Investing in safe, secure and sustainable social housing: the Sustainability Reporting Standard
In the race to create a just transition to a low carbon economy, ensuring that our homes are future-fit for both people and planet is a key challenge. Nowhere is this more crucial than in social housing.
Homes make up almost 15% of the UK’s greenhouse gas emissions, making housing a key area where large scale emissions cuts can, and need, to be made. The social sector makes up over five million homes, which is still far below what is needed to provide enough housing for those on low incomes. Large-scale cuts to public funding, combined with rising building prices have slashed the supply of genuinely affordable homes, exacerbating the housing crisis.
It is widely accepted that a significant retrofit of homes is needed if the UK is going to meet its climate targets. However, many of the current homes in the social sector are not fit for purpose, falling short not just on sustainability requirements, but also living quality and safety. Ensuring that our social housing is built for the future isn’t just vital for the families and individuals that live in those properties, but also for ensuring a greener world for all of us.
In this article, we’ll explore why investment in improving our social housing is so crucial, as well as how using the Sustainability Reporting Standard can improve sustainability in social housing and help social housing providers access much needed funds.
Retrofitting the UK’s homes
Housing associations now build nearly a third of all new homes in England, meaning they have a critical role to play in meeting demand for high quality, affordable and sustainable homes.
"Homes make up almost 15% of the UK’s greenhouse gas emissions, making housing a key area where large scale emissions cuts can, and need, to be made."
Housing associations, landlords and other providers of social housing need support to ensure that there is not just a sufficient quantity of homes; but also that the homes enable a good quality of life for residents and meet the environmental standards needed to cut emissions and meet the UK’s climate targets. Currently the rate at which new social housing is being built in the UK is low, meaning significant work also needs to be done to improve the environmental performance of existing stock to meet 2050 goals.
Cutting emissions across UK homes will mean wide-scale work, including updating outdated systems such as oil and gas boilers, installing better insulation and fitting smarter appliances and lighting systems. Not only do these changes lower carbon emissions, but they can also reduce monthly fuel bills for residents; which, for the 2.4 million households that live in fuel poverty, can be a lifeline.
These crucial upgrades can come at a significant upfront cost; which is why large-scale investment, of tens of billions of pounds, is needed to build new houses and retrofit existing homes to meet higher living and environmental standards.
A significant barrier to this investment is a lack of transparency and clarity around reporting on ESG.
The Sustainability Reporting Standard
The Sustainability Reporting Standard is a voluntary reporting framework that aims to address many of the shortcomings in previous reporting frameworks. It covers 48 criteria across ESG considerations such as zero carbon targets, affordability and safety standards.
As with many other sectors, current reporting frameworks for ESG are severely lacking. Landlords and housing associations have struggled with a disconnected multitude of varying ESG reporting frameworks, many of which require them to report on ESG criteria irrelevant to the housing sector.
A major advantage of the standard is its scale. A commonly used standard helps demystify the reporting process for investors and providers alike. With backing from over 60 organisations so far, the Sustainability Reporting Standard makes reporting more transparent, consistent and comparable. Allowing both providers of housing and potential investors to communicate their needs more easily.
"With backing from over 60 organisations so far, the Sustainability Reporting Standard makes reporting more transparent, consistent and comparable."
The three key benefits of the Sustainability Reporting Standard:
- It builds consensus on how to measure and report on ESG performance in the social housing sector focusing on questions which are relevant, meaningful and capable of being answered;
- It reduces the ESG reporting information burden on housing associations;
- It attracts increased capital flows to social housing which are well-aligned to the sector’s needs in terms of its financial objectives as well as its social and environmental objectives.
As part of our continued focus on contributing to a just transition, in early 2019, Rathbone Greenbank Investments (Greenbank) began to investigate reports of poor living conditions in social housing. Following a sector review in April of that year; Greenbank wrote to 20 housing associations on a range of quality, safety and environmental topics and held a number of follow-up meetings to encourage improved disclosure. Our review of the sector identified a lack of consistent and comparable indicators being reported and identified several core indicators as disclosure expectations.
We identified the Sustainability Reporting Standard, then under development, as a useful framework for encouraging better reporting across the sector. By Summer 2020, Greenbank, along with 52 other institutions, had submitted feedback on the draft reporting criteria of the Standard. Following this, in November, we became an early adopter of it. Greenbank has made a number of key recommendations to the standard based on our earlier work on the topics of tenant safety, resident support, climate change and biodiversity.
Involvement of Greenbank, alongside other investors and banks, has ensured that investor demands for ESG reporting are met by the standard - unlocking more investment streams for social housing providers.
What can investors do?
The first reporting cycle for the Sustainability Reporting Standard comes about in September this year. This will allow the first adopters to clearly communicate their progress and enable investors to direct capital to the organisations leading the way on social and environmental factors.
A key strength of the Sustainability Reporting Standard is that it is consistent. This attracts investors to adopters of the standard over providers who have chosen not to use it. To fully unlock investment into social housing we need to ensure that the standard becomes adopted across the UK.
"Greenbank has made a number of key recommendations to the standard based on our earlier work on the topics of tenant safety, resident support, climate change and biodiversity."
Furthermore, we need to prioritise investment to those who report beyond the minimum expected standard. This will encourage other providers to follow suit and prioritise the much needed social, safety and environmental changes we need to see both in new builds and, crucially, when retrofitting existing homes.
For the UK to meet its Paris Agreement commitments, the housing sector will be a hugely significant part of the emissions reduction jigsaw. But it is crucial that no-one is left behind, even as we update the quality of our homes. Retrofitting homes requires significant capital and, without the support of investors, social housing associations and providers will struggle to ensure that the most vulnerable can live in houses that are safe, secure and sustainable.