Corporate Sustainability Risks & Trends for 2024

Corporate Sustainability Risks & Trends for 2024


Rising challenges

Before the Covid Pandemic end to 2019 there was solid progress for Sustainability in the corporate world.   Awareness around climate change, biodiversity loss and the importance of social impact was improving.  The risk and the opportunity of adding sustainability into decision making and performance measurement was knocking more regularly on the board room door and People and Planet were starting to find a more regular place at the same table as profitability.  But then close behind the arrival of COVID a multitude of other inflection points have been triggered, with all sectors of work having to handle unpredictable risks arriving at faster rates. 

  • More Planetary Boundaries breached*.
  • AI generated misinformation and disinformation makes trust worthy data harder to find.
  • Market volatility is commonplace.
  • Political and Geo-political influence.
  • Inflation.
  • Cost of living.
  • War.

The list is long and relentless, with macroeconomic headwinds that historically have come once or twice a generation lining up in their droves.

For corporate sustainability, the challenges rose most fervently in 2023.  There was increasing criticism that sustainable thinking was impeding business performance.  If you were considering environmental or social impact in your decision making the you were denting the profitability.  This has been most formally demonstrated in the United States with legal and incentivised anti-ESG measures in place in more than 18 states.  In times of macro-economic challenge, the need for better rates of return in shorter time periods with quick fix thinking is exacerbated and this exacerbation is directly juxtaposed to the long-term strategic approach that sustainability needs.


Momentum and hope

With any substantial change there are negative reactions to the pro-activism before genuine progress and equality can be made. While the doom and gloom list is long, I believe the sustainability backlash has peaked and is passing.

There are few topics more entangled than Sustainability.  It is across business, science, law, politics, consumerism, popularism, public opinion and uncertainty. It is far more consistent and carrying far more weight as part of decision making at so many more parts of the business value chain.

Data consistency, partnerships, sharing, taxonomies, regulation, legislation, technological and biological innovation are more established and there has been a tectonic shift in the direction of capital investment.  Those who doubt the climate crisis or the importance of social impact are starting to acknowledge the commercial reality. There’s growing evidence that sustainability practices are linked to financial success with studies from the likes of McKinsey & Company showing a 3% to 8% increase in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for those firms embracing sustainability practices.


Sustainability themes: my current top 5

  1. Scaling renewables – the urgency of addressing climate change and meeting Net-Zero commitments made, plus falling costs and increasing government incentives are driving the rapid expansion of renewable energy capacity.
  2. Regulation and legislation – There are more consistent standards for disclosing sustainability information. It will remain fragmented through 2024 and 2025 but mandatory requirements are starting to bed in with spreading influence.
  3. Data tsunami – Consistent, standardised data is going to take time to evolve but the volume of data available now, assisted by AI evolution is huge. To mitigate risk, adhere to standards and meet commitments that have been made every sector must make sure their data management and related business processes can adapt and react to unpredictable risk.
  4. Technological and biological technology innovation – These are advancing Environmental (e.g. renewable energy, energy efficiency, pollution control, carbon capture, sustainable materials…) Social (e.g. Precision Agriculture, Waste Reduction and Recycling, Healthcare, Social Impact Investment…) and Governance Benefits (e.g. Transparency and Accountability, Risk Management, Sustainable Supply Chains…) and offering a powerful toolkit for companies to improve their sustainability performance.
  5. Consumer behaviour and social expectation – Increasing expectations on products and services to prove awareness and social conscience is playing a more important role in consumer and B2C and B2B decisions with supporting evidence of this showing through in behavioural science.


*Side knowledge bite

First Launched in 2009, the planetary boundaries concept presents a set of nine planetary boundaries within which humanity can continue to develop and thrive for generations to come. Crossing these boundaries increases the risk of generating large-scale abrupt or irreversible environmental changes. Drastic changes will not necessarily happen overnight, but together the boundaries mark a critical threshold for increasing risks to people and the ecosystems we are part of.



