Balancing competing funding demands while going green
To meet the challenge the climate crisis poses, we need to address it across every aspect of our organisations’ activity.
In London, housing makes up 33% of carbon emissions alone, so it’s imperative for us as housing providers to be at the forefront of the change we need to see.
MTVH, the organisation I lead, was an early adopter of the Sustainable Reporting Standard, which holds our organisation accountable to our sustainability credentials. Currently, we are looking at the 58,000 homes we provide, our offices, and our finances to ensure we are delivering what is needed to put us on a trajectory to meet net-zero by 2050.
Clearly, meeting this ambition comes with challenges, particularly in an operating environment that poses pressures from building safety to rising cost pressures. Yet it is one that housing associations are stepping up to meet. I look forward to discussing the approaches being taken with colleagues at the Cambridge Symposium in July.
A holistic approach
The government’s commitment to meeting net-zero means that we are having to make decisions in every part of our businesses to ensure that we are operating in a sustainable way, and to be thinking about what further steps will be needed to go further to meet this challenge.
For us at MTVH, all future financing opportunities will have a sustainability element to it. This is something that lenders are keen on and increasingly, we are seeing ESG-linked finance opportunities across the board.
There are, of course, competing demands when it comes to funding net-zero. Across the G15, we are expecting to spend £3.6bn by 2036 on building safety remedial works. This, alongside the need to invest in existing and new homes means there is a huge demand on organisations’ finances.
In December 2020, MTVH signed an innovative sustainability-linked loan with BNP Paribas. This tied the interest margins to reducing greenhouse gas emissions from our operations, transport, and housing. Then in July 2021, we were able to secure a £250 million sustainability bond (at a coupon rate of 1.875%), which will see all new homes we build meet at least EPC B or better. This historic investment will support many of our homes to be retrofitted to improve energy efficiency, as well as reducing residents’ energy bills. The conditions we have linked to our loans show the shift we are making to our investment approach and to how we operate as an organisation.
This shift in approach flows from the decision our board made in 2019 that all future financing should be sustainable and linked to an approach that supports ESG. This immediately meant that there was a cultural shift to ensure that every aspect of our organisation was working towards meeting net-zero targets.
Our commitment to this priority has seen on the ground operational changes too. For example, our maintenance vans, which are used across the country. We are transitioning our vans to lower emissions models as an interim step as the entire fleet moves to be electric only. To support our residents to make changes too, we are installing electric charging points at both new homes and existing ones to encourage our residents to make the switch to electric vehicles too. In future developments, we will look at how we can use design to encourage sustainable methods of transport or car sharing on our estates.
When we went through the process of applying for our sustainability bond, it was important for us to create incentives for investors. This included us using sustainable forms of light, heat, and power in our homes, as well as reducing reliance on coal and gas in the energy we source.
Alongside the need to make changes organisationally to support sustainability, it is an absolute priority to make sure the steps we take work for our residents too.
The sustainability bond investment of £250m will not only be used to retrofit homes to improve energy efficiency, but also help tackle fuel poverty for our residents in the longer-term.
This is crucial in the current climate where we are seeing energy bills soar. It will be particularly critical for those people living in older homes, especially the thousands of Victorian street properties we manage.
These homes will cost more to retrofit than a new block. These properties present a challenge of being difficult to insulate and therefore very expensive to retrofit to bring up to EPC C, let alone achieving net-zero. We need to have honest conversations with government about the challenge of retrofitting these older homes, and the cost of doing so, as there is a real risk these properties could be lost from the social sector.
An Inside Housing Investigation found that retrofitting all social homes in the UK would exceed £100 billion.
It’s welcome that the government has established the £3.8bn Social Housing Decarbonisation Fund (SHDF), which allows councils and housing associations to bid into grant funding for retrofit. Working with local authority partners, MTVH has been awarded £6million in the first wave and this will see us retrofit around 1,700 homes. Combining accelerated allocations of the SHDF with progressive market investment will enable us to conduct retrofit works quicker and get to the net-zero target sooner. Achieving net-zero is a challenge for our entire society. MTVH is committed to ensuring that every aspect of the organisation is sustainable.
Whilst the funding is crucial, we also need some long-term certainty from government over targets and standards, so we can plan for the future. The challenge is great, but it is one that I know housing associations across the country are ready to meet.
Geeta Nanda, CEO of Metropolitan Thames Valley Housing