As ESG credentials are increasingly being used by investors in the housing sector, we are now seeing registered providers of all sizes consider sustainability linked loans or bonds.
What are the advantages of this type of funding?
The proceeds of the loan or bond can be applied for any purpose but the pricing is linked to ESG related targets. This can result in cheaper funding and given the increasing focus on ESG for investors, it can also attract a larger pool of potential investors/funders.
What sort of targets can I expect?
These vary and should be specific to your organisation and to its overall sustainability strategy. Examples we have seen covering all 3 pillars of ESG include improvements in energy efficiency, return to work programmes for tenants, retrofit projects, reducing pay gaps (gender or ethnicity) and increasing diversity in the workforce.
What should housing associations consider before entering into this type of funding?
Metrics and reporting are key to obtaining ESG funding, so you will need to ensure you set clear targets and strategies for achieving those targets, together with processes for monitoring and reporting along the way.
Our top tips are:
- Identify the ESG targets most relevant to your organisation and ensure they are meaningful and will have an impact that can be seen by all of your stakeholders.
- Be clear how you are going to measure performance against these targets and what evidence you can provide to funders to demonstrate achievement.
- Speak to similar registered providers in the sector to find out more about what they are doing and avoid re-inventing the wheel.
- The Sustainability Reporting Standard for Social Housing, which was developed by the Good Economy Partnership in collaboration with the social housing sector and banks, provides a very useful voluntary framework.