How much value do landlords give to ESG?

Nevertheless, it should be a priority because potential investors are increasingly keen to find out more about the ethics and ESG practices of the organisations they lend money to. And at some point, even housing associations that are not developing new properties will face costs associated with retrofit obligations and the move towards net zero.

Understanding ESG

Yet ESG is not just an investment matter, insists James Duncan, governance and regulatory partner at Winckworth Sherwood. It is about tenant accountability and ESG strategy, which is embedded in the housing association’s objectives.

“This is an area where funders will be increasingly regulated, and if you can’t [demonstrate your ESG credentials], you could run into problems,” he says. “It seems that most responses to the survey came from larger organisations, which suggests that it’s the smaller ones that are struggling to start their ESG journey. But they really need to.”

A total of 97 organisations took part in the survey, of which 81% were housing associations, 13% were local authorities and 1% were ALMOs. The remainder were a mix of other organisations working in the sector. However, half did not answer specific questions about the areas of ESG they felt were most important, the metrics they had in place to measure their ESG performance, the barriers to ESG strategy adoption and – tellingly – when they expected to have an ESG strategy fully embedded within their organisation.

“Doesn’t the fact that they skipped those questions tell us something?” says Louise Forrest, head of banking and finance at Winckworth Sherwood.

Of those who answered the question, ‘What areas of ESG are most important to you?’ nearly half (49%) weighted environmental, social and governance equally. However, of the 51 organisations that responded to the question, ‘How confident are you that your organisation has robust metrics in place to measure its ESG performance?’ only 18% answered ‘to a large extent’.

This small number is troubling, notes Ms Forrest. “Banks or finance companies want to see incremental improvements [in an organisation’s ESG performance],” she says. “But if you don’t have [robust] data to set your base case, I don’t see how you can [demonstrate that]. Getting that data can be a challenge; but, in this sector, organisations need to have systems in place so that they are able to acquire it… Inertia is not an option.”

The vast majority of respondents ‘strongly agreed’ or ‘somewhat agreed’ that the finance their organisation raises either now or in the future should be ESG-linked. That makes perfect sense, says survey respondent Ben Colyer, corporate treasury director at Platform Housing Group, which manages 45,000 properties.

He says: “The sector’s core purpose is centred around the social ‘S’; its strong governance and regulation, which helps support the ‘G’; and improving the energy efficiency of homes is a major part of the net zero carbon agenda, both in and outside of the sector [the ‘E’]. Everything about the sector supports an ESG-led funding strategy.”

So what are the barriers that organisations undoubtedly have to overcome when adopting an ESG strategy?

Those who answered this question cited ‘time pressure and lack of internal resource’, ‘lack of data’ and ‘lack of understanding’ as the biggest impediments to this.

Furthermore, only a minority of organisations had in-house team members in dedicated ESG roles (most staff were driving ESG strategies in addition to their normal roles), while a handful of organisations had no ESG experts or advisors in place.