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HELPING BRITAIN PROSPER
ESG BONDS & TERM DEPOSITS
Annual Report
Statement of Allocation
31st December 2015
2
I don’t believe that our responsible business activities are separate from any of our other business
activities. We have one strategy for delivering sustainable success – being the best bank for
customers – and doing business responsibly is inherent in this strategy.
The helping Britain Prosper Plan makes best sense for our Group because of our scale and
presence in communities across Britain. As a result, we believe no other bank is better placed to
help Britain prosper.
António Horta-Osório
CEO, Lloyds Banking Group
3
James Garvey
Managing Director, Capital Markets
Having demonstrated last year both the strong investor appetite for an ESG bond and also the
social and economic benefit such a bond could provide to disadvantaged communities across the
UK, we are confident that this new ESG bond will be similarly positively received by investors. We
are proud the Group is leading the way in this nascent investment area, whilst at the same time
creating a funding solution that also underpins the Group’s commitment to support SMEs within our
Helping Britain Prosper Plan.
CONTENTS
Introduction 5
Section 1: The ESG Bonds Aggregated Highlights 6
ESG Bonds Case Studies 10
Bond I Eligible Assets & Highlights as at 31st December 2015 14
Bond II Eligible Assets & Highlights as at 31st December 2015 19
Section 2: Term Deposit Eligible Assets & Highlights as at 31st December 2015 23
Appendix A: Reporting Criteria 27
Appendix B: PwC Assurance Report 37
4
ESG BONDS & TERM DEPOSITS INTRODUCTION
5
In support of its Helping Britain Prosper Plan, Lloyds Bank plc (the Bank) has the ESG Bond I, the ESG Bond II and two Term Deposits. All loans
allocated to the bonds and term deposits were made in accordance with the lending criteria described below and are within the reporting criteria set out
in Appendix A.
The £250 million ESG Bond I was issued on the 9th July 2014, maturing on 9th December 2018 and pays 2.75% fixed coupon semi annually. The
£250 million ESG Bond II was issued on the 1st June 2015, maturing on 1st June 2022 and pays 2.50% fixed coupon semi annually. There are
currently two 12 month fixed rate Term Deposits totalling £40m . Qualifying loans are matched to bonds and term deposits from 9th July 2014 to 31st
December 2015 and represent new bank lending.
All balances used throughout this report are sourced from Lloyds Bank source systems as at 31st December 2015. These loans underwent three tiers
of eligibility criteria, resulting in amounts allocated to the selected key performance indicators.
•SIC1 code screening to exclude alcohol, tobacco, gambling, military weapons, fossil fuels, palm oil and payday lending
Tier 1 Exclusionary Criteria
•Lloyds Bank Code of Business Responsibility (link)
•Lloyds Bank SME Charter (link)
Tier 2 Governance Criteria
Tier 3 Environmental and Social Criteria
Regional Growth Fund (RGF)
Small scale renewable energy projects
SMEs and healthcare providers in the
bottom 30% of economically
disadvantaged areas2
Small scale and mid market renewable
energy projects
SMEs and healthcare providers in the
bottom 30% of economically
disadvantaged areas2
Small scale renewable energy projects
SMEs and healthcare providers in the
bottom 30% of economically
disadvantaged areas2
1. SIC refers to Standard Industry Code
2. List of postcodes as defined by the Index of Multiple Deprivation produced by the Office for National Statistics
ESG BOND I ESG BOND II ESG TERM DEPOSITS
SECTION 1: THE ESG
BONDS I & II
BOND I & BOND II AGGREGATED HIGHLIGHTS
7
£500m
Of allocated
eligible loans
93%
Allocated to 30% most
economically
disadvantaged areas
343
Jobs created or saved
through lending awarded
under the RGF
2,573
Qualifying
loans
£11m
Lent via the
RGF
£47m
Allocated to
Healthcare providers
44
Renewable
projects
£29m
Allocated to
Renewable Projects
8
ESG BONDS HIGHLIGHTS
£500m Allocation by Region
Central London North EastMidlands North WestSouth East Wales & BordersSouth West East MidlandsScotland East EnglandCentral England South Central
£500m Lending by Type1
RGFRenewablesHealthcareDisadvantaged Areas
1. Lending can meet one or more of the eligible criteria. For example, healthcare is a subset of the economically disadvantaged areas.
£29m Total Renewables
by Type
Wind Solar
Other Biomass
Anaerobic Hydro
ZE
ZE3
KW
KW
AL
B
BA
BB
BD
BHDT
GY
JE
BL
BN
BRBS
CA
CB
CF
CH
CM
CO
CR
CT
CV
CW
DA
DD
AB
DE
DG
DH
LD
DN
DY
EEC
EH
EN
EX
FY
GL
GU
HA
HD
HG
HP
HR
HS
HS
HU
HX
IG
IM
IP
IV
KA
KA
KT
KY
KY
L
LA
LD
LL
LLLN
LS
LU
M
ME
MK
ML
N
NE
NG
NN
NP
NR
NW
OL
FK
OX
PA
PA
PA
PA
PA
PA
PA
PA
PA
PA
PE
PH
PL
PO
PR
RG
RH
RM
S
SA
SE
SG
SK
SL
SM
SN
SOSP
SR
SS
ST
SW
SY
TA
TD
TF
TN
TQ
G
TR
LE
TS
TW
UB W
WA
WC
WD
WF
WN
WR
WS
WV
YO
BT
BR
CR
EEC
EN
H A
IG
KT
N
LONDON
NW
SE
SL
SM
SWTW
UBW
WC
WD
HEALTHCARE ALLOCATION BY REGION AND SECTOR
9
£46.8m of healthcare lending distributed across the UK to 154 customers
within the two Bonds. All sectors within Human Health and Social Work are
considered.
Over £14m provided to hospital activities, with a further £14m to general
medical practices.
