ESG Social Housing Working Group
10 November 2020
More than 60 banks, investors and housing associations have today become early adopters of an industry-led sustainability reporting standard designed to unlock institutional investment to help tackle the UK’s deepening housing crisis.
- The Sustainability Reporting Standard for Social Housing (“the Standard”) will address the lack of transparency, consistency and comparability in reporting ESG performance
- Lloyds, NatWest, LGIM and M&G are among more than 25 investors and lenders already committed to the Standard
- Social housing is understood to be first UK sector to come together with lenders and investors to create a common sustainability reporting standard
- Standard offers a blueprint to other sectors where a multitude of ESG reporting frameworks is fuelling inconsistency and a lack of transparency
- Roll-out of the Standard across the social housing sector will be governed by a new industry representative standards board, which will be operational in 2021.
The Sustainability Reporting Standard for Social Housing was unveiled today by the ESG Social Housing Working Group, a unique collaboration of 18 banks and investors, housing associations, service providers and impact investing organisations.
The working group was set up in 2019 in response to concerns ESG investment was being inhibited by the absence of a common reporting standard. As with many other sectors across the economy, there has been a plethora of ESG reporting frameworks, resulting in reporting that lacked transparency, was prone to inconsistency and was incomparable.
The aim of the Standard is to provide a voluntary reporting framework for housing providers to report on their ESG performance in a transparent, consistent and comparable way. This will make it easier for lenders and investors to assess the ESG performance of housing providers, identify ESG risks and opportunities to create positive social and environmental outcomes.
So far, more than 60 organisations (34 housing associations and 27 lenders and investors) have committed to become early adopters of the Standard. Participating housing associations – including Sovereign, Optivo, Clarion and Peabody – will report against the standard on an annual basis. Meanwhile lenders and investors, including Lloyds Banking Group, Legal & General Investment Management, M&G and NatWest, have agreed to use the standard in their investment and credit policies, processes and/or product design.
The Standard covers 48 criteria across ESG considerations such as affordability, fire safety and net zero carbon emissions, which are unveiled in a final report of the working group today. The report follows an earlier draft of the criteria, published in May as part of a sector-wide consultation. The consultation received feedback from more than 400 individuals, including representatives from housing associations, investors, trade bodies, financial experts and tenants’ groups.
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.
Quotes from the ESG Social Housing Working Group:
Lord Bob Kerslake, Chair of Peabody Trust, said: “The £2 trillion UK sustainable investment market is growingly rapidly, with an increasing focus on the positive impact of housing associations. As well as providing new homes, we help alleviate poverty, create jobs and economic prosperity, increase health and wellbeing, and support young people. We also have a shared commitment to getting to net-zero carbon as soon as we can, and helping to make cities, towns and communities more sustainable in the future. This sector-wide reporting standard makes a significant contribution to the aim of increasing private capital flows into social housing, and will help a better and fairer economy and society to emerge after Covid-19.”
Sarah Forster, CEO, The Good Economy, which led the process of developing the Standard, said: “By working together, the social housing sector and financial sector have demonstrated how the lack of consistency, transparency and comparability in ESG reporting can be overcome. We’re delighted so many significant lenders, investors and housing associations have already committed to using the Standard and believe it will improve access to finance for the social housing sector – helping deliver quality, affordable housing for all those who cannot afford to buy or rent in the private market.”
Phil Jenkins, managing director, Centrus, said: “The launch of the new reporting standard is a real testament to the collaborative approach of this sector and the hard work of everyone who has contributed to the process. This represents genuine progress, not only in offering borrowers and investors a consistent reporting framework around sustainability but also by providing a strong foundation for broader engagement between the sector and providers of responsible capital”
Shuen Chan, Head of ESG, LGIM Real Assets, said: “As a long-term investor, we have a responsibility to protect our clients’ capital through integrating ESG considerations into our investment process. We believe this leads to better risk management and will drive long-term value. The UK affordable housing sector faces ever greater challenges. We are delighted to contribute to the development of the Sustainability Reporting Standard for Social Housing as we believe it will play a pivotal role by providing a clear and consistent voluntary ESG disclosure framework that will help unlock investor capital to deliver more affordable and more sustainable homes for our communities.”
Naomi Roper, partner at law firm Trowers & Hamlins, said: "In a post-Covid world it is clear that putting ESG considerations at the heart of your business is vital for success. The new Sustainability Reporting Standard for Social Housing will help housing providers better articulate their already impressive ESG credentials to potential funders, hopefully opening up a new funding stream in the process. Trowers has been at the forefront of many significant developments in the social housing sector and we were delighted to be involved in this ground-breaking project."
Tracey Barnes, chief financial officer at housing association Sovereign, said: “The Sustainability Reporting Standard will play a pivotal role at Sovereign in our approach to performance reporting, enabling further transparency for our customers, investors, and other stakeholders. As early adopters of ESG, this will clearly drive environmental improvements and assure Sovereign’s clarity as an organisation of social purpose.”
Sarah Gordon, CEO at the Impact Investing Institute, said: “This important industry-led initiative brings us one step closer to the adoption of high-quality standards for measuring, managing and reporting social and environmental outcomes across all sectors. A standard approach to ESG reporting will help improve the flow of private capital to the social and affordable housing sector, create more affordable homes across the UK and serve as a blueprint for other sectors that want to put impact at the heart of what they do.”