19 funders poised to adopt social housing ESG reporting standard

News08 Oct 2020Sarah Williams

A call for ‘early adopters’ of a new standardised approach to environmental, social and governance (ESG) reporting within UK social housing has attracted interest from 19 lenders and investors, Social Housing can reveal.

Picture: Getty

Sharelines

19 funders poised to adopt social housing ESG reporting standard #UKhousing #SocialHousingFinance

A call for ‘early adopters’ of a new standardised approach to #ESG reporting within UK social housing has attracted interest from 19 lenders and investors

37 RPs have registered their interest to become 'early adopters' of a new social housing #ESG reporting standard #UKhousing #SocialHousingFinance

Now known as the Sustainability Reporting Standard (SRS) for Social Housing, the proposed criteria for the reporting approach launched in a ‘white paper’ in May following the formation of a working group of 13 sector partners last year, as first revealed by Social Housing.

A consultation followed, engaging further stakeholders, and the finalised standard is due to be published in an updated paper at the end of October. Lenders and providers were invited to register interest to become early adopters, and now have until 16 October to commit.

On the funder side, those answering the call range from institutional investors and asset managers, to pension investment funds and social housing-specific lenders, figures from project facilitator The Good Economy (TGE) show. Seven are UK or international banks.

These include NatWest, a lead bank sponsor of the project’s white paper. Other named funders on the list include sector bond aggregators The Housing Finance Corporation (THFC) and MORhomes.

Writing in Social Housing today, Dominic Brindley, head of public sector and structured asset finance and Dr Arthur Krebbers, head of sustainable finance – corporates at NatWest Markets, said that the use of the unified ESG criteria “should help increase efficiency and transparency on the sector and for individual HAs”.

While the final framework is yet to be published, THFC has begun the process of integrating the themes and criteria from the white paper into its processes. Chief executive Piers Williamson said it was increasingly apparent to the company as a frequent issuer that a broad range of investors are demanding real evidence of ESG in action.

“They won’t take ‘no’ or ‘we’re working on it’ for an answer. If associations are to continue to ‘sup at the table’ of long-term credit, they will need to be able to evidence that they are doing this stuff,” he said.

Elsewhere, MORhomes – which already issues ‘social bonds’ in alignment with International Capital Market Association (ICMA) principles – plans for future new bonds to be ‘sustainability bonds’ in accordance with the principles.

Patrick Symington, chief executive, said that the framework MORhomes will use will include a pre-borrowing questionnaire to assess prospective borrowers’ ESG performance, which will use the key criteria from the sector standard. He added: “We will also encourage our borrowers to go on and adopt the full sector ESG reporting standards.”

Meanwhile, 37 registered providers (RPs) have registered an interest in becoming early adopters, while a further 11 organisations signed up as ‘endorsers’. The latter includes developers and sector specialists, who will commit to promoting adoption.

Once confirmed as early adopters, lenders and investors would commit to integrating the standard into organisational priorities, processes and/or products. RPs would commit to reporting against the final version
of the SRS on an annual basis.

Early adopters at a glance

37

Registered providers that have registered interest

19

Lenders and investors that have registered interest

11

‘Endorsers’ that support the framework

RPs on the list vary from smaller associations with less than 7,000 homes, to several members of the G15 group ofLondon’s largest housing associations. Regionally, the cohort includes English and Welsh associations, with a mix of locally focused and nationwide providers.

Optivo, which became the first HA to adopt the draft criteria when it published an ESG report for investors in August, has confirmed that it will be an early adopter. Tom Paul, its director of treasury and commercial, told Social Housing: “We’re fully bought into the need for standardisation, which will make it easier for us and investors alike.”

Other HAs, such as Stonewater, have engaged with the initiative more recently. Anne Costain, corporate finance director at Stonewater, said: “This is the first time that a cohesive set of ESG measures has been formulated for our sector. Being an early adopter gives us the opportunity to help shape the narrative and hope that this will increase investor appetite for our sector, ensuring competitive spreads, cheaper borrowing, and
the ability to build more homes.”

Alongside plans to publish the final criteria, the initiative is also establishing its future governance structure. This is expected to comprise an SRS board, supported by technical input and advice from three different sub-groups, and the project is also engaging with sector representative bodies.

The sub-groups will likely feature registered providers, investors/lenders, and a third group open to for-profit RPs and other parties involved in impact investment in the sector.

Susan Hickey, working group member and the former CFO of Peabody, which co-launched the original initiative along with advisory Centrus and TGE, said: “The theme for us here is to take everyone with us, and we’re conscious of a wide range of stakeholders and indeed registered providers in the sector.

“These standards are voluntary standards but we want them to be compelling enough that they gather momentum and the focus and support of a wide church.”

This includes the need to hear and respond to ongoing feedback, Ms Hickey said. “It’s very important that we’re adaptable as we go, but through a very good, fit governance process that people can see.”

The Impact Investment and ESG Conference is taking place on 15 October. Click here for more information.