Healthcare
£ millions
0 - 0.5
0.5 - 1
1 - 5
5 - 10
10+
Regional Loan Allocation by Value
£47m Lending
by Sector
Hospital activitiesGeneral medical practice activitiesDental practice activitiesOther residential care activitiesSocial work activities without accommodationMedical nursing home activitiesOther health activities
Healthcare Lending by Sector
ESG BONDS CASE
STUDIES
Two Bristol-based medical practices have
combined under one roof, moving to a new
state-of-the-art surgery to widen the services
on offer to patients. With the support of a
seven-figure funding package from Lloyds
Bank Commercial Banking, the partners at
Eastville Medical Practice and Maytrees
Medical Practice built a new surgery on East
Park Road, to help them meet the increased
requirements of Patients across the area.
The new surgery has space for 30 consulting
rooms, including a minor operations facility as
well as a dedicated base for community Nurses
and health visitors. Midwifery, speech and
language and podiatry services are also available,
and a number of clinical rooms will be used by
visiting services, such as physiotherapists.
The site also boasts a health Education room and
kitchen where health specialists and nutritionists
can teach people in the local area about the
benefits of healthy eating and cooking with fresh
ingredients.
Steve Hartnell, partner at Maytrees Medical
Practice, said: “Combining under one roof has
allowed us to create a progressive medical centre
that will not only be a clinical space but a resource
for the whole community.
“One problem facing a lot of people across Bristol
is that they aren’t registered to a local practice,
making it difficult for them to access the correct
care and support when needed. Situating both
practices in one place will enable us to widen the
range of support services on offer to patients, as
well as enabling us to significantly increase patient
numbers.”
The partners of both Practices approached Lloyds
Bank Commercial Banking’s specialist healthcare
team to gain funding for the site, after being
impressed by the team’s diverse range of
knowledge of the medical sector.
Steve Hartnell, added: “Building a new business
premises can often be a complex process,
especially when there are multiple partners
involved. Our professional team worked closely
with us to make buying the site as simple as
possible, and were always on hand to discuss any
worries or problems that we had.”
Steve Pratt, senior healthcare banking consultant
at Lloyds Bank Commercial Banking, said: “When
we spoke to the partners of both Eastville and
Maytrees Medical Practices’ we recognised that
building a new centre would benefit members of
the local community immensely, not only providing
exceptional medical care but offering additional
services.
We are dedicated to helping medical firms to
access the tailored funding needed to operate in
this complex sector, and our team of specialist
relationship managers are always on hand to offer
the tailored guidance and support needed to
grow.”
EASTVILLE & MAYTREES MEDICAL PRACTICE
11
CASE STUDY
From left: Steve Pratt of Lloyds Bank, Angela Toumi and Steve Hartnell, Managing Partners
of Eastville & Maytrees Medical Practices and Richard Saunders of Lloyds Bank.
STAIRCRAFT (MIDLANDS) LTD
12
Leading staircase manufacturer, Staircraft
(Midlands) Limited, has opened two new
sites in the West Midlands following a
£1.6million investment from Lloyds Bank.
The expansion came after the firm exceeded
its manufacturing capacity at its Nuneaton
base, and needed to identify new space. A
combined financial package of £700,000 from
Lloyds Bank Commercial Banking and
£900,000 from Lloyds Bank Commercial
Finance has now enabled the acquisition of a
new freehold unit in Coventry, together with
the lease of an additional production space in
Wednesbury.
With more than 25 years of experience in the
sector, Staircraft, which produces wooden
staircases for major house builders, is using
the funding to reinforce its status as one of the
leading national suppliers in its field.
Through the expansion, Staircraft expects to
increase its sales turnover from £6million to
around £10million in 2014, growing to an
estimated £15million next year. In line with its
increased capacity, the move has also seen
approximately 50 new roles offered between
the two additional manufacturing sites,
increasing its employee numbers to 150.
Throughout the fundraising process, Staircraft
was assisted by Coventry and Leamington
based accountants and financial advisors
Harrison Beale & Owen which also helped to
secure additional funding through the
Regional Growth Fund provided by the
Coventry and Warwickshire Local Enterprise
Partnership.
The Regional Growth Fund is a Government
initiative that provides grants to SMEs looking
to purchase new assets and create economic
growth and local employment opportunities.
Andrew Hamilton, Director at Staircraft
(Midlands) Limited, said: “After exceeding our
production capabilities at our Nuneaton base,
it was vital for us to secure new premises in
order to meet customer demand for our
products, and we are pleased to announce our
expansion into Coventry and the Black
Country.”
Kevin Roberts, Relationship Director at Lloyds
Bank Commercial Banking, said: “We’re
passionate about helping to drive the
economic recovery by providing access to
lending for businesses, and we’re pleased to
have worked with Staircraft on this ambitious
plan for growth.”
Lauro Rodi, Regional Manager at Lloyds Bank
Commercial Finance in the Midlands, said:
“The financial package we’ve provided to
Staircraft (Midlands) Limited has allowed it to
spread the cost of its investment over a fixed
term, enabling a more manageable and
beneficial acquisition process.
“We’re committed to working with
businesses to demonstrate how they can
benefit from asset finance funding, offering
a means to realise growth ambitions
without any adverse impact on day-to-day
operations.”
“The support of Lloyds Bank has allowed us to realise
our vision for growth in the Midlands, and through this
investment, we are looking forward to maximising our
performance as a business, whilst creating new jobs for
the local community.” Andrew Hamilton, Director, Staircraft (Midlands) Ltd
From left: Kevin Roberts, Lauro Rodi of Lloyds and Andrew
Hamilton, Director at Staircraft (Midlands) Ltd
CASE STUDY
An Oldbury-based provider of supported
living for adults with learning and physical
difficulties and autism is to open a new
facility in Birmingham, following an
investment of over £300,000 from Lloyds
Bank Commercial Banking.
The package will fund the latest
expansion for Livewell
(Care & Support) Ltd, as it
prepares to open a new project
in Great Barr, which will feature
accommodation for six people
requiring supported living care
in a socially inclusive
community environment.
