As associations face up to the costs of decarbonising their housing stock, the sector’s Environmental, Social, and Governance (ESG) credentials offer a valuable, though not uncomplicated, opportunity for accessing sustainable finance.
Sustainable finance gives the social housing sector an opportunity to build cleaner, greener homes and create better futures for tenants.
The social housing sector is full of great people trying to do a great job. But it’s important to recognise that the size of the problems our society is trying to solve is growing quicker than our solutions.
There are no enough resources to provide decent care and support for those in the greatest need. We also operate in a broken housing system and a failing construction industry.
That’s not to say this is everybody else’s fault. The sector contributes towards some of these problems and many recent criticisms directed to the government are valid. This is why we must learn from our mistakes quickly to improve.
We must be more aligned with our residents, a little less naïve about some of our partnerships, and be more honest about the challenges we face in delivering our homes and services. Fortunately, the sector is full of people keen to improve, so we need to align and unlock that potential to play a bigger part in solving these problems.
At the same time, social landlords are moving into a new era where different strategies, skills and approaches will be needed to deliver great outcomes. As the horizon changes from maintaining existing homes to the more expensive ambition of improving them, increasing supply will become ever more challenging for social landlords, as well as local and central government.
Historically, many housing associations have taken big risks on the building of new homes and loaded their balance sheets with debt to try and reduce homelessness. But, in the future, that load is going to have to be shared by many others, some of whom will be new participants from public and private sectors, with different cultures and practices.
Housing associations will soon be redefining their role in this new mixed economy, if they haven’t done so already – perhaps stepping up if they have low debt, or stepping back/changing roles if they have been subsidising new homes for many years.
The finance sector is going through big changes, too. There are political and ethical pressures on lenders to invest in organisations that solve world problems rather than create them, and the dust hasn’t yet settled on what this will mean in the long term.
At the moment, ESG finance is offering financial incentives to borrowers that can demonstrate an investment can make a real difference. But this is a side story; the longer-term picture is that ESG finance may soon be the main type of funding available, with strings attached.
The main change is lenders will want to know more about your organisation than they currently do. They will want big-picture ideas and examples that add colour and explanation. They will want to know what you are trying to do and where you need help from others to achieve your goals. How you will succeed and the risks of failure will also be of interest.
It isn’t complicated and it’s exactly what other stakeholders will want, too. ESG reporting isn’t really financial reporting, it is a corporate reporting tool for all stakeholders.
The ESG reporting standards, created by the housing association and finance sector, help you do two things. Firstly, they help you tell your stories. Secondly, they help manage the interface with the finance world. If we can get a single view from the majority of lenders on what they want to know, that will save us the bureaucracy of producing multiple reports and improve communication.
However, we must collectively agree to give them that information. The standards won’t work if they are not adopted by the majority. If they don’t work for you, please help shape the next version so they improve.
