University College London (UCL) is one of the world’s top 10 universities, globally renowned for its academic and research excellence. In 2021, the university was looking to raise debt finance to boost its net £1.4 billion 10-year estates capital investment programme.
Keen to capitalise on favourable debt market conditions, with interest rates at a historic low and significant debt investor appetite for attractive new investment propositions, UCL engaged KPMG’s Debt Advisory team to offer independent advice on potential financing options.
KPMG assessed several possibilities, out of which UCL chose to target a debut long-term public bond issue. KPMG advised on the merits of a sustainability bond, given the potential for enhanced demand among an increasingly ESG-focused investor base, as well as the opportunity to showcase UCL’s own commitment to sustainability. The proceeds of this bond would therefore be invested in a range of eligible green and social projects.
KPMG acted as lead financial advisor to UCL on the bond issuance process, working closely with senior stakeholders at the university and external partners, including lawyers and arranging banks. The key was to ensure that the client felt comfortable at every stage of the process, forming their own considered decisions, supported by rich independent insights, experience and supporting analysis from KPMG’s experts.
KPMG’s role included steering UCL towards achieving an outstanding debut external credit rating (in line with the UK Government’s credit rating), awarded by Moody’s. Drawing on KPMG’s leading credit rating advisory proposition, this result reflected the university’s strategic and financial strength and resilience, particularly against the backdrop of COVID and Brexit.
KPMG also advised on selecting arranging banks and legal advisers, and project managed UCL’s creation of a sustainability finance framework, which sets out UCL’s plans to support a wide array of green and social projects with the proceeds from the bond. This was a collaborative process working with UCL leadership and several external experts, including Barclays as the bond’s Sustainability Coordinator.
The projects chosen aligned with UCL’s Sustainability Strategy, the UN Sustainable Development Goals and recognised sustainable financing standards such as the ICMA green bond principles. They included green estates development, based on stretching targets on energy efficiency and sustainable construction methods, as well as funding for charitable research and inclusive access to education programmes.
The final stage of the process was a virtual investor roadshow, reaching large numbers of market participants to explain the bond’s merits and highlight UCL’s ESG commitments.
The hard work by all involved paid off. When the university’s debut £300m 40-year sustainability bond was launched on 28th May 2021, it was the first of its kind for a UK higher education institution. It was priced highly competitively at 1.625%, with the lowest interest cost ever achieved for the sector in the UK, and the issue nearly three times oversubscribed. UCL had amply demonstrated its sustainability credentials to a broad new stakeholder base and given its employees and internal stakeholders concrete goals to be proud of.
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