The project is the company’s
biggest scheme to date, and will
also generate up to 15 new jobs
in the next 12 months, reinforcing
Lloyds Bank’s commitment to
helping to drive the economy by
supporting the growth of small
businesses within the healthcare
sector.
Founded in 2011, Livewell works
with adults living with autism,
learning and physical disabilities and other
long-term health conditions, and provides
specialist supported living and domiciliary
care.
The company specialises in encouraging
social inclusion, enablement, independence,
choice and autonomy, whilst involving family
and friends to enhance the levels
of support provided. Livewell currently
provides support to 30 people across the
Midlands, ranging from three hours of care
per day to a round-the-clock service.
It works with individuals both in their own
home and in the supported living properties
and, with the support of Lloyds Bank, this
number is set to increase to 48 before the
end of 2014.
Jayne Watkins, Director at Livewell (Care &
Support) Ltd, said: “Since 2011, we have
been working hard to provide
support to adults living with
autism, learning disabilities
and other long-term health
conditions, and this
investment from Lloyds Bank
has helped us to activate our
biggest project to date.”
Andy Pearson, Relationship
Manager at Lloyds Bank
Commercial Banking, said:
“At Lloyds Bank, we pride
ourselves on our in-depth
understanding of the
specific requirements of the
healthcare industry, and
we’re proud to be
supporting Livewell as it
presses ahead with its latest
expansion.
“This is a package which underpins our
commitment to the sector, helping to
safeguard the availability of quality care and
support here in the Midlands.”
LIVEWELL (CARE & SUPPORT) LTD
13
From left: Jayne Watkins, Nick Stanley and Raj Rana from Livewell (Care & Support) Ltd
“In the planning stages of the project, Lloyds
Bank stood out to us thanks to its innovative
approach and understanding of what we were
trying to do. The team have been great to work
with, and we thank them for their support.” Jayne Watkins, Director, Livewell (Care & Support) Ltd.
CASE STUDY
THE ESG BOND I
Eligible Assets & Highlights
BOND I ELIGIBLE ASSETS: AS AT 31 DECEMBER 2015
15
TOTAL ALLOCATION
£250.0m
of eligible loans allocated
ECONOMICALLY DISADVANTAGED AREAS
£241.1m
of eligible loans allocated to the 30% most
economically disadvantaged areas1
HEALTHCARE
£17.1m
allocated to healthcare providers in the 30% most
economically disadvantaged areas1
REGIONAL GROWTH FUND
£10.7m
lent to customers who have been awarded
grants through the Regional Growth Fund1
RENEWABLE ENERGY
£1.1m
allocated to small scale renewable
energy projects1
- indicator has been subject to limited independent assurance. PwC’s assurance report can be found in Appendix B.
1. Lending can meet one or more of the above eligible criteria. For example, healthcare is a subset of the economically disadvantaged areas.
A
A
A
A
A
A
BOND I HIGHLIGHTS
16
£250m
Of eligible
loans
100%
Of the bond
allocated
96%
Allocated to 30%
most economically
disadvantaged areas
343
Jobs created or saved
through lending awarded
under the RGF
1,394
Qualifying
loans
£11m
Lent via the
RGF
£17m
Allocated to
Healthcare
providers
4
Renewable
projects
ZE
ZE3
KW
KW
AL
B
BA
BB
BD
BHDT
GY
JE
BL
BN
BRBS
CA
CB
CF
CH
CM
CO
CR
CT
CV
CW
DA
DD
AB
DE
DG
DH
LD
DN
DY
EEC
EH
EN
EX
FY
GL
GU
HA
HD
HG
HP
HR
HS
HS
HU
HX
IG
IM
IP
IV
KA
KA
KT
KY
KY
L
LA
LD
LL
LLLN
LS
LU
M
ME
MK
ML
N
NE
NG
NN
NP
NR
NW
OL
FK
OX
PA
PA
PA
PA
PA
PA
PA
PA
PA
PA
PE
PH
PL
PO
PR
RG
RH
RM
S
SA
SE
SG
SK
SL
SM
SN
SOSP
SR
SS
ST
SW
SY
TA
TD
TF
TN
TQ
G
TR
LE
TS
TW
UB W
WA
WC
WD
WF
WN
WR
WS
WV
YO
BT
BR
CR
EEC
EN
H A
IG
KT
N
LONDON
NW
SE
SL
SM
SWTW
UBW
WC
WD
THE ESG BOND I: OVERALL ALLOCATION SUMMARY
17
The £250m bond is fully allocated as at 31st December 2015.
Lending across the UK in 98 of 122 postcode areas
Average loan per customer equates to £179k
A total of 1,394 qualifying loans across 17 industrial sectors £ millions
0 - 0.5
0.5 - 1
1 - 5
5 - 10
10+
UK Regional Loan Allocation by Value
Loan Value by Criteria (£ millions)
Deprived Area
Regional Growth
Fund
Healthcare RenewableEnergy
221.1
17.1
7.8
2.9
1.1
ZE
ZE3
KW
KW
AL
B
BA
BB
BD
BHDT
GY
JE
BL
BN
BRBS
CA
CB
CF
CH
CM
CO
CR
CT
CV
CW
DA
DD
AB
DE
DG
DH
LD
DN
DY
EEC
EH
EN
EX
FY
GL
GU
HA
HD
HG
HP
HR
HS
HS
HU
HX
IG
IM
IP
IV
KA
KA
KT
KY
KY
L
LA
LD
LL
LLLN
LS
LU
M
ME
MK
ML
N
NE
NG
NN
NP
NR
NW
OL
FK
OX
PA
PA
PA
PA
PA
PA
PA
PA
PA
PA
PE
PH
PL
PO
PR
RG
RH
RM
S
SA
SE
SG
SK
SL
SM
SN
SOSP
SR
SS
ST
SW
SY
TA
TD
TF
TN
TQ
G
TR
LE
TS
TW
UB W
WA
WC
WD
WF
WN
WR
WS
WV
YO
BT
BR
CR
EEC
EN
H A
IG
KT
N
LONDON
NW
SE
SL
SM
SWTW
UBW
WC
WD
RGF ALLOCATION BY REGION AND SECTOR
18
RGF £10.7m of lending to customers who have been awarded grants through the
regional growth fund .
