Three contradictions between ESG finance and social housing decarbonisation: a comparison of five European countries

Figures & data

Figure 1. Impact of ESG legislation, approved at the time of the interviews, on social housing financing.

Figure 2. Relative size of the social rental stock in Europe. Source: OECD Figure PH4.2.1.

Table 1. Breakdown of interviewees by sector and country.

Sector	Number	Country	Number
Consultancy	3	Austria	5
Sector Organisation-Federation	7	Denmark	5
Rating Agency	2	EU	4
Bank /Intermediary/Government	9	France	6
SHO	12	Germany	5
Total	33	Netherlands	8
		Total	33

Table 2. Summary social housing financing features.

	Public Bank	Bonds (Own-name)	Bonds (Intermediaries)	Reinvestment Fund	State Guarantee
Austria	No	One	Private	Yes	For govt.-owned
Denmark	Regulated	No	Private	Yes	Common Fund
France	Yes	Yes	Public	No	Yes
Netherlands	Yes	No	Public	No	Yes
Germany	Yes	Yes	Public	No	For govt.-owned

Table 3. Overview of forces, effects and contradictions.

	Intended homogeneising effect	Actual effect	Contradiction
(1) Reporting and disclosure obligations	To lower the cost of capital for ESG aligned activities	Impact on interest rates limited to commercially oriented SHOs. Increase in administrative costs.	1st between ESG and (some) national frameworks already in place to support social housing provision
(2) Renovation requirements and energy performance standards	To sustainably increase renovation rates and overall energy efficiency while avoiding negative social impacts	Focus on renovation steered to reductions in newbuild, rent rises and disposals, in some instances.	2nd Between ESG and the sector’s social objectives: lower rents and new housing provision
(3) “Greening” of Capital Markets	To redistribution of finance toward those sectors and activities where it can produce a high impact	Entrenchment of inequalities in access to finance. Certain management practices are not easily amenable to ESG. SHOs size and stock strongly impact SHO capacity to tap onto green markets.	3rd between green capital and organisational characteristics and management practices

Table 4. Contradictions, heterogeneising and homogeneising forces.

Contradictions	France	Netherlands	Germany	Austria	Denmark
1st	Reporting and Disclosure Obligations
	Limited Incentives	Limited Incentives	Large incentives for commercial operators	Limited incentives	Limited incentives	Homogenising
	Strong Guarantees and Countercyclical public lending	Strong guarantees and countercyclical public lending	Economies of scale in large operators	Strong public intervention through grants	Partial guarantee and strong legislation	Heterogenising
2nd	Renovation Requirements and Energy Performance Standards
	Relevant leverage limitations	Relevant leverage limitations	Relevant leverage limitations			Homogenising
	Low financial risks due to guarantees	Low financial risks due to guarantees	Temporally limited rent caps reduce financial risks	Cost-based rents reduce split incentives and strong grants reduce leveraging and risks	Revolving funds at country level and provision for renovation in rent setting reduce risks	Heterogenising
3rd	“Greening” of Capital Markets					Homogenising
	Public lending embedding ESG criteria in lending provision	Clashes with portfolio finance	High variation in adoption across providers	Public intervention aligned with financial markets	Public intervention being aligned with financial markets	Heterogenising

Table

Research questions	Data collection strategy	Codes
(1) What are the main underlying differences between social housing financing systems in Europe?	Literature Study	NA
(2) How are reporting and disclosure obligations affecting SHOs’ access to capital markets and ultimate borrowing costs?	Semi structured interview	Financing Models (Non)Taxonomy Aligned Bond Reporting & Disclosure ESG Additionality Guarantees
	Protocol: (1) business-as-usual, main investors and sources of finance (2) role of ESG finance (bonds, loans) and reporting obligations
3) How are renovation requirements and MEPS impacting SHOs’ social objectives?	Semi structured interview	Newbuild Compromise Rent Increases Renovation Financing Models
	Protocol: 3) financing renovation and energy efficiency requirements
(4) How are national management practices and organisation characteristics interacting with “greening” capital markets?	Semi structured interview	Risks Social (Taxonomy) Inequalities – Countries Inequalities – Providers Project Financing
	Protocol (4) risks, challenges and recommendations.