Real Help with Real Life
Yorkshire Building Society (YBS) is the third largest building society in the UK with total assets of £49.4bn (H1 2021) and over three million members.
To fulfil its purpose of providing Real Help with Real Life, the building society focuses on three central ambitions: helping people to have a place to call home, helping customers towards greater financial wellbeing, and creating long-term value for its members. To deliver on those ambitions, YBS prioritises lending to customers who are currently poorly served by the market in order to help them overcome the financial barriers they face. This includes targeted initiatives to support first-time-buyers, self-employed borrowers, early and later-life lending, and individuals who require the help of shared ownership and social housing schemes.
In September 2021, YBS published its Social Bond Framework to connect its financing strategy with its sustainability strategy and to raise dedicated funding for loans that bring a positive social impact and contribute to the UN Sustainable Development Goals (UN SDGs). The Framework, which is focused on providing access to financing to underserved populations and registered social housing providers, allows for the issuance of Social Covered Bonds and unsecured notes as well as Social Residential Mortgage-Backed Securities (via YBS’s Brass platform).
First SONIA issuance with a sustainable label
A regular issuer in the European debt capital markets across multiple formats, YBS turned to NatWest Markets for support with the issuer’s first ever Social SONIA Covered Bond (and the first SONIA issuance ever with a green, social or sustainability label).
Once YBS opened books for its £500m (no grow) 5yr Social SONIA Covered Bond, orders came in rapidly and exceeded £1bn within a short time. The transaction saw strong demand from YBS’s domestic UK investor base (79% of allocations), particularly from UK bank treasuries, who are increasing their focus on Green, Social and Sustainability (GSS) products for their liquid asset buffers to align with their broader bank sustainability strategies; the remaining 21% of demand came from across Europe, with notable interest from German and Nordic financial institutions. Banks and Private Banks made up 70% of the final allocation, while Pension Funds and Insurers took 15%, and Asset Managers received another 15%.
YBS will use the Covered Bond’s proceeds to fund ‘Access to Essential Services (financing and financial services)’ as outlined in the building society’s Social Financing Framework. S&P Global provided a Second Party Opinion (SPO), confirming the framework aligns with the ICMA Social Bond Principles and with the UN Sustainable Development Goals (SDGs) #1 “No Poverty”, #10 “Reduced Inequalities”, and #11 “Sustainable Cities and Communities”.
Market first marks another milestone of broadening ESG financing
Duncan Asker, Director of Treasury, Yorkshire Building Society, commented: “Closing this transaction enables us to continue to make a difference to people’s lives. We are grateful for NatWest’s continued support, their insights into the sustainable finance market and their access to a broad investor base.”
William Appleyard, Director, FI Debt Capital Markets, NatWest, said: “We congratulate YBS on the successful issuance of their third SONIA Covered Bond and their fourth transaction using their Social Financing Framework. We are delighted to have acted as an Active Bookrunner on this transaction, the proceeds of which will be used to provide access to financial services to underserved borrowers in the UK. The success of the transaction demonstrates the excellent relationships which YBS has developed with UK, European and global fixed income investors.”
Caroline Haas, Head of Climate and ESG Capital Markets, NatWest, added: “At NatWest we’re committed to contribute towards a more just economy by helping customers such as YBS, and we are proud to have supported with this Social SONIA Covered Bond market first, which marks another milestone on the path to broadening the range of ESG financing formats.”
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