343 jobs created or saved across the UK as a result of the grants awarded.
The regional growth fund scheme closed on 3rd December 2015, therefore as
of this date no further RGF grants have been issued.
Regional Jobs Created or Safeguarded
Jobs
0 - 5
5 - 10
10 - 20
20 - 30
30+
RGF by Sector
ManufacturingConstructionProfessional, Scientific & TechnicalTransportation & StorageWholesale & Retail TradeAdministrative & SupportInformation & CommunicationWater Supply, Sewerage & Waste MngtAccommodation & FoodReal Estate
RGF by Sector
THE ESG BOND II
Eligible Assets & Highlights
BOND II ELIGIBLE ASSETS: AS AT 31 DECEMBER 2015
20
TOTAL ALLOCATION
£250.0m
of eligible loans allocated
ECONOMICALLY DISADVANTAGED AREAS
£222.6m
of eligible loans allocated to the 30% most
economically disadvantaged areas1
HEALTHCARE
£29.7m
allocated to healthcare providers in the 30%
most economically disadvantaged areas1
RENEWABLE ENERGY
£27.4m
allocated to small scale and mid market
renewable energy projects1
- indicator has been subject to limited independent assurance. PwC’s assurance report can be found in Appendix B.
1. Lending can meet one or more of the above eligible criteria. For example, healthcare is a subset of the economically disadvantaged areas.
A
A
A
A
A
BOND II HIGHLIGHTS
21
£250m
Of eligible
loans
100%
Of the bond
allocated
89%
Allocated to 30% most
economically
disadvantaged areas
1,179
Qualifying
loans
£30m
Allocated to
Healthcare providers
40
Renewable
projects
ZE
ZE3
KW
KW
AL
B
BA
BB
BD
BHDT
GY
JE
BL
BN
BRBS
CA
CB
CF
CH
CM
CO
CR
CT
CV
CW
DA
DD
AB
DE
DG
DH
LD
DN
DY
EEC
EH
EN
EX
FY
GL
GU
HA
HD
HG
HP
HR
HS
HS
HU
HX
IG
IM
IP
IV
KA
KA
KT
KY
KY
L
LA
LD
LL
LLLN
LS
LU
M
ME
MK
ML
N
NE
NG
NN
NP
NR
NW
OL
FK
OX
PA
PA
PA
PA
PA
PA
PA
PA
PA
PA
PE
PH
PL
PO
PR
RG
RH
RM
S
SA
SE
SG
SK
SL
SM
SN
SOSP
SR
SS
ST
SW
SY
TA
TD
TF
TN
TQ
G
TR
LE
TS
TW
UB W
WA
WC
WD
WF
WN
WR
WS
WV
YO
BT
BR
CR
EEC
EN
H A
IG
KT
N
LONDON
NW
SE
SL
SM
SWTW
UBW
WC
WD
THE ESG BOND II: OVERALL ALLOCATION SUMMARY
22
The £250m bond is fully allocated as at 31st December 2015.
Lending across the UK in 96 of 122 postcode areas
Average loan per customer equates to £212k
A total of 1,179 qualifying loans across 19 industrial sectors £ millions
0 - 0.5
0.5 - 1
1 - 5
5 - 10
10+
UK Regional Loan Allocation by Value
Loan Value by Criteria (£ millions)
29.7
192.9 27.4
Deprived Area
Healthcare
RenewableEnergy
SECTION 2: THE ESG
TERM DEPOSITS
TERM DEPOSIT ELIGIBLE ASSETS: AS AT 31 DECEMBER 2015
24
TOTAL ALLOCATION
£40.0m
of eligible loans allocated
ECONOMICALLY DISADVANTAGED AREAS
£40.0m
of eligible loans allocated to the 30% most
economically disadvantaged areas1
HEALTHCARE
£3.2m
allocated to healthcare providers in the 30%
most economically disadvantaged areas1
- indicator has been subject to limited independent assurance. PwC’s assurance report can be found in Appendix B.
1. Lending can meet one or more of the above eligible criteria. For example, healthcare is a subset of the economically disadvantaged areas.
A
A
A
A
TERM DEPOSIT HIGHLIGHTS
25
£40m
Of allocated eligible loans
£3m
Allocated to
Healthcare providers
224
Qualifying
loans
100%
allocated to 30% most
economically disadvantaged areas
ZE
ZE3
KW
KW
AL
B
BA
BB
BD
BHDT
GY
JE
BL
BN
BRBS
CA
CB
CF
CH
CM
CO
CR
CT
CV
CW
DA
DD
AB
DE
DG
DH
LD
DN
DY
EEC
EH
EN
EX
FY
GL
GU
HA
HD
HG
HP
HR
HS
HS
HU
HX
IG
IM
IP
IV
KA
KA
KT
KY
KY
L
LA
LD
LL
LLLN
LS
LU
M
ME
MK
ML
N
NE
NG
NN
NP
NR
NW
OL
FK
OX
PA
PA
PA
PA
PA
PA
PA
PA
PA
PA
PE
PH
PL
PO
PR
RG
RH
RM
S
SA
SE
SG
SK
SL
SM
SN
SOSP
SR
SS
ST
SW
SY
TA
TD
TF
TN
TQ
G
TR
LE
TS
TW
UB W
WA
WC
WD
WF
WN
WR
WS
WV
YO
BT
BR
CR
EEC
EN
H A
IG
KT
N
LONDON
NW
SE
SL
SM
SWTW
UBW
WC
WD
TERM DEPOSIT: OVERALL ALLOCATION SUMMARY
26
The £40m term deposits are fully allocated as at 31st December 2015.
