What is ESG?
ESG has become an ever-present acronym when it comes to private finance and investment. The term refers to environmental, social and governance-related factors which can be measured in an organisation so that investors can consider whether their investment has a wider social impact, rather than just generating returns.
With issues such as the climate crisis and gender pay gaps becoming an increasingly prevalent part of public discourse, ESG has become more important in the realm of private finance. With shareholders becoming more discerning about where their money is being invested.
How does it apply to UK social housing?
UK social housing has a big role to play when it comes to socially responsible investment. Where banks or other sources of private finance are looking to invest in organisations that yield social value, housing associations can certainly claim to do so as they provide affordable housing for people who cannot afford to buy on their own.
UK social landlords can also claim to fulfil the ‘E’ in ESG, with government demanding that all social housing stock must achieve an energy performance certificate rating of ‘C’ by 2035 and net zero-carbon emissions by 2050.
In both aspects, housing associations may represent a good, socially responsible investment which may lead to social housing bonds receiving strong interest from investors. The greater the interest usually means the better the price housing associations can secure for their bonds.
During the year there has been a spate of sustainability-linked bonds from individuals housing associations and aggregators. Just this week, Clarion, the UK’s largest housing association, priced a £300m bond at a coupon of just 1.25%. The funds from the bond will be used exclusively to develop new energy-efficient affordable homes.