Students, Take Note: UCL Is Launching a Sustainability Bond
(Bloomberg) -- University College London will be targeting students as much as investors as it offers the first ethically-labeled bond from a U.K. university.
The institution is tapping the bond market with a 40-year sustainability bond on Thursday, a debut for a publicly syndicated transaction of its kind in the sector, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it. It is also the longest-dated offering in the sterling market this year, based on data compiled by Bloomberg.
The borrowing comes as the coronavirus pandemic has blown a hole in university finances, since lockdown restrictions have hit income from student accommodation and international admissions. Raising debt that benefits the environment could help attract favor from students, who have campaigned at some universities for more ethical investing.
“It makes strategic sense: Universities want to promote themselves as sustainability leaders to students and other stakeholders, and this is a good way of doing that,” said Arthur Krebbers, head of sustainability, corporates at NatWest Markets Plc, one of the deal’s bookrunners.
Sustainability bonds offer borrowers flexibility as they are effectively a mix of green and social bonds, raising cash to finance environmentally-friendly projects or ventures with a positive social impact. Global sales this year of $75 billion have already topped last year’s total.
UCL will spend the proceeds according to its sustainability finance framework. In a 36-page document published this month, the university listed a wide range of potential projects, from renewable energy investments across its campus to scholarships that “make education more accessible.”
“This framework builds on growing interest from higher education issuers in those subjects,” said Krebbers. A spokeswoman at UCL did not immediately respond to a request for comment.
Debt from higher education remains a rarity in the rapidly growing world of environmental, social and governance -- or ESG -- bonds. Only a handful of universities, including the Massachusetts Institute of Technology and the National University of Singapore, have issued such bonds, amounting to just $1.35 billion, based on data compiled by Bloomberg. The total ESG debt market is now worth over $2 trillion.
Still, environmental concerns have become more prominent across campuses in recent years. In 2020, after five years of sustained pressure that saw students protest and graffiti on ancient buildings, the University of Cambridge committed to divesting its endowment from fossil fuels. Others have made similar pledges.
Demand for ethical debt has been soaring, with assets under management at sustainable fixed-income funds rising to $325 billion globally at the end of March, from $237 billion a year earlier, according to data by Morningstar Inc.
Barclays Plc is the ESG structuring adviser in the deal and a joint bookrunner alongside HSBC Holdings Plc and NatWest Markets. The bond is being marketed at initial price talk of 65 to 70 basis points above U.K. government bonds, and is expected to price later on Thursday.
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