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HELPING BRITAIN PROSPER
ESG BONDS
Annual Report
Statement of Allocation
31st December 2016
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
CONTENTS
Introduction 4
The ESG Bonds Aggregated Highlights 5
ESG Bonds Case Studies 9
Bond I Eligible Assets & Highlights as at 31st December 2016 12
Bond II Eligible Assets & Highlights as at 31st December 2016 17
Appendix A: Reporting Criteria 21
Appendix B: Ernst & Young Assurance Report 32
3
ESG BONDS INTRODUCTION
4
In support of its Helping Britain Prosper Plan, Lloyds Bank plc (the Bank) has the ESG Bond I and the ESG Bond II. All loans allocated to the bonds
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 9th July 2014, maturing on 9th December 2018 and pays a 2.75% fixed coupon semi annually. The £250
million ESG Bond II was issued on 1st June 2015, maturing on 1st June 2022 and pays a 2.50% fixed coupon semi annually. Qualifying loans are
matched to bonds from 9th July 2014 to 31st December 2016 and represent new bank lending. During the year, on 29th April 2016 and 12th August
2016, the two 12 month fixed rate Term Deposits, totalling £40m, matured.
All balances used throughout this report are sourced from Lloyds Bank source systems as at 31st December 2016. Loans are assessed against three
tiers of the Bank’s eligibility criteria (set out below and which were agreed in conjunction with Sustainalytics1 when Bond I was issued), resulting in
amounts allocated to the selected key performance indicators.
•SIC2 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 areas of the UK3
Small scale and mid market renewable
energy projects
SMEs and healthcare providers in the
bottom 30% of economically
disadvantaged areas of the UK3
1. Sustainalytics are an external 3rd party sustainability consultancy used by Lloyds Bank to structure the eligibility criteria of ESG Bond I
2. SIC refers to Standard Industry Code
3. Based on postcodes as defined by the Index of Multiple Deprivation produced by the Office for National Statistics at bond inception date
ESG BOND I ESG BOND II
THE ESG BONDS I & II
AGGREGATED
HIGHLIGHTS
BOND I & BOND II AGGREGATED HIGHLIGHTS
6
£500m
Of allocated
eligible loans
88%
Allocated to 30% most
economically
disadvantaged areas
269
Jobs created or saved through the £7m
lending awarded under the RGF.
2,419
Qualifying
loans
£7m
Lent via the
RGF
£48m
Allocated to
healthcare providers
110
Renewable
energy projects
£52m
Allocated to renewable
energy projects
7
ESG BONDS HIGHLIGHTS
£500m Allocation by Region
Central London North EastMidlands North WestUnknown Wales & BordersSouth East ScotlandEast Midlands South WestEast England South Central
£500m Lending by Type1
Disadvantaged Areas
Renewables
Healthcare
RGF
1. Lending can meet one or more of the criteria above. For example, healthcare is a subset within the economically disadvantaged areas.
2. Other includes biomass (including anaerobic digestion) and loans to small scale agricultural borrowers for renewable energy purposes.
£52m Total Renewables
by Type
Wind
Solar
Hydro
Other 2
ZE
ZE3
KW
KW
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LONDON
NW
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UBW
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HEALTHCARE ALLOCATION BY REGION AND SECTOR
8
£48m of healthcare lending distributed across the UK to 143 customers are
included within the two Bonds. All sectors within Human Health and Social
Work are considered.
Over £15m lent to General medical practices, with a further £14m to Hospital
activities.
Healthcare
£ millions
0 - 0.5
0.5 - 1
1 - 5
5 - 10
10+
Regional Loan Allocation by Value
£48m Lending
by Sector
General medical practice activitiesHospital activitiesDental practice activitiesSocial work activities without accommodationOther residential care activitiesMedical nursing home activitiesOther human health activities
Healthcare Lending by Sector
ESG BONDS CASE
STUDIES
STAIRCRAFT (MIDLANDS) LTD
10
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
Note: Case Study produced in 2014
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
11
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
Note: Case Study produced in 2014
THE ESG BOND I
Eligible Assets & Highlights
BOND I ELIGIBLE ASSETS: AS AT 31 DECEMBER 2016
13
TOTAL ALLOCATION
£250.0m
of eligible loans allocated
ECONOMICALLY DISADVANTAGED AREAS
£242.6m
of eligible loans allocated to the 30% most
economically disadvantaged areas1
HEALTHCARE
£17.0m
allocated to healthcare providers in the 30% most
economically disadvantaged areas1
REGIONAL GROWTH FUND
£7.1m
lent to customers who have been awarded
grants through the Regional Growth Fund1
RENEWABLE ENERGY
£2.0m
allocated to small scale renewable
energy projects1
Indicates that procedures have been performed over these balances to obtain limited assurance by Ernst & Young. The limited assurance report can be found in Appendix B.
1. Lending can meet one or more of the above criteria. For example, healthcare borrowers can also be located in an economically disadvantaged area.
A
A
A
A
A
A
BOND I ADDITIONAL HIGHLIGHTS
14
100%
Of the bond
allocated
97%
Allocated to 30%
most economically
disadvantaged areas
269
Jobs created or saved through the £7m
lending awarded under the RGF.
1,315
Qualifying
loans
6
Renewable
energy 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
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NP
NR
NW
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FK
OX
PA
PA
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EEC
EN
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LONDON
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UBW
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THE ESG BOND I: OVERALL ALLOCATION SUMMARY
15
The £250m bond was fully allocated as at 31st December 2016.
Lending across the UK in 98 of 122 postcode areas
Average loan equates to c.£190k
A total of 1,315 qualifying loans across 18 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
223.9
17.0
5.4
1.7
2.0
ZE
ZE3
KW
KW
AL
B
BA
BB
BD
BHDT
GY
JE
BL
BN
BRBS
CA
CB
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CH
CM
CO
CR
CT
CV
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DD
AB
DE
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EEC
EH
EN
EX
FY
GL
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HP
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IM
IP
IV
KA
KA
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KY
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PA
PA
PE
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UB W
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EN
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LONDON
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UBW
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RGF ALLOCATION BY REGION AND SECTOR
16
RGF £7.1m of lending to customers awarded grants through the Regional Growth Fund
The largest two sectors in which grants were awarded are in manufacturing
(£2.8m) and construction (£1.4m)
343 jobs created or saved across the UK as a result of the grants awarded
since inception. 269 of these jobs relate to the £7.1m loans still active as at
31st December 2016.
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
Manufacturing
Construction
Wholesale & Retail Trade
Professional, Scientific & Technical
Transportation and Storage
Information & Communication
Accommodation & Food
Real Estate
Water Supply, Sewerage & Waste Mngt
RGF by Sector
THE ESG BOND II
Eligible Assets & Highlights
BOND II ELIGIBLE ASSETS: AS AT 31 DECEMBER 2016
18
TOTAL ALLOCATION
£250.0m
of eligible loans allocated
ECONOMICALLY DISADVANTAGED AREAS
£199.8m
of eligible loans allocated to the 30% most
economically disadvantaged areas1
HEALTHCARE
£31.0m
allocated to healthcare providers in the 30%
most economically disadvantaged areas1
RENEWABLE ENERGY
£50.2m
allocated to small scale and mid market
renewable energy projects1
Indicates that procedures have been performed over these balances to obtain limited assurance by Ernst & Young. The limited assurance report can be found in Appendix B.
1. Lending can meet one or more of the above criteria. For example, healthcare borrowers can also be located in an economically disadvantaged area.
A
A
A
A
A
BOND II ADDITIONAL HIGHLIGHTS
19
100%
Of the bond
allocated
80%
Allocated to 30% most
economically
disadvantaged areas
1,104
Qualifying
loans
104
Renewable
energy 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
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SOSP
SR
SS
ST
SW
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TA
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UB W
WA
WC
WD
WF
WN
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WS
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YO
BT
BR
CR
EEC
EN
H A
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KT
N
LONDON
NW
SE
SL
SM
SWTW
UBW
WC
WD
THE ESG BOND II: OVERALL ALLOCATION SUMMARY
20
The £250m bond was fully allocated as at 31st December 2016.
Lending across the UK in 96 of 122 postcode areas
Average loan equates to c.£226k
A total of 1,104 qualifying loans across 18 sectors £ millions
0 - 0.5
0.5 - 1
1 - 5
5 - 10
10+
UK Regional Loan Allocation by Value
Loan Value by Criteria (£ millions)
31.0
168.8 50.2
Deprived Area
Healthcare
RenewableEnergy
APPENDIX A
Reporting Criteria
APPENDIX A: REPORTING CRITERIA – CONTENTS
Statement of Directors Responsibilities 23
Introduction 24
Total amount of lending to SMEs 27
Total amount of lending to Healthcare providers 28
Total amount of lending to participants of the RGF 29
Total amount of lending to renewable projects 30
Tier 1 Exclusionary List 31
22
STATEMENT OF DIRECTORS RESPONSIBILITIES
23
APPENDIX A – REPORTING CRITERIA
24
Introduction
1. Sustainalytics are an external 3rd party sustainability consultancy used by Lloyds Bank to structure the eligibility criteria of ESG Bond I
The Reporting Criteria document details the approach and scope used to allocate qualifying loans to the ESG Bond I and II.
Background
The loans allocated to the ESG Bond I were assessed in accordance with the eligibility criteria agreed in conjunction with
Sustainalytics1. The first 2 tiers of eligibility criteria has been applied to the loans allocated to the ESG Bond II, with tier 3 being
amended by excluding RGFs (as the scheme closed in December 2015) and including Mid Market and Agricultural Mortgage
Company (AMC) small scale renewable loans.
A process to identify all loans to SMEs, mid market customers and AMCs from Lloyds Bank systems has been put in place.
These loans are then assessed against 3 tiers of eligibility resulting in amounts allocated to the bonds.
Period covered by the data for the Bonds
The period in scope is from bond issue to date of reporting. These are as follows:
• ESG Bond I: 9th July 2014 to 31st December 2016
• ESG Bond II: 1st June 2015 to 31st December 2016
Scope and Organisation Boundary for ESG Reporting
The scope covers the loans allocated to the ESG Bonds, which have been issued by Lloyds Bank, all of which meet the Bank’s
eligibility criteria.
APPENDIX A – REPORTING CRITERIA
25
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.
Key Performance Indicators
APPENDIX A – REPORTING CRITERIA
26
Tier 1: Exclusionary Criteria
Lloyds Bank has categorised borrowers in accordance with Standard Industrial Classification (“SIC”) code. Lloyds Bank has agreed a list of
SIC codes with Sustainalytics, for the ESG Bond I, which covers the sectors to be excluded. The same exclusionary criteria has been used
for the ESG Bond II (this list can be found on page 31).
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 meet the Tiers 1 and 2 criteria are available for allocation to the ESG Bonds I and II 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 represent new to bank lending between 9th July 2014 and 31st December 2016. This includes
any new lending applications by existing or newly qualifying customers. The allocated amount is the amount lent not the committed value.
As a result only material drawings and repayments (greater than 20% of the drawn value as at the previous reporting period) 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 2016 the ESG Bonds I and II 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.
APPENDIX A – REPORTING CRITERIA
27
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 The KPI applies to all lending across the UK.
Bond I It covers the period from 9th July 2014 to 31st December 2016.
Bond II It covers the period from 1tstJune 2015 to 31st December 2016.
Units Bond I & Bond II Total amount of lending (£) drawn during the above mentioned periods.
Method Bond I & Bond II 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 31.
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 business as usual governance committees. In addition to this a qualifying sample of
eligible loans is validated annually by respective Relationship Managers to confirm 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. This was performed at bond inception.
Source Bond I & Bond II 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 The most economically disadvantaged area has been defined using the Index of Multiple Deprivation (“IMD”), published by the Office for
National Statistics (”ONS”) , applicable as at bond inception.
Total amount of lending to Small and Medium Sized Enterprises (“SMEs”) in the most
economically disadvantaged areas
APPENDIX A – REPORTING CRITERIA
28
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 The KPI applies to all lending across the UK.
Bond I It covers the period from 9th July 2014 to 31st December 2016.
Bond II It covers the period from 1tstJune 2015 to 31st December 2016.
Units Bond I & Bond II Total amount of lending (£) drawn during the above mentioned period.
Method
Bond I & Bond II 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 31.
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 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 The most economically disadvantaged area has been defined using the Index of Multiple Deprivation (“IMD”), published by the Office for
National Statistics (”ONS”), applicable as at Bond inception.
Bond I & Bond II 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
29
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.
The Regional Growth Fund scheme closed on 3rd December 2015, therefore as of this date no further RGF grants have been issued.
Bond I It covers the period from 9th July 2014 to 31st December 2016.
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 Global Transaction Banking, Hire Purchase & Leasing 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 31.
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
Global Transaction Banking 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 Global Transaction Banking, Hire Purchase & Leasing team.
Source Bond I Lending activity has been sourced from our core system or confirmed by Global Transaction Banking, Hire Purchase & Leasing team.
Bond I Hire Purchase Agreements have been sourced from our Global Transaction Banking, Hire Purchase & Leasing team.
APPENDIX A – REPORTING CRITERIA
30
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 2016.
Bond II It covers the period from 1tstJune 2015 to 31st December 2016.
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 31.
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 (for Bond II this also includes AMC and mid market loans).
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 bonds. For Bond II only, qualifying mid market drawn loans are provided
by the Relationship Managers and 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 Bond II.
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
31
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
Ernst & Young Assurance Report
EY ASSURANCE REPORT (PAGE 1 OF 2)
33
EY ASSURANCE REPORT (PAGE 2 OF 2)
34
IMPORTANT INFORMATION
35
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