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£1bn of HA issuance to shift to ‘social’ bonds as major UK lender adopts framework

By 06/05/2021No Comments

More broadly, Mr Williamson said the adoption of the approach is in response to the wider trend within the finance sector to focus increasingly on ESG considerations, and in order to maintain access to a broad pool of investors. There is also an opportunity for the sector to clearly communicate with government as it maps out the financial challenge of decarbonisation, he said.

“I think there will be an ask of government [from HAs] around the path to zero carbon, and if there is a common language around what are we all doing towards E, S and G, at that point, it will be a really useful differentiator for us as a sector.”

In this respect, housing’s aggregators have “a very important role to play in fast-tracking the adoption of common standards”, Mr Williamson said. Fellow bond vehicles MORhomes and GB Social Housing are also early adopters of the reporting standard.

MORhomes, which was first to issue a ‘social’ bond in the sector with its debut issuance in 2019, recently launched an upgraded ‘sustainability’ framework, which it will apply to future issues.

To date just a handful of HAs have launched ‘sustainability’-labelled bonds, with first-mover Clarion launching two in 2020, totalling £650m, followed by Aster’s £250m bond in January 2021.

Last week, PA Housing joined the club with its £400m (£100m retained) issuance, while Beyond Housing this week began marketing its first sustainable bond.

The number is likely to increase rapidly this year, with numerous HAs including the likes of Bromford, L&Q and Hyde penning frameworks.

Speaking in early May, Mr Williamson said that Blend expects to issue its first social bond within the next “four to six weeks”.

On whether a pricing advantage is anticipated, Mr Williamson said that there was evidence in the market of increased ESG investor interest on shorter-dated (circa 15-year) sustainability bonds, but for THFC’s (longer-dated) bonds he said proof would need to be seen in comparison with the secondary markets.

He added: “Over time, I think it will become a hygiene factor for investors, that they will say if it isn’t social or sustainable we will charge you more. But in the short term I think the early adopters are getting some benefit for shorter [tenor] deals that are done.”

In the last year, Blend has signed £565m in new loans, at a weighted average cost of funds below 2.2 per cent.

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