On 15 November 2022, the Investment Association (IA) (the trade body and "industry voice" for UK investment managers) published updated "Governance and disclosure guidelines for housing associations seeking funding from capital markets".
These represent a significant update to the 2017 iteration, and as might be expected, there is a significant shift in focus. The guidelines suggest that housing associations significantly widen the information that may currently being made available to investors, particularly in relation to environmental, social and governance (ESG) matters. The guidance also provides a useful summary reminder to issuers of their obligations in relation to insider dealing and the management of inside information.
The introduction to the guidance indicates that the IA consider that most of the information sought will already be produced, and that the "only" shift is to ensure the information is made publicly available. Whilst this will certainly be true in some cases, others will no doubt be more challenging.
Easy wins
To the extent not already in place, the suggestions for regular bondholder update calls, a named investor relations contact and a dedicated section of the website should be relatively straightforward to implement. Some of the requested KPIs will no doubt be capable of publication, though associations should give some consideration to the format in which the data is presented to ensure that there is no inadvertent breach of data protection regulations.
Many, if not all, of the governance aspects will already be in place through the regulatory requirement for associations to adopt a corporate governance code.
ESG
Unsurprisingly, the IA state their members' preference for sustainable finance frameworks to be externally validated or accompanied by a second party opinion.
The Sustainability Reporting Standard is described as a "minimum" in terms of investor expectations regarding ESG matters and the full list of desired information in the area goes further, taking in Scope 1, 2 and 3 emissions and TCFD reporting. The latter, while not yet mandated for many housing associations, is increasingly expected as standard by investors.
Challenges
The ask to publish audited accounts within 3 months of the year end and committing to a set publication date will be challenging. A handful of sector issuers may be able to achieve this, but a shift of this nature is going to require additional audit resource (internal and external), which may or may not be available, particularly in terms of the pressures on external audit which have been experienced in recent cycles.
Some of the data may not be as readily available as the IA might hope, for example the ability of associations to charge unencumbered properties will likely be unknown until an attempt is made to prepare them for charging. The number of tenants claiming universal credit may be unknown as circumstances change.
Status of guidance
The guidance is not mandatory, but it does give a detailed insight into investors' wish lists. It should be required reading for those associations with listed public debt and would-be entrants to the capital markets and similarly illuminating for all treasury teams.