Lending across the UK in 75 of 122 postcode areas
£40m allocated to the 30% most economically disadvantaged
areas of the UK
Average loan per customer equates to £179k
A total of 224 qualifying loans across 18 industrial sectors
£3m allocated to Healthcare providers
£ millions
0 - 0.5
0.5 - 1
1 - 5
5 - 10
10+
UK Regional Loan Allocation by Value
APPENDIX A
Reporting Criteria
APPENDIX A – CONTENTS
Introduction 29
Total amount of lending to SMEs 32
Total amount of lending to Healthcare providers 33
Total amount of lending to participants of the RGF 34
Total amount of lending to renewable projects 35
Tier 1 Exclusionary List 36
28
APPENDIX A – REPORTING CRITERIA
29
The Reporting Criteria document details the approach and scope used to allocate qualifying loans to the ESG Bond I and II and the ESG Term Deposits.
Background
The loans allocated to the ESG Bond I were assessed in accordance with the eligibility criteria agreed in conjunction with Sustainalytics, the Bank’s sustainability partner. The same eligibility criteria has been applied to the loans allocated to the ESG Bond II and the ESG Term Deposits.
A process to identify all loans to SMEs from Lloyds Bank systems has been put in place. These loans then undergo 3 tiers of eligibility criteria resulting in amounts allocated to selected key performance indicators.
Period covered by the data for the Bonds:
The period in scope is from bond issue or when the deposit was placed with Lloyds Bank. These are as follows:
• ESG Bond I: 9th July 2014 to 31st December 2015
• ESG Bond II: 1st June 2015 to 31st December 2015
Period covered by the data for the Term Deposits:
• Term Deposit : 1st May 2015 to 31st December 2015
Scope and Organisation Boundary for ESG Reporting
The scope covers the loans allocated to the ESG Bonds, which have been issued by Lloyds Banking Group, and the ESG Term Deposits, all of which meet numerous eligibility criteria.
Introduction
APPENDIX A – REPORTING CRITERIA
30
Bond I
1. Total amount allocated to the bond issue.
2. Total amount of lending to Small and Medium sized enterprises (“SMEs”) in the most economically disadvantaged areas.
3. Total amount of lending to Healthcare Providers in the most economically disadvantaged areas.
4. Total amount of lending to enterprises which have been awarded grants through the UK’s Regional Growth Fund (“RGF”).
5. Total amount of lending to small scale renewable energy projects.
Bond II
1. Total amount allocated to the bond issue.
2. Total amount of lending to Small and Medium sized enterprises (“SMEs”) in the most economically disadvantaged areas.
3. Total amount of lending to Healthcare Providers in the most economically disadvantaged areas.
4. Total amount of lending to small scale and mid market renewable energy projects.
Term Deposit
1. Total amount allocated to the term deposit.
2. Total amount of lending to Small and Medium sized enterprises (“SMEs”) in the most economically disadvantaged areas.
3. Total amount of lending to Healthcare Providers in the most economically disadvantaged areas.
Key Performance Indicators
APPENDIX A – REPORTING CRITERIA
31
Tier 1: Exclusionary Criteria
Lloyds Bank has categorised borrowers in accordance with Standard Industrial Classification (“SIC”) code. The SIC is a system for
classifying industries by a five-digit code. Lloyds Bank has agreed a list of SIC codes with Sustainalytics, the Bank’s sustainability partner,
for the ESG Bond I, which covers the sectors to be excluded. The same exclusionary criteria has been used for the ESG Bond II and the
ESG Term Deposits.
Tier 2: Governance/Responsible Lending Criteria
1. Loans must comply with Lloyds Bank code of business responsibility and
2. Loans must comply with Lloyds Bank SME charter
Tier 3: Environmental and Social Criteria
SMEs or agricultural enterprises that pass through Tiers 1 and 2 criteria are available for allocation to the ESG Bonds I and II and the ESG
Term Deposits if they fulfil one or more of the following criteria:
1. SME is located in the 30% most economically disadvantaged areas of the UK. Disadvantaged areas are determined using the Index
of Multiple Deprivation (IMD) published by the Office for National Statistics.
2. Healthcare providers located in the 30% most economically disadvantaged areas of the UK.
3. Enterprises which have been awarded grants through the UK’s Regional Growth Fund (“RGF”) – Bond I only
4. Small scale renewable projects that increase energy efficiency or climate change resilience (including flood recovery) of operations
(for Bond II only, AMC and Mid Market loans are also considered in addition to SMEs).
Loan Allocation
All loans allocated to the ESG Bonds I and II and the ESG Term Deposits represent new to bank lending from 9th July 2014 to 31st
December 2015. This includes any new lending applications by existing or new qualifying customers. The allocated amount is the amount
lent not the committed value and as a result material drawings and repayments (greater than 20% of the drawn value) are considered.
Allocated amounts may include an upfront arrangement fee depending on the terms and conditions of the loan.
Reporting
As at the 31st December 2015 the ESG Bonds I and II and the ESG Term Deposits were fully allocated. An annual report will be produced
as at 31st December of each corresponding year until maturity of the ESG Bonds I and II and the ESG Term Deposits.
APPENDIX A – REPORTING CRITERIA
32
Definition Product This Key Performance Indicator (“KPI”) measures the amount of lending to SMEs in the most economically disadvantaged areas of the
UK.
Scope Bond I, Bond II,
Term Deposit
The KPI applies to all lending across the UK.
Bond I It covers the period from 9th July 2014 to 31st December 2015.
Bond II It covers the period from 1tstJune 2015 to 31st December 2015.
Term deposit It covers the period from 1tstMay 2015 to 31st December 2015.
Units Bond I, Bond II,
Term Deposit
Total amount of lending (£) drawn during the above mentioned periods.
Method Bond I, Bond II,
Term Deposit
The total amount of new lending drawn during the above period by SME customers.
This KPI applies to all lending across postcode areas within the UK.
Lending from our core systems (“ACBS” and “CAP”) covering both fixed and floating rate lending as well as Hire Purchase Agreements sourced
from our Commercial Finance team have been retrieved and filtered to ensure compliance with Tier 1 and Tier 2 Criteria. All data is considered and
where data quality is an issue, such loans are excluded from the amount allocated to the bond.
