Are housing associations effectively demonstrating their ESG credentials to investors?

For our Sustainability Bonds, it is vital that we are able to assess housing associations’ impact in all three ESG areas. To do this, we have developed a first-of-its-kind ‘sustainable housing assessment’ (SHA) – just 11 questions – which will measure housing providers’ performance against an objective standard.

Not only will this help associations to effectively report on and benchmark ESG performance, but it will also provide MORhomes with a clear and consistent way to demonstrate overall impact to investors. We know that our Sustainability Bond funds will predominantly be invested in the development of new homes, therefore borrowers will need to show that they genuinely meet the criteria for new ‘green’ buildings.

The assessments are independently validated by Ritterwald, a pan-European housing and real estate consultancy with a focus on sustainability, and will provide housing associations with their own ESG assessment report.

The standards ensure that MORhomes borrowers are going above and beyond the minimum requirements and questions cover several key indicators including the energy efficiency of existing and new stock, how housing associations are encouraging tenants to conserve more energy and the installation of low-carbon heating systems.

If a prospective borrower wants to borrow from funds raised by a Sustainability Bond they will have to complete the MORhomes SHA. We can then ensure that the majority of the bond proceeds will go to borrowers who meet high sustainability standards. And all borrowers will at the very least meet the current standards for our social bonds.

This powerful new approach has been developed and piloted with the input of five housing associations including Melin, the 4,000-home South East Wales landlord.

Elizabeth Howard, director of finance at Melin, told us: “It has been a really useful and interesting process to be part of the development of MORhomes’ SHA and to have the opportunity to feed in the Welsh perspective. Like many of our sector peers, we know that Melin does a lot of great work in terms of ESG but we haven’t always had a clear way of benchmarking this or recording it in a consistent way.

“A score of 50% in the SHA is a ‘pass’ and indicates high standards so it is reassuring to see that we have scored so well, particularly in the environmental category where we achieved 75%. We now have an independently validated assessment which can be shared across the business and something we can all use to identify improvement areas and next steps.”

“I believe we have created an approach that can help to hold our whole sector to account on sustainability as well as demonstrate why housing associations are such a strong and trustworthy bet for ethical investors”

I would argue that the world outside the housing sector doesn’t fully appreciate or understand the extent of housing associations’ collective impact. It is vital that we keep reiterating this story.

Since the launch of MORhomes in 2018, the funds we have lent have been used to provide more than 3,000 new homes across England and Wales. Our latest impact report demonstrates the powerful direct and indirect benefits of these new homes on communities and lives.

I believe we have created an approach that can help to hold our whole sector to account on sustainability as well as demonstrate why housing associations are such a strong and trustworthy bet for ethical investors. That’s why we are really encouraging all our sector peers to do their own reporting in line with the SRS and to identify how, through their work, they can safeguard the planet now and long into the future.

Patrick Symington, chief executive, MORhomes