What the IA guidance means for HAs
Originally published in Social Housing magazine 23-02-23
The IA is a trade body representing 250 UK investment managers that collectively manage £10tn of assets.
Having raised nearly £34bn of debt in the capital markets since 2012, the social housing sector is of great importance to IA members, with housing associations increasingly turning to them for funding.
Last November, the IA issued an updated set of guidance for housing associations (HAs) participating in the debt capital markets.
This guidance calls on HAs to significantly ramp up their ESG disclosures, particularly surrounding key environmental and stock condition information.
The IA cites evolving investor expectations on ESG disclosures, along with demand for wider transparency, as the reason for its updated guidance.
More specifically, on the environmental front, the IA calls upon housing associations to report their Scope 1, 2, and 3 emissions data, more detailed EPC information, estimated capital expenditure required to meet the government’s 2030 EPC targets, Task Force on Climate-related Financial Disclosures (TCFD) reporting status, and details regarding plans to achieve net zero by 2050.
But it is not just the ‘E’ aspect of ESG for which the IA has requested more comprehensive disclosures.
HAs have also been asked to publish new social-related information regarding tenant satisfaction, the percentage of tenants on universal credit, employment data, and employee pay gaps, along with specific age, gender and ethnic breakdowns.
There is also a deeper focus on the qualitative discussion surrounding HAs’ positive social impact.
Greater details around stock condition, such as information on the type and age of all properties, details on any homes that do not meet the Decent Homes Standard, the percentage of units affected by issues involving repair works, and a detailed breakdown on required repair works, are also required.
Hugo Gordon, senior policy advisor at the IA, explained in a recent webinar that while it’s unlikely that a failure to immediately report against ‘all’ of the updated guidance will result in divestment, the guidelines should be considered aspirational and represent the direction in which the sector should be travelling.
From a funder’s perspective, there is no denying the increasing importance of ESG factors when it comes to making investment decisions, and the need for consistent, reliable and comparable data is only becoming greater.
This staunch belief in the importance of ESG is what prompted THFC to rally around the Sustainability Reporting Standard for Social Housing (SRS) as an official early adopter.
While the IA views the SRS as a complementary, rather than competing, standard, THFC encourages alignment and collaboration between them to avoid the existence of multiple diverging standards.
The SRS is currently comprised of 48 social housing-specific ESG criteria and, with an upcoming 2.0 version in the works, the sector is well poised to continue its journey of aligned ESG reporting.
The SRS was created to unite the sector under one common set of reporting standards and allow it to communicate its ESG story with a unified voice.
While the SRS can and should evolve over time, it is deliberately structured to allow for consistent, year-on-year comparisons.
Created by the sector and for the sector, the true power of the SRS lies in its ability to capture the nuance, breadth and diversity of HAs across the UK.
As HAs across the country battle intensifying pressures surrounding damp and mould, continued fire safety challenges, decarbonisation targets, and soaring interest rates, we must also recognise that the cries for more comprehensive ESG reporting must be balanced with the need to address the barrage of immediate problems.
This is particularly true for smaller HAs, which typically have fewer staff to dedicate to ESG reporting and may just be commencing their ESG journeys.
It has never been more pivotal for the social housing sector to tell its unique ESG story in a collective and aligned manner.
While we understand the need for funders to meet their stakeholders’ demands and communicate their borrowers’ ESG credentials, we need to prevent this from becoming merely a ‘tick the box’ exercise.
The social housing sector has a great ESG story to tell, and our strong hope is that we can all unite under a uniform, affordable and straightforward way of reporting that allows all HAs – big or small – to tell their ESG stories.