The case for ESG in a Trumpian world

Marginal decisions

 

Ethical business has always been about marginal decisions, not obvious ones.

 

While some institutions are now rejecting net zero, the likes of the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) are still driving ahead with climate-related regulation. 

 

Climate change denial will neither diminish the work being done to address scope 3 emissions nor stop the incoming International Financial Reporting Standard (IRFS) 1 and 2.

 

We might be seeing the European Committee already amending the Corporate Sustainability Reporting Directive (CSRD), as part of its Omnibus package – but that’s about a rebalance, not retrenchment.

 

The regulatory die is cast – a sustainable future is the safe bet. Because, what’s the alternative?

 

For better or worse, ESG as a concept has outgrown the investment industry.

 

This is one thing we at Sustainability for Housing have in common with the US administration – we both see ESG as something bigger than finance.

 

It speaks to why do we do what we do as a sector. Because we believe in social justice. We care about sustainable communities. And we’re here for people who are left behind. It’s undeniable that the planet is burning, and the most vulnerable groups are hit the hardest.

 

There’s an irrepressible generational shift happening. People are more aware of the effects of their actions on the planet, leading to lifestyle changes including turning their lights off, using less energy and shopping more ethically.

 

The UK population didn’t vote for Mr Trump, and households will continue to struggle with high energy bills and fuel poverty, even more so if sustainability and ESG are removed from the housing agenda.

 

Thankfully, we also have a UK government that is committed to more social and affordable housing.

 

With the recent funding and policy pledges, and the launch of the latest Warm Homes funding for retrofit, the government is making some much-needed strides to tackle the housing crisis and helping move homes to net zero.

 

But we can’t deny the economic pressures. In a period of acute public spending pressures, social policy areas are the ones that suffer.

 

Now that defence budgets are going back up, there is a risk that social policy may, once again, be sidelined.

ESG in housing

 

As a sector, we have a moral obligation to care – and a duty to demonstrate where we are on our journey.

 

It was suggested for some time that housing associations that implement ESG strategies can access cheaper finance.

 

But ESG has never really been about pricing. It’s always been about creating long-term value. It is about resilience and sustainability, transparency and accountability.

 

Stakeholders want to see tangible progress – and something that pushes housing associations to drive performance and raise standards.

 

The Sustainability Reporting Standard for Social Housing (SRS) may have been designed hand-in-hand by the sector and the financial community, but it captures a lot of information that wider stakeholders are looking for.

 

So, what’s the value of ESG, if not about saving money?

 

When organisations sign up to the SRS, they are signing up to becoming a healthier business.

 

I wear my smartwatch everyday – it tracks my sleep, it measures my heart rate, it counts my steps and much more. Yet, I don’t have to wear it. It is a personal choice I make to monitor my health and physical activity.

 

Similarly, ESG reporting is an internal discipline.

 

It allows housing associations to track their progress and proves to stakeholders like the UK government that your housing association is effective and fitter than ever.

 

This, in turn, will help the government as it makes tough choices on spending and seeks return of investment. 

 

And it is equally important for residents to hold housing associations to account.

 

ESG in practice

 

Ultimately, an ESG framework serves as an internal checklist, providing organisations with both a moral compass and a management tool.

 

Adhering to the SRS and implementing ESG strategies aren’t about reaching the top of a hypothetical league table.

 

But housing associations can use this as opportunity to benchmark themselves against other organisations to take their own, specific goals and missions even further.

 

The collective power of the SRS should not be ignored, either. As we approach what is likely to be a tough comprehensive Spending Review, the objective data of 130 housing associations proving the tangible progress they are making towards a wide range of social policy outcomes is a strong message to deliver to HM Treasury. 

 

A message few, if any, other sectors can match.

 

Beyond monetary gain and exposure, ESG goals signal a commitment to making real change, including improving living standards and quality of life for residents.

 

There’s no denying that the election of Mr Trump has triggered scepticism around ESG and its adjacent initiatives.

 

But ESG by any other name is very much alive.

 

The UK housing sector must block out the noise and refocus our attention to what is important. Tackling fuel poverty, high energy bills and unfit homes with damp and mould remains our top priority.

 

We need to show that we’re on the right track and getting the job done. We need to demonstrate why this sector has been, and always will be, good value for money.

 

Piers Williamson, chair, Sustainability for Housing