Southern Housing showcases ESG credentials with inaugural Sustainability Bond

We're delighted to have acted as Joint Bookrunner on Stonewater’s inaugural Sustainability Bond, after acting as Sole Arranger for their EMTN programme and Sole ESG Structuring Advisor for the Sustainability Framework, earlier this year.

Southern Housing Group

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Improving communities’ lives

Southern Housing Group (Southern) is one of the largest housing associations in the UK providing over 30,000 homes to over 77,000 residents across more than 88 Local Authorities in London and the South East. 

Founded in 1901, the housing association’s purpose is to provide high-quality homes, services such as access to employment and training, and a range of other services and projects that support digital inclusion, health, and wellbeing. Southern also offers specialist accommodation and manages and delivers care and support services for those residents who need it.

Equally, Southern is committed to support its residents to live sustainably through improving the energy efficiency of their homes whilst also reducing overall carbon footprint. By 2024, the housing association plans to have up to at least 75% of their homes achieve EPC C, and 100% by 2030. 

Together with the UK Centre for Ecology & Hydrology and other partners, the housing association has also launched a ‘Biodiversity Toolkit’ to help housing providers and residents support more wildlife on their estates – and putting the toolkit suggestions into practice on their own sites.

Investors welcome detailed insight into Southern’s sustainability ambitions

Supporting Southern with their Sterling bond issuance in 2018 as an Active Bookrunner, the housing association turned again to its bank partner, NatWest, to help in the role of Active Bookrunner, Documentation and B&D with their inaugural Sustainability Bonds issuance and to guide the Southern team in establishing their Sustainable Finance Framework (SFF).

Southern’s SFF, which received a Second Party Opinion from S&P Global Ratings, confirming that the SFF is aligned with the relevant ICMA and LMA principles, focuses on Affordable Housing, Access to Essential Services, Socioeconomic advancement and empowerment and Green Buildings. The projects under these categories contribute to the United Nations Sustainable Development Goals (SDGs) No 1 “No Poverty”, No 3 “Good Health and Wellbeing”, No 4 “Quality Education”, No 7 “Affordable and Clean Energy”, No 8 “Decent work and economic growth”, and No 11 “Sustainable Cities and Communities”.

After establishing the framework, Southern targeted a £250 million sustainability issuance (with an additional £50m retained) and opted for a 15-year tenor to complement the housing association’s existing maturity profile, and to meet investor demand for this tenor for ESG transactions.

Given the inaugural nature of Southern’s Sustainability Bond and the importance to thoroughly re-introduce investors to Southern’s credit story and sustainability strategy, the deal team agreed to conduct a robust investor marketing process, which culminated in three days of investor meetings, which was welcomed. The approach resulted in a high order volume right after books opened for the transaction.  

Given the strength of the order book, NatWest was able to recommend tightening pricing, exceeding expectations for the transaction. As expected, and reflecting the quality of the proposition, the order book remained robust through to final pricing, reaching over £630 million. This transaction continues the increasing trend of housing associations accessing sustainable capital markets financings: approximately 90% of sector benchmark issuances year to date have been in sustainability and/or social debt. 

Tomorrow begins today

George Flynn, Corporate Financing & Risk Solutions, NatWest, said: “We are thrilled for Southern Housing to have received such strong investor backing for their debut Sustainability Bond. This outstanding result is a clear testament to the strength of Southern and the quality of their investor engagement during the roadshow. From start to finish, it has been an honour for us to be a part of the process, leading key workstreams including Sustainability structuring, Documentation and Billing & Delivery, and also actively supporting and contributing to the Investor Presentation & Roadshow process. Working so closely with the Southern team was an absolute pleasure.”

Dean Shahfar, Sustainable Finance, NatWest, added: “The overall outcome is a great reflection of both Southern’s credit proposition and ESG credentials. The granular articulation of the company’s strategy and objectives, how bond proceeds will be used, and how progress will be measured, landed very well with investors. At NatWest we’re determined to help our customers, such as Southern Housing, achieve what they want today while ensuring sustainable growth for tomorrow. For us, tomorrow begins today.”

Amanda Holgate, Chief Financial Officer, Southern Housing Group: “Thank you to the entire NatWest team for their strong support across all workstreams.  It was a pleasure to work with you, and we are grateful for your hard work and diligence in keeping us to time and high quality on all deliverables. This transaction also re-establishes us in the Sterling market and provides an excellent platform for more sustainable issuances.”

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