For more information on any of the topics discussed, please contact George Roffey, Chief Sustainability Officer at Centrus

UK Affordable Housing Market Update | April 2024

Market update

  • March CPI of 3.2% was higher than the expected 3.1%, however despite this swap rates did not increase by the end of the day of the announcement.
  • CPI is expected to get close to the 2% target for April driven by the energy price cap reduction, although the increase in national minimum wages could reduce its effect.
  • Inflation has proved to be stickier than markets were expecting until relatively recently; the US Federal Reserve has acknowledged interest rates will stay higher for longer.
  • Given this, markets now only expect one BoE 0.25% rate cut this year in November (at the beginning of 2024 markets were pricing in 6 or 7 rate cuts).
  • Hence, the swap curve is 15 to 20 bps higher than a month ago.
  • House prices indices are now showing month-on-month falls, although a material fall in nominal prices seems unlikely.


Implications for clients

  • The SONIA curve remains flat, now at 4.0% from 7 years through to 30, meaning clients can hedge over a tenor that suits their loan portfolio; this can reduce short-term interest rates and negate the need for risk buffers on hedged funding.
  • Investor demand for HA paper is still strong and spreads remain attractive, which creates opportunity for long term covenant light funding from the DCM market; there has been a notable uptick in activity in this space over the last month.
  • Even though interest rate projections and swap rates have risen over the last month, all in funding costs are still attractive at current levels and delaying fundraising in the hope of market rate falls is a risky strategy (particularly as any increase in margins/spreads could offset any fall in gilt/SONIA rates). Steady hedging over time and maintaining the right hedging ratio to mitigate interest risk is the objective of a hedging strategy, and we think now presents a good opportunity to lock in relatively attractive rates.


Recent client activity

  1. Bond issuances and retained bond sales: Several new bond issues and retained bond sales have recently completed, with HAs seeking to spread maturities through medium and long-term notes with tight pricing achieved.
  2. Strategic asset disposals and acquisition strategies: Centrus is advising HAs on strategic asset disposals and acquisition strategies, highlighting the sophisticated approach some HAs are exploring to unlock capacity.
  3. Corporate finance and treasury strategy advice for mergers: We’re providing comprehensive corporate finance and treasury advice for ongoing mergers in the social housing sector. Our expertise ensures that these mergers are executed smoothly and strategically.
  4. Hedging strategies and interest rate risk management: Centrus continues to assist clients with hedging strategies and interest rate risk management. Our tailored solutions help HAs navigate market uncertainties and protect against potential risks.
  5. Banking transactions: We anticipate announcing successful completion of several banking transactions, including revolving credit facilities (RCF) and term facilities, shortly. These transactions offer competitive pricing and attractive terms, further strengthening our clients’ financial positions.

To learn more about our work in the affordable housing sector, click here.

For more information, please contact Paul Stevens or John Tattersall.

Key insights from World Hydrogen UK


Last week, the Centrus team attended World Hydrogen UK, where industry leaders convened to explore the latest trends and challenges shaping the hydrogen landscape.

The discussions surrounding the investment and funding dynamics for hydrogen projects in the UK underscore a complex interplay of excitement, caution, and the critical need for supportive frameworks to bridge the gap towards tangible commitments.

The hesitancy to invest heavily in green hydrogen, despite its recognised potential, highlights the indispensable role of robust off-taker agreements, government revenue support mechanisms, and innovative financing strategies in securing project bankability and investor confidence. These elements are not only pivotal for individual project viability but also for the broader sector’s growth, signaling a strategic push towards aligning policy, industry, and financial sectors.


