Sainsbury’s has announced it has agreed a £200m corporate ‘green’ loan to invest in on-going carbon reduction and sustainability projects. Whilst Green Bonds are now increasingly issued by institutions to support environmental and sustainable initiatives, this is the first time that a commercial loan has been structured to do the same.

The creation of a ‘green’ loan, a conventional corporate loan underpinned with clear environmental commitments, ensures that Sainsbury’s will use the loan proceeds for environmental, sustainability and water-related projects.

The structure of the loan is consistent with the Green Bond Principles 2014, the guidelines developed by a leading group of bond underwriters and endorsed by environmental groups to provide a clear framework for this emerging asset class for the benefit of investors and issuers.

Lloyds and Rabobank acted as Joint Green Arrangers and Rabobank acted as Sole Mandated Lead Arranger. The loan has been accredited ‘Green’ by Sustainalytics, an independent provider of environmental, social and governance (ESG) research, analysis and support services.

John Rogers, chief financial officer of Sainsbury’s said: “This £200m Green loan – which is the first of its kind in the UK – demonstrates our commitment and leadership in carbon reduction and sustainability, and shows the value we attach to environmental improvements as demonstrated by our Project Graphite programme. We have a proud record in reducing the environmental impact of our operations by investing in low and zero carbon technologies and energy efficiency programmes – for example, our current absolute electricity use in supermarkets is over 12% lower than in 2007/08, despite around 35% growth in floor space. Project Graphite is focused on improving energy efficiency in our existing stores and investing in onsite renewable energy, and it includes measures such as replacing traditional light bulbs in our estate with energy efficient LED lighting, producing renewable heat from ground source heat pumps and biomass boilers plus installing photovoltaic solar panels on roofs and petrol stations. The green loan will be used to fund clean energy generation, energy efficiency and water saving projects over a period of two to three years. It will be independently measured and monitored by a third party to evaluate its use and its positive environmental impact, and we will publish progress on the various green investments and carbon emission savings on our corporate website.”

Jan van Nieuwenhuizen, member of the Executive Board of Rabobank, said: “Sustainability is an essential element in Rabobank’s strategy. We understand the challenges faced by our Food and Agribusiness clients and are constantly evolving our products to meet their ambitions. This green deal is a first of its kind and further emphasises how we collaborate with our clients to meet our joint sustainability aspirations. We are thrilled that Sainsbury’s chose Rabobank to help them invest in a more sustainable future for their business.”

James Garvey, managing director, head of capital markets and portfolio management at Lloyds Bank Commercial Banking, said: “As an organisation, Lloyds Bank is committed to responsible business. We have supported several companies bringing green bonds to market and earlier this month issued our own Environment, Social and Governance bond. We are delighted to have utilised this expertise working with Sainsbury’s to create the first green loan and look forward to this market developing further.”