Poor sustainability disclosures are akin to junk status. We need to tell our story

The dial has shifted

 

Only a few years ago, talking about sustainability outcomes and linking ESG performance to new funding was still very much a luxury.

 

When we issued the first green loan in the sector with NatWest, there were still vanilla funding deals without any link to sustainability. The dial has now shifted; funders want a focused narrative on how we are positively impacting our people and places.

 

Once driven by discussions focused on margins and interest coverage, investor roadshows are now dominated with questions on a range of ESG themes – from how we are supporting our customers through the rising cost of living to our roadmap for reducing our carbon footprint. And negotiations on new bank loans now focus heavily on linking to several KPIs measuring ESG outcomes, with specialist sustainability committees challenging target setting to ensure we continue to stretch the boundaries of what we can achieve.

 

If we once thought it, we now know it for sure: poor sustainability disclosures are akin to junk credit status. If we get it wrong, we will be locked out of new funding and the ambitions of our corporate strategy will be cut short. We can choose to live in fear of that outcome, or we can choose to see this as a new dawn to tell our story in an even more compelling way.

ESG in our DNA?

 

So how did we come to this position?

 

In our view, sustainability has always been integral to our purpose as housing associations. We are stewards of social housing, who are here for the long term, with 30-year business plans and financial strategies to match, making decisions and investments today that need to deliver social outcomes both in the immediate term and for years to come.

 

We are quite rightly proud of our not-for-profit status that reinvests our surpluses into new and existing homes, and our mission to help our customers and communities thrive.

 

But the reality is, the narrative around our purpose has been eroded.

 

Purpose is becoming an integral part of all businesses, and what used to be our USP is now a very competitive marketplace.

 

While as a sector we’ve been weighing up the pros and cons of being fully invested in ESG, and grappling with a set of new challenges, sustainability has gone mainstream. We’re now seeing other sectors doing it better.

 

So, how do we respond? Just as we own our credit ratings, and rather than being a slave to the agency scorecards, we have the opportunity to drive our sustainability agenda so it remains housing association-led but resonant with the investor community. This is exactly what we have been doing at Bromford.

 

Establishing the golden thread

 

Investors will soon express their red lines – but we can reclaim the ground and drive the agenda before they do that. We know the true drivers of ESG outcomes. We know our assets, homes and people and what really makes a difference.

 

At Bromford, we have reflected this in our 2023-27 corporate strategy, which in turn powers our sustainable finance framework and drives investment decisions.

 

We have established this golden thread across our organisation; it ends with a link to the funder community to co-create new linkages for sustainable finance. This is how we make sure we remain in control of our sustainability journey.

 

Looking to the future

 

We still think we need to work harder to define the ‘S’ in ESG. We have started this work by examining homelessness reduction, improving customer advocacy, focusing on the number of social homes built and our market-social rent differential. But, we have much further to go.

 

And, of course, we need the board on the journey. We have been working hand in hand with the group board and treasury committee this year to establish what good ESG reporting looks like.

 

Above all, we need to embrace this journey with authenticity; an acknowledgement that we don’t have all of the answers, and in many instances, still don’t know the right questions to ask.

 

And we need to frame everything back to our customers and colleagues and make sure they are driving our agenda so we deliver ESG outcomes that have a positive impact on our communities and places.

 

In short, we need to stop hiding behind our financial metrics and start telling our story.

 

If we get that right, we can unlock new funding so that we can continue to do what we do best in our sector – investing in our homes and relationships so our people can thrive.

 

Imran Mubeen, director of treasury, Bromford