The social housing sector can establish a meaningful and consistent approach to reporting its environmental, social and governance (ESG) performance.
Housing associations are an extremely strong investment proposition for investors wanting to make an impact and capitalise on the sector’s social purpose. Existing lending to the sector is approaching £80bn, but we know that significant new private debt and equity investment will be required to modernise existing stock and build new affordable housing at the scale needed.
Alongside Peabody and The Good Economy, Centrus is taking the lead on a project to establish a credible, meaningful and consistent approach to measure and report on the social housing sector’s ESG performance.
Alongside a core group of housing and investment experts, we’ll be launching a white paper, themes and criteria for consultation at the end of March. We hope this will lead to a framework which can be adopted by key stakeholders, including lenders, investors, regulatory bodies, and government.
Ultimately, the project aims to sustain and increase capital flows into the UK social housing sector against a backdrop of significant changes in the policy and investment environment.
Peabody and Centrus initiated the project and brought together a working group to develop the proposed approach. This includes:
The Good Economy, a specialist impact advisory firm, led and facilitated the research and development process.
The paper begins by setting the context. It examines the nature of the housing market and attendant crisis in the supply of genuinely affordable homes in the UK. Housing associations’ critical role in meeting the need for new good quality, sustainable, affordable homes is explored. So too is the way in which private capital funding can complement public investment to address the UK’s housing challenges.
The UK social housing sector can help meet many of the UN’s Sustainable Development Goals. Housing associations can help alleviate poverty, create jobs and economic prosperity, increase health and wellbeing, help reduce energy consumption, mitigate climate change and facilitate sustainable cities, towns and communities.
The report analyses these outcome areas in the context of the Impact Management Project – examining how housing associations and private investors interested in ESG and impact creation can align. The impact of housing associations’ investment in services, community programmes, and existing buildings is also considered.
The next section explores the growing role and interest of investors. The sector has become a firmly established asset class which is of increasing interest to a wide range of UK and international institutional investors, including asset managers, pension funds and insurance companies.
Affordable housing is well disposed to pension fund and insurance investment with its long-dated, index-linked returns, underpinned by government through the social security system and secured by property. These investors also see affordable housing as an investment opportunity that delivers both financial returns and has strong ESG and impact credentials.
The report then proposes 10 themes and 42 criteria for ESG reporting by housing associations. These were developed based on a review of existing ESG investor questionnaires for social housing, workshops with subject matter experts from partner investors and housing associations, and wider consultation.
This process has been characterised by a positive market response and a high level of engagement from both housing associations and investors – from traditional bank lenders to asset managers looking to participate in the UK social housing sector.
We plan to publish the white paper consultation later this month on this website.