NatWest Group today published its Social Bond Interim Impact Report, providing a first look at the impacts of its inaugural social bond. The Group estimates that ~6,900 full-time jobs have been created through the amount of lending equivalent to the bond proceeds, in some of the most deprived parts of the UK[1], supporting more than 2,750 SMEs in 96 industry sectors, with one quarter of the estimated jobs being created in the health and social work sectors.
The net proceeds of the social bond have been used exclusively to finance and/or refinance new or existing SME lending, according to the Eligibility Criteria for Social Loans as described in NatWest Group’s GSS Bond Framework. Since issuance, the full proceeds have been allocated to NatWest Group loans of an average £280,000 loan size to more than 2,750 SMEs across Scotland, England, Wales and Northern Ireland.
Regions with the highest number of jobs created are North East of England (~1,600 jobs), London (which includes Greater London) (~1,000 jobs) and West Midlands (~1,000 jobs). Industry sectors with the highest number of jobs created are Health & Social Work (~1,800), Wholesale and Retail (~1,200) and Professional, Scientific and Technical Activities (~1,200).
NatWest Group Chief Executive, Alison Rose, commented:
“Our inaugural social bond is a clear demonstration of our purpose in action. It shows how we have supported businesses to create jobs in some of the most deprived parts of the UK, across a range of sectors.
“NatWest Group is the largest supporter of UK businesses. This social bond demonstrates the positive impact we can have in helping to address regional inequality by championing the potential of the customers and communities we serve so they can recover, rebuild and, ultimately, thrive.”
The November 2019 senior unsecured issuance from the NatWest Group’s EMTN programme raised €750 million (~£640 million), with a 6NC5 maturity structure, in MREL-eligible format. The bond spread, set at MS+100, gave rise to a coupon of 0.75%. It has ratings of Baa2/BBB/A by Moody’s, S&P and Fitch, respectively and is listed on the London Stock Exchange’s Sustainable Bond Market.
This issuance, the first of its kind by a UK financial institution, marked an important milestone as NatWest Group builds a more sustainable, purpose-led bank and diversified its investor base. The majority of investors to whom the bank allocated bonds were Principles for Responsible Investment (PRI) signatories. Seventy percent of these investors met two out of three of the following ESG-related criteria: a dedicated SRI/ESG fund, an SRI/ESG policy, and an SRI/ESG Analyst in the team.
The social bond reaffirms NatWest Group’s commitment to addressing regional inequality through lending to SMEs in deprived areas of the UK. It was the first issuance under the NatWest Group’s GSS Framework (see Notes to editors), which provides a basis for the future issuance of Green, Social or Sustainability Bonds. Using a standardised methodology, the bank will provide an impact report to investors at least annually Each impact report will be based on the average composition of the bank’s eligible portfolio over the proceeding period, and represent the impacts over the life of the bond. In May 2020, the NatWest Group followed up with the issuance of a green bond, which was the first from a UK bank into the US onshore market.
NatWest Group became one of the Founding Signatories of the United Nations Principles for Responsible Banking in September 2019, committing to strategically align the business with the Sustainable Development Goals and the Paris Agreement on Climate Change. This commitment supports the bank’s continued focus on priority areas such as financial capability, enterprise and the environment.
[1] Calculations are based on a input-output methodology using the Office for National Statistics’ Industry by Industry, UK-wide Input-Output tables
