We may be wrapped up in ESG – but actions speak louder than labels
‘ESG finance’ could soon just be ‘finance’ for housing associations – and actions will always speak louder than labels, writes editor Sarah Williams
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To say that Social Housing is interested in ESG finance is something of an understatement.
From reporting the very first green-labelled bond by a housing association (HA) in 2014, to charting the rapid escalation of sustainability-linked financial instruments in the past three years, we’re as wrapped up in the green-tinged revolution as the best of them.
But with the movement now well and truly in the mainstream as more than £4bn of labelled HA debt circulates in the capital markets alone, will ESG finance soon revert to being just, well, finance?
As more HAs unveil sustainable finance frameworks, often accompanied by wider sustainability strategies, several have been at pains to emphasise that these moves ‘formalise’ rather than reinvent previous approaches.
That position in some ways strengthens the defence that this is no ‘greenwashing’, but rather a clearer representation of purposeful activities under way. Other voices have cautioned that more work still needs to go into the evolution of reporting standards in the sector to ensure that impact is truly measurable, comparable, and potentially even auditable.
On the latter point, HAs should take care to avoid accidental ‘audit creep’, writes one of the columnists in our latest edition of Social Housing.
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Meanwhile, sector experts are increasingly warning of a higher cost of debt for those that do not flash their impact, while others have voiced concern that discounts currently available do not sufficiently justify the costs involved in administering such labels.
Whether seeking to enjoy a ‘greenium’, or ultimately avoid a penalty, the trend appears to be travelling in just one direction. In the view of one sector advisor, soon it may be non-ESG-wrapped bonds that are the minority.
But beyond the remit of financial products, HAs really are flexing their ESG muscles more broadly.
They are continuing to grapple with the charge towards 2050 on decarbonisation – and finding new ways of collaboration and knowledge-sharing to reach it.
They are stepping up their engagement with residents, in line with what the Tpas chief executive, writing for us this month, calls a “quiet revolution in tenant influence”; a long-awaited, but much welcomed trend.
And they are boosting both the activities and spending power of their community arms, where a variety of organisational, financial and governance structures have emerged in the past decade as associations attempted to safeguard vital projects while dealing with tightened belts.
While structural approaches and funding sources diverge across different HAs’ community foundations and trusts, a common theme has emerged in terms of increased need and funding for their activities during the pandemic.
A recent NHF-led commitment to avoiding evictions, after the lifting of the government-imposed ban, and continued support for tenants to sustain their tenancies as further government support is withdrawn, is another positive sign.
As ESG finance becomes the status quo, it is these acts, together with the genuine experience of tenants and the sector’s performance on value for money, that will continue to matter most. Actions speak louder than labels.
Sarah Williams, editor, Social Housing
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