“Sustainability” is now a significant factor in Registered Social Landlord's (RSLs) day-to-day business decisions and this article considers the drive towards capturing and measuring an RSL’s sustainability credentials.
The Sustainability Reporting Standard
In 2020 the Sustainability Reporting Standard for Social Housing (SRS) was drawn up by the ESG social housing working group composed of professionals from the housing and financial sector. “ESG” refers to the better inclusion of environmental, social and corporate governance factors in investment decisions” with an estimated $2.7 tn of ESG based borrowing in 2021.
The SRS Principles
The SRS sought to apply the principles set out in ESG proposals (by organisations such as the United Nations; the International Capital Markets Association; Global Reporting Initiative; and Loan Market Association) to the social housing sector to achieve consensus on how RSLs and funders measure and report on ESG performance; identify risks and pursue investment opportunities. By 1 May 2022, 104 organisations had adopted the SRS (68 housing associations, 36 financial institutions including most funders to the sector) and 20 organisations endorsing the standard including the Scottish Federation of Housing Associations (SFHA).
The SRS Criteria
The SRS contains 48 criteria (30 core criteria and 18 enhanced criteria). The themes are:
(Social) Affordability and Security; Building Safety and Quality; Resident Voice; Resident Support; Placemaking
(Environmental) Climate Change; Ecology; Resource Management
(Governance) Structure and Governance; Board and Trustees; Staff Wellbeing and Supply Chain Management
with the criteria applicable under each shown here. Sustainability for Housing Limited (SfH) who monitor performance anticipate that adopting associations will report against core criteria annually, but stress that adopting associations should seek to report against both core and enhanced criteria where possible.
What are the Advantages of Signing Up to SRS?
According to SfH the key advantages of adoption are to:
(a) set up best practice criteria and drive strategic direction and operational decision making for ESG, and
(b) provide credibility and assurance to current and prospective lenders and investors - since the launch of SRS 81% of public bonds raised were linked to ESG Finance with close to 60% being raised by associations who were SRS adopters.
Current Considerations
Early days: That said SfH do concede that SRS is still at an early stage of development with funders noting that they do not presently prioritise SRS adopters over non-adopters (although they may decide to do so in the future).
Cost of Finance: SfH also note that although pricing models that consider ESG metrics may in time impact on margins that has not really been the case to date.
Duplication with Current Standards: In addition there is some overlap between the SRS criteria and SHQS, EESH the Social Housing Charter and much of the statutory guidance with which Scottish RSLs are expected to comply and this may be why, as at May 2022, only three of the 68 adopting associations operated in Scotland.
However, given both the current and growing importance of ESG and its impact, both nationally and internationally, as SRS evolves it will almost certainly play an increasing role in the sector and Scottish housing associations may wish to familiarise themselves with its principles sooner rather than later.
For more information or advice, please contact our team.
