Trust’s social bonds an SA first

• First financial service provider in SA to offer a social impact-linked bond to help small firms

Inner-city housing financier The Trust for Urban Housing Finance (TUHF) has launched SA’s first bonds designed to raise money for socially responsible initiatives for the benefit of investors in low-cost housing projects. TUHF borrows money from capital markets and invests it in inner-city areas.

Inner-city housing financier The Trust for Urban Housing Finance (TUHF) has launched SA’s first bonds designed to raise money for socially responsible initiatives for the benefit of investors in low-cost housing projects.

TUHF is a nonbank financial services company that borrows money from capital markets and invests it in inner-city areas, extending finance to smallscale property entrepreneurs who want to grow their rental businesses.

It targets property entrepreneurs in the affordable housing market who develop, own and operate buildings in inner-city areas.

The social bonds will attract investment in products with quantifiable social effects.

LOAN BOOK

The company, which has a loan book of R3.9bn, has financed more than 39,000 residential units since inception in 2004. Sqiniseko Mbatha, financial analyst at TUHF, said on Monday social and green bonds will help TUHF grow its loan book to more than R4bn by the end of 2021. It wants to increase it by R6bn in the next six years.

A “sustainable bond framework”, which stipulates a set of social targets that developers must meet to get the bond, will provide a measurable and reportable way to demonstrate green and social impact in TUHF funding. This will allow the fund and its associated structured finance vehicles to issue the green and social bonds in support of its lending to qualifying projects.

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, TUHF CFO Ilona Roodt said.

“In the 18 years that we’ve been operating in this niche market segment, sustainability, in terms of financial, environmental and social aspects, has emerged as a key determinant of our long-term business success,” she said.

“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.”

Two years ago TUHF introduced the TUHF Luhlaza Initiative, which formalised the company’s commitment to fund entrepreneurs who want to develop green residential buildings.

Mbatha said this provided investors and developers with a measurable blueprint around which to drive energy-efficient ways of building and getting value from their residential projects.

“Now, our sustainable bond framework builds on that achievement with a similarly measurable blueprint that captures TUHF’s overall development impact,” he said.