NatWest was praised for providing an "important standard" on additionality for its sustainable bond issuances in 2021, leading to it pick up both the green and social bond of the year award for financial institutions as well as the green bond use of proceeds innovation of the year award.

The UK lender raised €1 billion ($1.1 billion) from a social bond in February to finance affordable housing loans to housing associations, before raising £600 million ($790 million) from a green bond in November to support its newly launched green residential mortgage lending programme.

The judges praised the bonds for their incorporation of clear limits on how much of the proceeds could be used to refinance existing lending, looking to address rising concern from investors that sustainable bonds demonstrate clear "additionality". The social bond committed at least 25% of proceeds to finance future loans, with the green bond committed to using at least 50% of proceeds for new loans.

The "innovative" terms of the green bond to "limit refinancing and increase additionality" set an "important standard" for green bonds, one judge said, and could create a market for 'darker' green issuances in the future for investors seeking higher impact.

The innovative strategy adopted by NatWest also involved the London-listed firm publishing an initial allocation report at the point of issuance, rather than waiting until the first annual post-issuance report is published 12 months after issuance as is usual.

This "clear" capital allocation strategy was "really appreciated," according to a judge, and provided additional transparency for the investors.

The judges also welcomed the "strong alignment" of the use of proceeds for both of these bonds with NatWest's overall business strategy. The green bond will support the roll-out of cheaper 'green mortgages' for residential properties with an Energy Performance Certificate (EPC) score of 'A' or 'B' as it looks to achieve a 50% EPC 'C' or higher mortgage book by 2030. The social bond, meanwhile, was the first UK issuance by a financial institution focused on housing association funding.

The two bonds were the first issued under the updated frameworks published by NatWest and followed two earlier sustainable bond issues by NatWest. According to Environmental Finance Data, NatWest – then named Royal Bank of Scotland (RBS) – previously issued a €750 million social bond in 2019 and $600 million green bond in 2020.