A key driver of UK economic growth
There is huge benefit in the structural maturing of the UK’s GSS market, supported by the demand drivers behind it.
As well as the positive societal and environmental outcomes targeted from the issuances of these bonds, this specific type of funding can act as a crucial driver for UK economic growth.
Businesses are often keen to access the growth and benefits of moving towards sustainable business practices, but they can sometimes struggle to obtain the requisite financing to undertake such ventures. The specific ‘use-of-proceeds’ lending criteria of GSS issuances therefore helps unlock and redirect investment capital to UK businesses in ways not always possible for traditional financing.
Importantly, with sustainable financing typically also offering a longer investment horizon than the shorter-term lifecycle of mainstream lending, businesses can also set growth plans more easily over the long term.
Funding these investment gaps not only adds value to previously underfinanced areas, it also means financial institutions are enabling growth across a broader range of segments and regions of the UK economy. The outcomes are often tangible. In our recently published GSS Impact Report, we estimate that 9,700[1] FTE jobs have been created or enabled across diverse industries and areas in the UK as a result of the loans included in our Social Bond for Employment Generation.[2]
This sectoral and geographical dispersion of investment is vital for ensuring a more sustainable and diversified base of UK economic growth.
Growth opportunities
In pure market terms, sustainable financing can also play a fundamental role in satisfying demand factors that look set to persist into the long term.
Social housing, in particular, is a crucial element within the burgeoning GSS capital markets. Extensive waiting lists for homes and a reduction in the number of available units has led to a critical point where funding is increasingly required for investment into building new homes and improving living standards.
NatWest Group was proud to recently announce a £5 billion lending programme to the social housing sector and we remain supportive of GSS issuances within this area. The advantages of this lending are twofold: firstly, through the primary funding benefits to recipient businesses, but secondly, as the finance cascades through local economies.
The ‘multiplier’ effect of this investment is even more impactful in regions with lower socio-economic levels where there are higher rates of personal consumption.
Elsewhere, the unprecedented levels of private and public finance required for the UK to meet its commitments of becoming net zero by 2050 will require a continued, and undoubtedly growing, participation from sustainable bond markets.
This will be a vital part of stimulating growth, innovation, and job creation as part of the net-zero transition.