Tier 1 filtering is based on excluding lending to companies within certain industrial sectors. A defined set of Standard Industrial Classification
(“SIC”) codes agreed with our sustainability partner (Sustainalytics) is used. These can be found on slide 35.
Tier 2 filtering is based on responsible lending and covers compliance with Lloyds Bank code of business responsibility and SME charter. Such
compliance is monitored through various businesses as usual governance committees. In addition to this a qualifying sample of eligible loans is
distributed to the front line to attest compliance.
The remaining population is filtered to ensure compliance with our Tier 3 criteria, which, in the case of this KPI, identifies lending to SMEs in the
most economically disadvantaged areas. This KPI relates to lending in the 30% most economically disadvantaged areas of the UK. To determine
all loans eligible, the post code for each loan is mapped to the Index of Multiple Deprivation and the bottom 30% of postcodes are used to create
this KPI.
Source Bond I, Bond II,
Term Deposit
Lending activity has been sourced from our core systems.
Bond I Hire Purchase Agreements have been sourced from our Commercial Finance Team.
Bond I, Bond II,
Term Deposit
The most economically disadvantaged area has been defined using the Index of Multiple Deprivation (“IMD”) published by the Office for National
Statistics (”ONS”).
Total amount of lending to Small and Medium Sized Enterprises (“SMEs”) in the most
economically disadvantaged areas
APPENDIX A – REPORTING CRITERIA
33
Definition Product This Key Performance Indicator (“KPI”) monitors the amount of lending to Healthcare Providers within the most economically disadvantaged areas of the
UK.
Scope Bond I, Bond II,
Term Deposit
The KPI applies to all lending across the UK.
Bond I It covers the period from 9th July 2014 to 31st December 2015.
Bond II It covers the period from 1tstJune 2015 to 31st December 2015.
Term Deposit It covers the period from 1tstMay 2015 to 31st December 2015.
Units Bond I, Bond II,
Term Deposit
Total amount of lending (£) drawn during the above mentioned period.
Method
Bond I, Bond II,
Term Deposit
The total amount of new lending drawn during the above period by SME customers.
This KPI applies to all lending across postcode areas within the UK.
The KPI monitors the amount of lending to Healthcare Providers within the most economically disadvantaged areas of the UK.
Lending from our systems (“ACBS” and “CAP”) covering both fixed and floating rate lending as well as Hire Purchase Agreements sourced from our Commercial
Finance team has been retrieved and filtered to ensure compliance with Tier 1 and Tier 2 Criteria. All data is considered and where data quality is an issue such
loans are excluded from the amount allocated to the bond.
Tier 1 filtering is based on excluding lending to companies within certain industrial sectors. A defined set of Standard Industrial Classification (“SIC”) codes agreed
with our sustainability partner (Sustainalytics) is used. These can be found on slide 35.
Tier 2 filtering is based on responsible lending and covers compliance with Lloyds Bank code of business responsibility and SME charter. Such compliance is
monitored through various businesses as usual governance committees. In addition to this a qualifying sample of eligible loans is distributed to the front line to attest
compliance.
The remaining population is filtered to ensure compliance with our Tier 3 criteria. This KPI relates to lending in:
a. The 30% most economically disadvantaged areas of the UK. To determine all loans eligible, the post code for each loan is mapped to the Index of Multiple
Deprivation, and the bottom ranked 30% of the postcodes are used.
b. Healthcare Providers. To determine qualifying Healthcare Providers, SIC codes have been used covering sectors within Human Health and Social Work.
Source Bond I, Bond II,
Term Deposit
Lending activity has been sourced from our core systems.
Bond I Hire Purchase Agreements have been sourced from our Commercial Finance Team.
Bond I, Bond II,
Term Deposit
The most economically disadvantaged area has been defined using the Index of Multiple Deprivation (“IMD”) published by the Office for National Statistics (”ONS”).
Bond I, Bond II,
Term Deposit
The 2007 SIC Codes for Human Health and Social Work have been used.
Section Q: Human Health and Social Work Activities
Division 86: Human Health Activities
Division 87: Residential Care Activities
Division 88: Social work Activities without accommodation
Total amount of lending to Healthcare Providers in the most disadvantaged areas
APPENDIX A – REPORTING CRITERIA
34
Total amount of lending to participants of the Regional Growth Fund
Definition Product This Key Performance Indicator (“KPI”) monitors the amount of lending awarded to recipients of the Regional Growth Fund (“RGF”).
Scope Bond I The KPI applies to all lending that meets the criteria of the Department for Business, Innovation & Skills scheme. Grants are awarded to qualifying
companies for asset purchases by SMEs that lack sufficient deposits to meet Lloyds Bank normal lending requirements.
London is excluded from the RGF and only 8% of allocated grants can be in the South East England so as to promote employment in areas where it is
most required.
Lloyds Bank can contribute up to 20% of the value of assets purchased by qualifying SMEs.
Bond I It covers the period from 9th July 2014 to 31st December 2015.
Units Bond I Total amount of lending drawn during the above mentioned period.
Method
Bond I The total amount of new lending drawn during the above period by SME customers.
Bond I
Lending from our core systems (“ACBS” and “CAP”) covering both fixed and floating rate lending as well as Hire Purchase Agreements sourced from our
Commercial Finance team has been retrieved and filtered to ensure compliance with Tier 1 and Tier 2 Criteria. All data is considered and where data
quality is an issue such loans are excluded from the amount allocated to the bond.
Tier 1 filtering is based on excluding lending to companies within certain industrial sectors. A defined set of Standard Industrial Classification (“SIC”) codes
agreed with our sustainability partner (Sustainalytics) is used. These can be found on slide 35.
Tier 2 filtering is based on responsible lending and covers compliance with Lloyds Bank code of business responsibility and SME charter. Such compliance
is monitored through various businesses as usual governance committees. In addition to this a qualifying sample of eligible loans is distributed to the front
line to attest compliance.
