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

The regulation of financial markets according to Environmental, Social and Governance (ESG) criteria has become a priority for the European Union (EU). Recent legislation, such as the EU Green Taxonomy, aims to identify sustainable investments enhancing transparency and accountability while steering private finance toward environmental objectives. The introduction of ESG criteria poses specific questions for Social Housing Organisations (SHOs), particularly as the decarbonisation of the housing stock is also incorporated into national legislation. This article contributes to the social housing finance literature by breaking ground on ESG, an area of intensive legislative activity currently re-shaping financial markets. The study draws from interviews with SHOs’ finance directors, banking officers, rating agencies and public officials to answer the question: How does the introduction of ESG legislation affect the financing of social housing decarbonisation? First, the results show that ESG legislation is broadening reporting responsibilities while producing only limited additional finance ultimately geared towards large and commercially oriented SHOs. Second, the expansion of energy-efficiency requirements is resulting in higher costs creating tensions with SHOs’ social mission of building homes at affordable rents. Third, the adoption of ESG financing is producing inequalities in access to capital across national financing systems and individual providers.