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In recent years, sustainability reporting has become a critical focus for investors in housing associations.
Environmental metrics, such as the Energy Performance Certificate (EPC) ratings of properties and the carbon emissions of housing associations, significantly impact credit ratings as they indicate potential retrofitting costs and the overall preparedness of a housing association to meet decarbonisation targets. Thus, thorough sustainability reporting is essential. When companies fail to recognise or report against these sustainability factors, it raises concerns about their ability to manage emerging risks effectively.
To us at Pension Insurance Corporation (‘PIC’) – a specialist insurer of defined benefit pension funds – social housing is an ideal asset class. It offers long-term, inflation-linked returns that support our policyholders' pensions and delivers significant social value by addressing the housing crisis with high-quality housing across the country.
As a lender to over 60 housing associations across the UK, we have a substantial footprint in the sector. Beyond developing new housing complexes, we are among the few providers of long-term capital necessary for retrofitting existing homes. Consequently, we place great importance on reporting and tracking the sustainability credentials of the housing associations and social housing developments we support.
Standardised reporting enhances transparency within the industry, allowing for better comparability between providers. This, in turn, advances the industry’s ambition for sustainability initiatives and best practices.
To support this, The Good Economy developed the ‘Sustainability Reporting Standard for Social Housing’ (SRS). This standard is a collaborative effort involving participants from both the social housing and financial sectors. PIC was a founding member and remains a strong supporter of the SRS. Recognised as a leading voluntary sustainability sector standard, the SRS enables housing providers to measure and communicate their performance in a consistent, transparent manner.
According to the latest Sustainability for Housing (SfH) annual report, nearly half of housing providers (44%) and almost all funders (92%) believe that sustainability reporting has prompted housing providers to undertake actions they otherwise would not have considered, such as developing sustainability strategies and setting ESG-related targets.
Reporting frameworks like the SRS are vital, especially since private companies are not mandated to report under the Task Force on Climate-Related Financial Disclosures (TCFD). At PIC, we actively encourage all sector participants to adopt voluntary reporting standards and support our partner housing associations in doing so.
We collect and analyse data from individual housing associations, encouraging alignment with the SRS. This includes reporting on Scope 3 emissions, which cover the gas and electricity used by residents for heating and lighting their homes. However, we notice that among providers the methodologies are inconsistent which makes the data harder to use. We advocate for a more standardised approach across the industry.
We are also keen to obtain more data on housing associations' broader biodiversity impacts and social metrics, reinforcing the importance of alignment with the SRS.
Throughout the year, PIC has engaged with numerous housing associations regarding sustainability reporting. During these engagements, we address a wide range of topics beyond environmental concerns, including residents' health and safety (particularly fire safety and issues like damp and mould), human rights, modern slavery, and gender pay gaps—all areas covered by the SRS.
PIC has, for instance, reached out to a social landlord after it was graded non-compliant by the housing regulator. The regrading related to the potential risk to the health and safety of its tenants due to electric certifications. We have worked closely with the social landlord over the past year to understand how they were addressing the regulator’s concerns, including recertification of electrical systems and bolstering the experience on the board of the housing association. They were eventually regraded to a compliant governance grading earlier this year reflecting improvements made following our engagement and changes in the executive team and board.
In 2024, PIC also joined the Investor Forum, a collaborative engagement initiative focused on listed companies in the UK, which is expanding its work into the social housing sector. This allows us to leverage multiple engagement routes, complementing and enhancing each other.
In conclusion, sustainability reporting is indispensable for the social housing sector. It not only provides transparency and comparability but also drives meaningful action towards sustainability. At PIC, we are committed to promoting and supporting robust sustainability practices across the industry, ensuring long-term benefits for both our policyholders and society at large.
This article previously appeared in Social Housing magazine, in August 2024