The value of community investment for ESG in social housing
By Andrew van Doorn, CEO, HACT
With Environmental, Social and Governance (ESG) becoming an increasingly important issue within housing associations, the spotlight is falling on the role community investment plays in realising the social element of ESG. On 5 November, we’ll be hosting a webinar to discuss some of the issues and questions that are becoming commonplace within housing associations.
The pressure for ESG reporting has emanated, in part, from financial organisations, who want to be able to demonstrate to their shareholders that the money they are investing is doing good. In the last two years, three large housing associations have signed sustainability-linked loans (SSLs) with banks, which see them receive more favourable interest rates upon the delivery of pre-agreed social targets.
Peabody’s loan from BNP Paribas, for example, was linked to childcare qualifications, while L&Q and Optivo both signed loans with incentives linked to employment support. One senior banker involved said that the products were a “key part of [the bank’s] socially responsible lending strategy”.
The Good Economy confirmed this trend, reporting that, “a major UK pension fund investor recently described to us how ESG considerations are becoming as central to their credit process as a company’s balance sheet or profit and loss profile”. Their white paper launched in May 2020 is building a sector standard approach to ESG reporting and was informed by numerous housing associations, including Clarion, Optivo, Sovereign and Peabody.
The framework published by the Good Economy is a self-disclosure tool for housing associations to demonstrate how they meet and contribute to ESG goals. The work social housing organisations do in delivering social outcomes sits at the centre of the framework, which also asks social housing organisations to demonstrate that they are supporting their residents, and how they are measuring their impact.
Community investment has always been a core part of the work that social housing organisations do and with the emphasis lenders are placing on ESG, it has become even more important. Particularly over the last eight months, housing association colleagues have been proud of the role they’ve played within communities. This has resulted in internal conversations about the importance of community investment, about the role of social housing organisations in place and how every individual within the organisation can contribute to its social purpose.
One of challenges of the ESG approach is how to draw the golden thread from the investment that lenders are making in housing associations, to the impact they are making on the lives of people living in communities. This is also an opportunity.
Measuring the impact of that work has previously been focused around the wellbeing values contained within the UK Social Value Bank. The increasing relevance of ESG reporting is one of the reasons why HACT is developing new environmental and economic values for the UK Social Value Bank, as well as expanding the existing wellbeing values.
Housing associations are already driving forward their own environmental agendas, determined to move towards being carbon net zero organisations. By expanding the UK Social Value Bank to include environmental values, social housing organisations will have the ability to speak to and measure all parts of the ESG framework.
At the same time, we’ll only be able to understand the scope and depth of our work, and its social impact, if we have a common measurement framework that is understood by, and accessible to, social housing organisations, and their lenders.
This isn’t just good news for investors. It’s good news for communities as well.
As investors demand that social housing organisations are able to demonstrate the social impact of their work, so the value of community investment will become further embedded at the core of social housing.
As well as hosting the webinar on 5 November, we’re also taking forward discussions with social housing organisations, contractors and investment funds to turn the social value roadmap into reality.
For those organisations who want to take a step along the Governance path, we’ve recently relaunched our Board Charter for community investment – a simple and effective way to demonstrate your organisation’s commitment to community investment.
The rise in importance of ESG reporting signals an opportunity for community investment. We’re delighted to endorse the Sustainability Reporting Standard for Social Housing, which is being launched on the 10 November. With this, an expanded UK Social Value Bank, and community investment at the core of social housing, it’s time to demonstrate our social purpose.
To book your FREE space on the webinar, follow this link to the event page.