Trust for Urban Housing Finance (TUHF), in partnership with Standard Bank, has launched its Sustainable Bond Framework and South African first social bonds.
As an impact-focused lender with an eighteen-year track record of successfully financing inner-city residential buildings, TUHF is a non-bank financial services company that borrows money from the capital markets and invests this in inner-city areas, extending finance to small scale property entrepreneurs who want to grow their rental businesses. TUHF targets entrepreneurs in the affordable housing market who develop, own, and operate building in inner-city areas.
“In the eighteen-years that TUHF has been operating in this niche market segment sustainability, and in terms of financial, environmental, and social aspects, has emerged as a key determinant of our long-term business success,” says Ilona Roodt, Chief Financial Officer at TUHF.
“And we consider these to be important long-term measures of success for property finance and a key differentiator to attract investors active in the capital markets.”
The Sustainable Bond Framework allows TUHF and its associated structured finance vehicles to issue Green and Social bonds that support its lending to qualifying projects and ensures that the relevant impact that TUHF has, such as providing funding in the affordable housing space and providing access to finance for small scale property entrepreneurs, is recognised.
The Framework can be referenced to all TUHF’s funding going forward as it will provide investors with a measurable and reportable way to demonstrate green and social impact in its funding. The widening gap in housing supply versus demand, particularly for affordable inner-city rental housing, highlights an opportunity to support emerging entrepreneurs who want to make a developmental and sustainable contribution in this market and Roodt believes illustrates an important role for Sustainable and other Bonds in the market going forward.
“In 2019, we introduced the TUHF Luhlaza Initiative, which formalised our green building approach to provide investors and developers, alike, with a measurable blueprint around which to drive energy-efficient ways of building and getting value from their residential projects,” says Sqiniseko Mbatha, Financial Analyst at TUHF. “Now, our Sustainable Bond Framework builds on that achievement with a similarly measurable blueprint that captures TUHF’s overall development impact.”
Lusanda Netshitenzhe, CEO for TUHF21, adds: “The Sustainable Bond Framework “builds on” TUHF’s overall impact by backing entrepreneurs to provide quality affordable rental housing, facilitating urban regeneration and changing the complexion of property ownership to make a significant contribution to urban land reform and transformation.”
Measuring impact by international standards
TUHF’s Framework contributes to five of the UN’s Sustainable Development Goals (SDGs), including alleviating poverty, affordable and clean energy, decent work and economic growth, sustainable cities and communities, and climate action. Additionally, the Framework aligns to principles outlined by the International Capital Markets Association (ICMA), namely “The Green Bond Principles” (GBP), the “Social Bond Principles” (SBP) and the “Sustainability Bond Guidelines” (SBG). These principles are the leading framework globally for the issuance of sustainable bonds.
A South African first
TUHF has since also issued its first social bonds, which are also a first for South Africa. Listed on the JSE Sustainability Segment, the bonds were issued by Urban Ubomi 1, an asset-backed security structure administered by TUHF and issued in line with TUHF’s Sustainable Bond Framework, which was developed with the assistance of Standard Bank, and which has subsequently been independently verified by ISS ESG.
ISS ESG provided a Second Party Opinion (SPO) to verify both the Sustainable Bond Framework and the Sustainability Quality of TUHF as the Issuer and found both to be well aligned with the GBPs, SBPs and the SBGs. It also assessed the contribution of TUHF’s Green, Social and Sustainability Bonds to the UN SDGs, and rated the planned use of proceeds as making a significant contribution to all five targeted goals.
“This means our framework allows local and international investors to come on board and address real social and sustainability issues through responsible finance. The interest in our Social Bonds has mainly been in terms of the ground-breaking impact of an achievable, measurable framework, as well as real financial returns, that can be accredited through formal audit processes,” adds Roodt.
Inner-city property investment and development is based on multi-sector economies and high demand for well-located, affordable, and quality accommodation. This is a key driver for urban regeneration, neighbourhood revitalisation, urban densification, and local economic development, which have a knock-on impact on improving further local socioeconomic activity and inclusion.
“Sustainability, transformation and inclusive growth has been part of the TUHF business model since this since inception – providing financial inclusion, developing affordable housing, and supporting sustainable building. This framework allows us to articulate TUHF’s development impact in a more formalised, internationally recognisable way,” Mbatha concludes.