Rerum cognoscere causas
Founded in 1895, the London School of Economics and Political Science (“LSE”) is a world leading university, ranking first in Europe and second globally (QS subject rankings 2021) for social sciences and management. Aligned with its motto "rerum cognoscere causas" ("to know the causes of things") and its founding purpose, "for the betterment of society”, LSE’s ambition today is to be the leading social science university with the greatest global impact.
Core to LSE’s principles is sustainability. The university’s Sustainability Strategic Plan was developed in close consultation with the LSE community, with key milestones already having been achieved. For example, LSE is the first carbon neutral verified university in the UK for all its measured emissions thanks to ongoing work by the School to reduce its carbon footprint and mitigate its residual emissions by supporting carbon reduction projects. LSE’s direct emissions have reduced by 44% since 2005, despite an increase in campus size and student numbers.
Private placement delivers all of LSE’s financing objectives
To secure funding for green and social projects at the School, including the development of LSE’s first Net Zero Carbon building at Lincoln’s Inn Fields in central London, the university asked its banking partner NatWest to support with the development of a Sustainable Finance Framework (SFF).
A new landmark building overlooking Lincoln’s Inn Fields Park in central London, the site will include adaptable spaces for teaching, research and conferences. And with sustainability, energy efficiency and carbon minimisation at the core of its design, it is set to be LSE’s first Net Zero Carbon building.
As Sole ESG Structuring Bank, NatWest worked closely with LSE to help establish a holistic framework that captures both environmental and social categories, allowing the university to raise sustainable debt through a variety of debt instruments. The framework aligns with LSE’s social purpose and Sustainability Strategic Plan with its funding and financial strategies. The university will use the proceeds of these sustainable debt instruments to improve the environmental impact of their campus as well as fund a range of social initiatives.
The NatWest team also supported the LSE team on finding an external third-party to review their framework and assess its alignment to applicable International Capital Markets Association (ICMA) and Loan Markets Association (LMA) Sustainability, Green and Social debt principles. Following a Request for Proposal (RfP) process and interviews with several Second Party Opinion (SPO) providers, S&P Global Ratings was appointed. NatWest supported LSE throughout the SPO review, assisting with any queries and follow-up calls with S&P to ensure an optimal result for LSE.
Following the publication, LSE was aiming to obtain attractively priced long dated funding through a private placement (PP), whilst also looking to showcase its leading sustainability credentials.
As Sole Agent, NatWest marketed the transaction to both UK and US investors who were selected based on their ability to provide long term funding to LSE and based on their track record in investing in the UK Higher Education sector.
Given LSE hadn’t been in the market since 2013, the NatWest team proposed a detailed Investor Presentation for an Investor Call and one-to-one meetings and worked closely with the LSE team to ensure that the presentation highlighted LSE’s ambitious sustainability goals and Sustainable Finance Framework.
The marketing effort paid off: despite considerable market volatility in both credit and rates, LSE received significant demand, over 4.6 times oversubscribed from the £110 million launch. Given the strength of the investor demand, the NatWest team were able to achieve advantageous pricing for its customer, as well as a very flexible deferment structure with £50 million of funds delayed for one year and £50 million for five years.
With this successful PP, LSE achieved all its core financing objectives:
- Launching a versatile Sustainable Finance Framework and achieving a Sustainable Private Placement on a use of proceeds basis.
- Very attractive pricing across a range of long dated tenors from 35-50 years, with deferrals achieved for twelve months and five years and no commercial documentation changes, maintaining the LSE’s flexible covenant structure.
- Achieving an average maturity of over 43 years across four tranches, and
- Attracting new, supportive long-term investors for future capital markets transactions.
NatWest helps deliver a transformational result
Minouche Shafik, LSE’s Director, said: “Securing this funding is a historic moment for LSE and a milestone on our journey to achieve our ambition to be the leading social science institution with the greatest global impact.”
Mike Ferguson, Chief Finance Officer at the LSE, added: “From day one, the team at NatWest were extremely professional, quickly understanding our ambitions for this private placement, carefully listening to our requirements and proactively helping us frame a Sustainable Finance Framework that will provide a roadmap for sustainable financing at the School. I was particularly impressed by their marketing strategy, which had to cope with some tricky market conditions and delivered a transformational result for us. We have had a long running partnership with NatWest, so I’m really pleased to have been able to add this dimension and look forward to working with them in the future.”
Sonia Gadhia, Private Placements, NatWest, commented: “We’re absolutely delighted to have been able to support the LSE, with this very successful private placement, which attracted strong demand from UK and US investors. This is the first time I have seen a 5-year delay drawdown achieved! The transaction is also testament to our experience and in-depth knowledge of the PP market as well as our outstanding access to the global investor community.”
George Flynn, Debt & Financing Solutions at NatWest, stated: “It has been fantastic to support another landmark transaction for the UK’s higher education sector with the LSE’s Sustainable Private Placement. We are particularly pleased to have delivered on their funding objectives despite the underlying market volatility. At NatWest, we’re committed to actively contributing to social, economic and environmental progress in the UK through supporting ambitious organisations such as the LSE.”
Helen Ferguson, ESG Advisory, NatWest, said: “It has been a great pleasure to support the LSE as Sole ESG Structuring Bank with its Sustainable Finance Framework. The Framework underlines the pivotal role universities play in helping to solve some of societies’ key environmental and social challenges, as well as managing their own environmental footprint.”
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