bond framework follows the 2020 launch of Kensington’s first range of environmentally friendly mortgage products, the eKo Cashback Mortgage which rewards borrowers with £1,000 cashback if they improve the energy efficiency of their home within the first 12 months of ownership. In May 2021, Kensington launched its next green mortgage product to continue supporting its green initiative. This product rewards owner-occupied borrowers for purchasing an ‘A’ or ‘B’ EPC-rated new-build property by doubling the cashback available at purchase compared with a regular cashback product.

Alex Maddox, capital markets & digital director at Kensington Mortgages, commented: “The majority of the UK housing stock is energy inefficient and responsible for one-fifth (21%) of all UK carbon emissions. Improving the efficiency of our existing housing stock is one of the best ways to help the UK transition to a low-carbon economy.

“Kensington’s decision to develop a Green Bond Framework is built on its commitment to invest in projects that promote progress on environmentally sustainable activities, help borrowers reduce their carbon footprint, and contribute to increasing the amount of capital allocated to sustainable uses of proceeds in the financial sector. Kensington is committed to sustainable lending - social bond and green bond transactions will form a clear part of Kensington’s funding strategy.

“Kensington sees ESG factors as key to its long-term performance and as a result, we are integrating ESG into our business strategy. We were the first specialist lender to publicly release corporate ESG targets in August 2020. As part of our ESG targets to address environmental and social risks, we have embedded ESG within our lending strategy, originating both green loans and loans to viable borrowers that are underserved by high street banks, showing our commitment to accelerate progress towards a better and cleaner planet.”

A spokesperson for ISS ESG added: "Kensington secured a Second-Party Opinion from ISS ESG that confirmed the transaction alignment with the standards set forth by the ICMA Green Bond Principles.

“By designing the Green Bond Framework and issuing green bonds, Kensington is eager to increase its commitment to invest more time and resources to sustainable lending to reduce the carbon footprint of its customers. The proceeds of its Green Bonds will be contributing towards Kensington’s target to finance the origination of mortgages secured by green properties and refurbished homes that have improved their energy performance."


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