In recent years, KOIS has been happy to witness the growth of impact topics within larger corporations and businesses. A growing set of sustainable initiatives has drawn a crowd of new actors to the impact stage. Recently, initiatives such as Business for Inclusive Growth (B4IG) from the OCDE and Danone have gathered actors from leading corporations such as Unilever, Mars, Ikea, Microsoft and more. These have all signed a pledge to take concrete actions ensuring the benefits of economic growth benefit a wider population.
The positive trend has rippled into the financial sector all the same. For instance, major banks are now involving their CSR department into more business activities. This has led to the design of innovative and sustainable financial products such as funds dedicated to impact, and more broadly integrating impact measurement into the heart of banking strategy.
In fact, just last week, the 2nd largest French Bank (the BPCE group), launched an interesting product: a Social & Environmental Impact loan. This loan sets extra-financial objectives that, if met, can result in a reduced borrowing cost for the client.
A Social and Environmental Impact loan for the real estate industry: a transformative idea
The Impact Loan of the BPCE group is a simple yet transformative idea: incentivizing real estate developers and social housing companies to put impact measurement at the heart of their project, with the reward of a reduced interest rate. The concept even rises further, with the option to donate all or part of the money saved to a pre-defined NGO.
The current setup allows the borrower to choose which criteria to consider. Criteria include for instance: inclusion, ageing and health of the tenants, energy performance and greenhouse gas emissions. The chosen one will be evaluated throughout the loan lifespan. The customer will then benefit from a reduced interest rate if the project reaches or surpasses the objective. Part of the savings can also be donated to a non-profit.
The first French Impact Loan includes three parties:
- the BPCE group;
- the second largest social housing company of the Parisian region;
- and the Abbé Pierre foundation, a non-profit working to offer decent accommodation to everyone
All three parties signed a € 25M tripartite convention. Thanks to the innovative financing mechanism, the Social Housing company will benefit from an interest rate reduction of 0.15% if, each year, it rents a minimum of 20% of its housing to a target population officially flagged as priority group. The Abbé Pierre Foundation will directly receive 50% of the bonus granted each year.
At KOIS, such evolutions in the banking world rejoice us, as hey help move towards more sustainable financing solutions for all. We look forward to seeing if other banking players follow these footsteps!
About the authors
Ladislas de Guerre is a Manager at KOIS