The new Sustainability Reporting Standard is a voluntary reporting framework for housing associations to report on their Environmental, Social and Governance (ESG) performance. Andy Smith of The Good Economy writes about the importance and significance of the Standard and why housing associations should adopt it.
It was just 15 years ago that the then UN Secretary-General Kofi Annan invited the CEOs of the world’s biggest financial institutions to take part in an exciting new initiative to integrate what would become known as environmental, social and governance (ESG) considerations into what they do.
By 2018, ESG considerations were at the forefront of investment decisions, influencing the flow of £22.8tn. In the UK, the sustainable investment market is growing rapidly, worth around £2tn.
The Good Economy is not alone in thinking we could be fast approaching a time when it will be all but essential for organisations to report on their ESG performance in order to secure investment, or raise funding from banks or institutional investors.
This, of course, should be good news for housing associations – it is a sector awash with powerful stories about social purpose and impact. The Sustainability Reporting Standard for Social Housing, a sector-wide initiative launched earlier this month, exists to enable housing associations to tell this story to increasingly ESG-minded investors and lenders.
The Standard addresses concerns that ESG investment can be inhibited by the absence of common reporting standards. Previously investors would use their own questionnaires to assess ESG performance. These would be inconsistent, and fail to highlight the positive actions that are inherent in the social and affordable housing sector.
The aim of the Standard is to provide a voluntary reporting framework for housing providers to report on their ESG performance transparently and consistently. This makes it easier for lenders and investors to assess the ESG performance of housing providers, and identify ESG risks and opportunities to create positive social and environmental outcomes.
More specifically, the Standard is made up of 12 themes and 48 criteria (30 core and 18 enhanced). Responding to the core criteria should be straightforward for almost all housing associations because the bulk of these relate to the good practice already underway in the sector. But the Standard also includes various enhanced criteria that might take more time and effort – they might be treated as targets for housing associations to work towards.
The Standard is made up of 12 themes covering the “E”, “S” and “G” in “ESG”:
|ESG area||Theme||Theme name|
|Social||T1||Affordability and security|
|T2||Building safety and quality|
|Governance||T9||Structure and governance|
|T10||Board and trustees|
|T12||Supply chain management|
By the time of its launch more than 70 organisations had signed up as early adopters of the Standard. As such, 42 housing providers were already committed to reporting against these criteria on an annual basis, while 32 lenders and investors were committed to using the Standard in various parts of their products, policies or processes.
The Standard has also been endorsed by a further 17 organisations, including the National Housing Federation, who commit to promoting its adoption and implementation. It has also received support from Homes England and the Regulator of Social Housing.
Going forward, the Standard will be overseen by a new Social and Affordable Housing: Sustainability Reporting Standards Board, which will be established in early 2021. A Governance Steering Committee has been set up to oversee the establishment of this board, chaired by Susan Hickey, a former Chief Financial Officer at Peabody Trust, with secretariat support from the Impact Investing Institute.
We anticipate housing associations will use the Standard to tell their stories of impact in as many different ways as there are different types of housing association. Examples of how stories might be communicated to stakeholders, including investors and lenders, have already been offered by Clarion and Optivo.
If you’d like to read our report on the need for the Sustainability Reporting Standard, the detailed criteria (explaining reporting expectations, rationale and alignment to other standards), or if your housing association is thinking about becoming an early adopter and has other questions, please get in touch with us.