ESG processes and investment opportunities in social housing.
In recent years, the UK housing sector has seen increasing levels of private investment engaged to complement public investment and help housing associations build affordable housing stock. Here’s how you can adapt your processes to ensure your organisation is more attractive to investors.
To engage effectively with (Environmental, Social and Governance) ESG funds and attract more investment into your housing stock, it's important for your social housing business to show how these ESG factors are taken into consideration within your operational decisions.
Housing providers need an approach that is carefully planned and targeted, which enables them to track progress, assess value for money, and understand the level of public trust invested in their programmes. Previous approaches have been largely designed around the assumption that structured ESG processes are best suited for large organisations and institutions.
The truth is very different.
Why are these ESG factors important to investors?
Most ESG funds are interested in a housing provider’s investment decisions in relation to reaping a positive return on investment in your company's assets in a more responsible, future-focused way.
At present, the difficulty for investors lies in the fact that ESG metrics are not yet standardised which can make it difficult to track compliance. While organisations such as the ESG Social Housing Working Group are working to create a common reporting standard, there are some analytical approaches that investors might use in the meantime to evaluate your company's ESG performance.
These include examining third-party social and environmental assessments (which may be easier than tracking internal processes) and looking for signs that show your company's commitment to sustainability by evaluating their projects, operations, strategy, and communications.
What does positive change look like in terms of ESG-led operational processes?
But before you consider making changes on a day-to-day level, it's crucial that you first review your core systems to ensure these are as efficient and sophisticated as possible to handle the changes in workload generated by an ESG approach.
Board and trustees.
Your board and trustee structure must be clear (to show who is accountable for what), transparent (in relation to conflicts of interest), and able to enforce standards with resolutions and directives that put muscle behind your decisions. For example: setting up an ESG committee with high-level representation and the power to make decisions (not just raise issues or concerns).
Structure and governance.
Your entire organisation must be geared towards increased performance in all aspects. This means employing the right staff with the right skills, continuous training to develop in-house capabilities and/or partnering with external ESG experts.
Beyond cost-effective procurement of goods and services, ESG requirements should be built into your business operations by leveraging Proptech and data analytics tools to reduce resource wastage.
Supply chain management.
To mitigate the risk of supply chain failure in your projects, it’s critical to understand the risk exposure of each party in the value chain. This requires managing commercial relationships with your external service providers and ensuring they meet ESG standards.
How can you ensure you are monitoring and measuring ESG factors in your operational processes?
1. Consider the full life cycle of a review.
There’s little point in conducting an ESG review of your operational processes if the results are not going to be used to improve processes in the long run.
2. Include an ESG framework in your risk management.
A risk management process must include an ESG framework or policy and ensure that appropriate actions are taken when risks are identified. This could include an environmental risk assessment and/or a social risk analysis.
3. Include ESG issues in your business plan.
Define key performance indicators in your business plans and include these in your ESG review reports. These can include both measurable outputs and social outcomes.
4. Assess the relevance of ESG factors at the project level – then monitor and report on related risks
Assessing the relevance of ESG factors and risks at the project level, rather than at a corporate level, will help you identify any issues that need to be tackled to ensure sustainability. These risks could include factors such as the likelihood of environmental sustainability improvements and community-led initiatives having a negative impact on community cohesion.
For more information:
Here are some of the investment funds available to organisations with ESG at the heart of their processes – all of these funds already adopt the Sustainability Reporting Standard set out by the ESG Social Housing Working Group: