Why treasury activity must be customer-centred, and ESG a two-way street with lenders

Credit where it’s due

 

For many years, there has been a rather lofty view that customers don’t care about or understand how we finance ourselves.

 

We don’t agree. Our customers have told us they want to hear more from our funders and other financial stakeholders.

 

After all, the money lent to us by investors and banks is invested in our customers’ homes and communities, and credit rating agencies check that we are managing our finances effectively so that we are able to repay our debt.

 

At a recent series of workshops, everyone had the chance to openly share their questions and ideas.

 

This ranged from analysts explaining the importance of lending criteria and credit ratings for housing associations, to customers sharing their backgrounds, their routes into social housing, and their individual experiences of interacting with Bromford. 

 

A key theme was that each customer’s circumstance is unique, and they each need something different from Bromford.

 

Our customers raised interesting questions, sparking lively debate. How is the customer experience factored into lending decisions and credit ratings?

 

What should the balance of investment be between new and existing homes? How are lenders and agencies selected by housing associations?

 

There were also plenty of questions for our customers. What is the condition of their homes? How have their experiences been with repairs and home improvements? What relationship do they have with their neighbourhood coaches?

 

These are questions that may have missed the customer voice in our regular meetings with our treasury partners, but we believe that having the answers is crucial in truly understanding our performance.

 

We heard from a customer who had benefited hugely from the support of a neighbourhood coach during the pandemic, describing their experience as life-changing.

 

On the other hand, another customer was frustrated by our responsiveness to repairs, and we discussed the home standard gap between new and existing homes.

 

Hearing about these experiences directly from customers was extremely powerful in understanding the huge impact we have on their lives.

 

Both sides developed a deeper and fuller understanding of Bromford as a result.

Asking more of our funders

 

We believe we must create similar spaces for our investors to engage with our customers and learn about their experience of living in a Bromford home.

 

This includes being honest and open: we don’t get everything right, and it’s important that we recognise that with our investors and customers, too.

 

As part of our plans to raise £1bn of sustainable finance, we are intending to return to the capital markets in 2024 and our call to investors is simple: don’t invest a single pound in Bromford without first speaking to the people we are here to serve.

 

And just as they want to hear about our sustainability journey, we want to know about their commitment to environmental, social and governance (ESG) issues, too – including in our priority areas of customer service, carbon emissions (including scope one, two and three), and on diversity, equity and inclusion in the form of gender, ethnic and disability pay gaps.

 

The starting point for us is asking for disclosure, sharing information more evenly – and then making this disclosure part of our own selection process.

 

That includes scoring banks in areas such as their commitment to our sector, how much lending they do through the cycle (alongside things like covenants and loan terms) – and how well they’re performing and committing to sustainability.

 

It’s important to stress that this is not about a snapshot in time, but about the journey that funders – like all businesses – are on towards a more sustainable future.

 

This isn’t about ‘cancelling’ the major banks for investing in fossil fuels; it’s about working with them to understand their transition plans, challenging their carbon reduction targets and holding them to account on their performance.

 

After all, if banks cannot articulate their own sustainability journey, can we rely on them to enquire about our own ESG performance and advise us on how to set out our narrative for investors?

 

Power of partnership

 

I know these approaches will raise some eyebrows across the sector.

 

Might this reduce our choice of funders and materially impact our own financial strength?

 

We don’t believe so – because this is about funders walking the walk on sustainability and being willing to work with us to demonstrate that they’re serious about purpose. And we are confident that they are – so speaking as a treasury team, it’s a risk we’re willing to take.

 

The response we’ve already had from our ratings agencies and funders not only demonstrates that they see the value too – but that housing associations can use their position of influence to ask more of partners.

 

Our sector is arguably one of the best, if not the best, ESG investment for any bank or investor.

 

These credentials put us – and our fellow housing associations – in a position that we can leverage, for the good of our business, the good of the sector but most importantly in the interests of our customers, the communities in which we work and society as a whole.

 

As one Bromford customer put it, being involved at this level shows that we value their opinion – and are adopting a “trusting and collaborative mindset”.

 

Imran Mubeen, director of treasury, and Rachel Hurst, head of new funding, Bromford