Attracting sustainable finance for affordable and social housing

Clara Mafé represented the syn.ikia EU project, that has as main goal scaling up Sustainable Plus Energy Neighbourhoods. SPENs have the potential to expedite the adoption of green buildings, surpassing the standards of nearly zero energy or zero-emission buildings, and resulting in greater reductions in lifecycle greenhouse gas emissions. SPENs require significant investment (€400K - €1M extra), posing a financial challenge for the social and affordable housing sector. Without substantial public or private funding, SPENs projects are not feasible.

Paolo Mazzeo from EFRAG offered an overview on the different dimensions of the ESRS process. He highlighted that there is a robust legal mandatory regime of sustainability reporting: Corporate Sustainability Reporting Directive (political level) and European Sustainability Reporting Standards (technical level). More support is available online.

The role of public banks for an affordable transition

Public banks are key in providing affordable finance for social housing and climate efforts - said Lidwin van Velden, from the European Association of Public Banks (EAPB). While the sectors supports the green finance agenda, the regulatory focus on the private commercial sector poses challenges. She mentioned that the organisation is involved in discussions for a social investment framework, as there is interest from the private market for interest in providing finance at attractive rates for social, health, eduction, etc, which are needed for a just transition.

Charlotte Limousin from DELPHIS outlined the main challenges faced by public and social housing providers, data being a serious one. Most housing providers are not yet prepared for the upgraded CSRD reporting requirements. While it is a complex process, she pointed out that there are also positive aspects, such as considering this an opportunity for organisations to improve their strategies. In this context, DELPHIS is advocating for a collective approach, built on the sharing of best practices.

How can ESG finance be applied to social housing? Is the question for which Alex Fernández, PhD candidate from TU Delft tried to shed some light. The ESG label system is meant to signal to investors, among others, a lower risk. However, a series of interviews conducted with representatives from the sector form Austria, the Netherlands, Germany, France and Denmark showed that there are three key limitations:

• Social housing organisations already have access to a capital with lower rates than the market level, e.g. the ‘guarantees system’ from the Netherlands
• Currently in EU legislation there are very high thresholds when it comes to energy efficiency; impacting sometimes the organisation’s priorities and leading to compromises such as reducing new construction or selling off the worst performing stock
• Not taking into account individual characteristics, as the current ESG standards tend to favour scale.

He recommends two key areas for improvement:

• At EU level: The need to incorporate social indicators
• At national level: aggregators and intermediaries are essential

 

A section of the webinar was dedicated to practices from the field.

Charlotte Limousin presented a major urban renewal project from Orléans, France, implemented by Valloire Habitat. The goal was to renovate 280 social housing units for improved energy efficiency, attractiveness, comfort, and quality for residents. The most interesting aspect: part of the funding was from a commercial bank loan, based on EIB funding.

Oliver Hagvall shared the ÖrebroBostäder AB’s approach to green bonds and social impact investment. ÖBO evaluates the sustainability of all its projects to enhance reporting. It has developed its ESG framework and prioritizes renovation projects with a strong social impact. Currently, 33% of its bonds are green, and ÖBO aims to use social bonds to refinance older projects.

Reflecting the Norwegian context, Christian-Marius Stryken from NBBL shared the example of an owners association from Tromsø, that secured a loan from a private bank for energy efficiency renovation of 149 housing units. 'Green finance will be important.'

Julien Dijol brought the discussion to today's challenging financial landscape, in which the energy performance contract (EPC) emerges as a promising tool, although its utilization remains limited in the residential sector due to existing favorable conditions for affordable housing providers. To address this, private loans with ESG requirements and potential public or collective guarantees may become more prevalent. Exploring tools like InvestEU is essential. Encouraging EPCs is important, requiring strong public sector performance to attract private funding.

To close up the session, Dara Turnbull agreed the standards are here to stay, that housing providers should be taking them seriously, to attract green investment, and that this process should begin now.