The remaining population is filtered to ensure compliance with our Tier 3 criteria, which in the case of this KPI relates to two types of lending:
a. Outright lending for asset purchases that have been approved for grants. These loans are booked to core systems, ACBS and CAP.
b. Assets purchased through Hire Purchase Agreements. These loans are appended to the dataset as lending administered throughout Commercial
Finance Teams.
The above qualifying drawn loans are mapped to the SME inventory sourced from core systems or appended (in the case of Hire Purchase Agreements)
following confirmation that such lending has taken place by our Commercial Finance Team.
Source Bond I Lending activity has been sourced from our core system or confirmed by Commercial Finance.
Bond I Hire Purchase Agreements have been sourced from our Commercial Finance Team.
Bond I A complete view of RGF activity is received from the Specialist Business Lending Unit. This covers both types of lending mentioned above.
APPENDIX A – REPORTING CRITERIA
35
Total amount of lending to small scale renewable energy projects
Definition Product This Key Performance Indicator (“KPI”) monitors the amount of lending to small scale renewable energy projects.
Scope Bond I & Bond II
The KPI applies to all lending related to small renewable energy projects.
Lloyds Bank provide loans to help SMEs and Mid Market customers in the agricultural sector to undertake small-scale renewable energy projects including
(but not restricted to) wind, solar, hydro and anaerobic digestion.
Bond I It covers the period from 9th July 2014 to 31st December 2015.
Bond II It covers the period from 1tstJune 2015 to 31st December 2015.
Units Bond I & Bond II
Total amount of lending drawn during the abovementioned period.
Method Bond I
The total amount of new lending drawn during the above period by SME customers.
Bond II The total amount of new lending drawn during the above period by SME, AMC and Mid Market customers.
Bond I & Bond II
Lending from our core systems (“ACBS” and “CAP”) covering both fixed and floating rate lending as well as Hire Purchase Agreements sourced from our
Commercial Finance team has been retrieved and filtered to ensure compliance with Tier 1 and Tier 2 Criteria. All data is considered and where data quality
is an issue such loans are excluded from the amount allocated to the bond.
Tier 1 filtering is based on excluding lending to companies within certain industrial sectors. A defined set of Standard Industrial Classification (“SIC”) codes
agreed with our sustainability partner (Sustainalytics) is used. These can be found on slide 35.
Tier 2 filtering is based on responsible lending and covers compliance with Lloyds Bank code of business responsibility, and additionally the SME charter for
SME loans only. Such compliance is monitored through various businesses as usual governance committees. In addition to this a qualifying sample of
eligible loans is distributed to the front line to attest compliance. The remaining population is filtered to ensure compliance with our Tier 3 criteria.
The above qualifying SME drawn loans from the data provided by the SME Banking Credit team are mapped to the SME inventory sourced from core
systems, to enable qualifying loans to be clearly attributed to the bond. Qualifying mid market drawn loans are provided by the Relationship Managers.
Qualifying AMC drawn loans are provided by the SME Business Partner Finance team and mapped to the AMC inventory sourced from core systems to
enable qualifying loans to be clearly attributed to the bond.
Bond II Renewables are prioritised in the allocation methodology.
Source Bond I & Bond II
Lending activity has been sourced from our core systems.
Bond I & Bond II
Hire Purchase Agreements have been sourced from our Commercial Finance Team.
Bond I & Bond II
A summary view of qualifying SME activity received from the SME banking credit team.
APPENDIX A – REPORTING CRITERIA
36
Tier 1: Exclusionary Criteria
Exclusionary Criteria SIC 2007 Code Description
Alcohol
46342 Wholesale of wine, beer, spirits and other alcoholic beverages
11010 Distilling, rectifying and blending of spirits
11020 Manufacture of wine from grape
Gambling 92000 Gambling and betting activities
Tobacco
01150 Growing Tobacco
12000 Manufacture of tobacco products
46350 Wholesale of tobacco products
47260 Retail sale of tobacco products in specialised store
Military Weapons 30400 Manufacture of military fighting vehicles
25400 Manufacture of weapons and ammunition
Payday Lending
64999 Financial Intermediation
64929 Other Credit Granting
64921 Specialist consumer credit grantors
Fossil Fuels
05101 Deep coal mines
05102 Open cast coal mines
05200 Mining of lignite
06100 Extraction of crude petroleum
06200 Extraction of natural gas
08920 Extraction of peat
20110 Manufacture of industrial gases
19100 Manufacture of coke oven products
35210 Manufacture of gas
Palm Oil
01260 Oil Palm Growing
10410 Palm Oil Production/Refining
46630 Wholesale of dairy products, eggs & edible oils and fats
APPENDIX B
PwC Assurance Report
_Lpwc
Our conctusionBased on the procedures we have performed and the evidence we have obtained, nothinghas come to our attention that causes us to believe that the Selected Information as at 31
December 2015 has not been prepared, in all material respects, in accordance with theReporting Criteria.
This conclusion is to be read in the context of what we say in the remainder of our report.
Selected Information
The scope of our work was limited to assurance over the information marked with the symbol inLloyds Bank plc’s Helping Britain Prosper ESG Bonds & Term Deposits: Annual Report, Statement ofAllocation as at 31 December 2015 (the “Selected Information”).The Selected Information and the Reporting Criteria against which it was assessed are summarised inthe table below. Our assurance does not extend to information in respect of earlier periods or to anyother information included in Lloyds Bank plc’s Helping Britain Prosper ESG Bonds & Term Deposits:Annual Report, Statement of Allocation as at 31 December 2015.
Selected Information Reporting Criteria*
ESGBondI• Total ligible loans allocated - Page 31
: Total allocated to 30% most economically disadvantaged areas Page 32• Total allocated to healthcare providers located within the 30% Page 33
most economically disadvantaged areas• Total lending to customers who have been awarded grants Page 34
through the regional growth fund .
-
. Total allocated to small scale renewable energy projects Page 35ESG Bond II
• Tot•• eligible loans allocated Page 31
• Total allocated to 30% most economically disadvantaged areas Page 32
• Total allocated to healthcare providers located within the 30% Page 33most economically disadvantaged areas
. Total allocated to renewable energy projects Page 35Term Deposit
. Total eligible loans allocated; Page i
. Total allocated to 30% most economically disadvantaged Page 32areas; and
• Total allocated to healthcare providers located within the 30% Page 33most economically disadvantaged areas.
Professional standards applied and level ofassurance
We performed a limited assurance engagement in accordance with International Standard onAssurance Engagements 3000 (Revised) ‘Assurance Engagements other than Audits and Reviews ofHistorical Financial Information’ issued by the International Auditing and Assurance StandardsBoard. A limited assurance engagement is substantially less in scope than a reasonable assuranceengagement in relation to both the risk assessment procedttres, including an understanding of internalcontrol, and the procedures performed in response to the assessed risks.
Our Independence and Quahizj ControlWe applied the Institute of Chartered Accountants in England and Wales (ICAEW) Code of Ethics,which includes independence and other requirements founded on fundamental principles of integrity,objectivity, professional competence and due care, confidentiality and professional behaviour.We apply International Standard on Quality Control (UK & Ireland) 1 and accordingly maintain acomprehensive system of quality control including documented policies and procedures regardingcompliance with ethical requirements, professional standards and applicable legal and regulatoryrequirements.Our work was carried out by an independent and multi-disciplinary team with experience insustainability reporting and assurance.
Understanding reporting and measurement methodologies
The Selected Information needs to be read and understood together with the Reporting Criteria, whichLloyds Bank plc is solely responsible for selecting and applying. The absence of a significant body ofestablished practice on which to draw to evaluate and measure non-financial information allows fordifferent, but acceptable, measurement techniques and can affect comparability between entities andover time. The Reporting Criteria used for the reporting of the Selected Information are as at 31
December 2015.
IVork done
We are required to plan and perform our work in order to consider the risk of material misstatementof the Selected Information. In doing so, we:• made enquiries of Lloyds Bank plc’s management, including those with responsibility for the Helping
Britain Prosper ESG Bonds & Term Deposits: Annual Report, Statement of Allocation as at 31
December ors;• evaluated the design of the key structures, systems, processes and controls for managing, recording
and reporting the Selected Information. This included analysing a limited number of lendingprojects, selected on the basis of our risk assessment to understand the key processes and controlsfor reporting the Selected Information;
• performed limited substantive testing on a selective basis of the Selected Information in relation to alimited number of lending projects to check that data had been appropriately measured, recorded,collated and reported; and
• considered the disclosure and presentation of the Selected Information.
Independent Limited Assurance Report to the Directors of Lloyds Bank plc
The Board of Directors of Lloyds Bank plc engaged us to provide limited assurance on the information described below and set out in Lloyds Bank plc’s Helping BritainProsper ESG Bonds & Term Deposits: Annual Report, Statement of Allocation as at 31 December 2015.
* Pages referred to in the table above refer to the Reporting Criteria as set out on pages 28 to 36 ofLloyds Bank plc’s Helping Britain Prosper ESG Bonds & Term Deposits: Annual Report, Statement ofAllocation as at 31 December 2015’.
38
— Independent Limited Assurance Report to the Directors of Lloyds Bank plcpwc
The Board of Directors of Lloyds Bank plc engaged us to provide limited assurance on the information described below and set out in Lloyds Bank plc’s Helping BritainProsper ESG Bonds & Term Deposits: Annual Report, Statement of Allocation as at 31 December 2015.
Lloyds Bank plc’s rc:sportsibitities
The Directors of Lloyds Bank plc are responsible for:designing, implementing and maintaining internal controls over information relevant to thepreparation of the Selected Information that is free from material misstatement, whether due to fraudor error;
• establishing objective Reporting Criteria for preparing the Selected Information;• measuring and reporting the Selected Information based on the Reporting Criteria; and• the content of the Helping Britain Prosper ESG Bonds & Term Deposits: Annual Report, Statement
of Allocation as at 31 December 2015.
Ottr responsibilities
We are responsible for:• planning and performing the engagement to obtain limited assurance about whether the Selected
Information is free from material misstatement, whether due to fraud or error;• forming an independent conclusion, based on the procedures we have performed and the evidence
we have obtained; and• reporting our conclusion to the Directors of Lloyds Bank plc.
This report, including our conclusions, has been prepared solely for the Board of Directors of LloydsBank plc in accordance with the agreement between us, to assist the Directors in reporting the HelpingBritain Prosper ESG Bonds & Term Deposits: Annual Report, Statement of Allocation as at 31
December 2015. We permit this report to be disclosed on Lloyds Bank plc’s website, to assist theDirectors in responding to their governance responsibilities by obtaining an independent assurancereport in connection with the Selected Information. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the Board of Directors and Lloyds Bank plc forour work or this report except where terms are expressly agreed between us in writing.
(Lf
PricewaterhouseCoopers LLPChartered AccountantsLondon31 March 2016
‘The maintenance and integrity of Uovds Bank plc’s website is the responsibility of the Directors; the work carried out by us does not
involve consideration of these matters and, accordingly, we accept no responsibility for any changes that mat have occurred to the
reported Selected Information or Reporting criteria when presented on Lloyds Bank plc’s website,
39
IMPORTANT INFORMATION
40
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not be treated as investment research, a research recommendation, an opinion or advice; (v) is confidential and has been prepared by, and is subject to the copyright
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Persons”), and no representation or warranty, express or implied, is made as to whether or not such an event will occur; (viii) is subject to change at any time and
Lloyds Bank is under no obligation to inform any person of any such change; (ix) may only be sent to recipients who may lawfully receive it in accordance with
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Lloyds Bank and Lloyds Bank Commercial Banking are trading names of Lloyds Bank plc. Lloyds Bank and Lloyds Bank Commercial Banking are trading names of
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