5 key takeaways from World Hydrogen UK:  

  1. Ambitious Targets: The UK government has set an industry-leading target of achieving 10GW of hydrogen capacity by 2030, with a significant portion derived from low-carbon electrolysis. This ambitious goal positions the UK as a global frontrunner in hydrogen innovation, leveraging robust policy frameworks and international collaborations to drive market growth and supply chain development.
  2. Policy Imperatives:  There’s a unanimous consensus on the critical role of government policies in facilitating the formation of stable off-taker agreements. Policy frameworks that encourage long-term contracting and provide mechanisms to mitigate off-take risks are essential for fostering investor confidence and project bankability. Cross-party support and alignment across various government implementation strategies are imperative for policy effectiveness. 
  3. Enhancing Project Bankability: Despite increasing interest in green hydrogen, stakeholders remain cautious about committing to large-scale projects. The key challenge lies in securing revenue support mechanisms and viable off-take contracts to enhance project bankability. Supportive policies and innovative financing mechanisms are crucial for scaling up hydrogen projects and ensuring their commercial success. 
  4. Alignment Challenges: Aligning the duration and terms of project finance with off-take contracts poses a significant challengeProjects often require long-term financing, yet securing off-take agreements that align with these terms can be complex. This misalignment introduces risks to the project, underscoring the need for innovative solutions to bridge the gap between financing and off-take requirements.
  5. Priority of Uses: While large-scale industrialisation offers economies of scale, the transportation sector presents diverse off-take solutions, catering to both light and heavy-duty vehicle markets. 

As the UK strives to lead in hydrogen innovation and application, a collaborative effort to address investment challenges, align policies, and implement sector-specific strategies is paramount. 

Centrus is proud to have supported a number of hydrogen projects (with clients such as DBE Energy and NGN/CKI) and will continue to support our clients and new investors over the coming years.

For further insights on navigating the evolving hydrogen landscape and leveraging investment opportunities, please reach out to David Craig, Myrto Charamis or Barney Harris.




Myrto Charamis, Director – Centrus

Myrto brings a wealth of experience in London listed investment companies investing in infrastructure assets including renewables, battery storage and energy efficiency. With over 25 years of experience, her career has encompassed roles in leading investment banks in the UK and pivotal corporate finance positions in the US and Europe.


David Craig, Director – Centrus

David has over 20 years of energy, utilities and infrastructure experience sitting across all sides of the transaction table as advisor, lender and principal sponsor. Prior to Centrus, David worked for leading firms both in the UK (pwc and Lloyds Banking Group) and most recently in Sydney for KPMG and Pacific Partnerships, the investment arm of the CIMIC Group, Australia’s largest infrastructure contractor.


Barney Harris, Assistant Director – Centrus

Experienced in business planning and treasury management as well as managing and advising on clients’ derivative portfolios, Barney joined Centrus from the Gresham House Capital Market Team, where he focused on financing solutions across the Real Asset sectors. Prior to this, Barney was at Deloitte for 5 years, working primarily with clients listed on overseas stock exchanges.

Centrus Spotlight with Electric Land

About Electric Land

Electric Land, established in 2015, has been instrumental in identifying and securing prime land for renewable projects. It’s platform is delivering a growing pipeline of best in class assets by securing predominately freehold land, viable grid and required utility connections and planning permission, and leasing it ‘Ready-to-Build’ to operators. All assets are held long term in Electric Land’s investment portfolio. 

With an impressive portfolio spanning 650 acres across 32 sites in the UK, Electric Land hosts a diverse range of projects including solar, wind, battery storage, electric vehicle charging, and flexible generation infrastructure. Owned by FPC, Electric Land’s commitment to long-term investment in sustainable energy infrastructure is truly commendable.


Centrus Spotlight with Electric Land

In our first Centrus Spotlight episode, Omer Fazal, Managing Director and Head of Real Estate at Centrus, sat down with Stephen Lansman, Chairman at Foundation Property & Capital Group and Electric Land, to delve into the unique characteristics of this specialised asset class and the appeal it holds for institutional real asset investors. For Stephen, these include: 

  • Secure Ground Rent Income: Electric Land’s assets provide a stable and secure income stream, making them highly appealing to institutional investors seeking low-risk opportunities.
  • Scarcity and Importance of Grid-Connected Land: Grid-connected land, essential for housing energy generating and storage infrastructure, is in high demand and difficult to develop, ensuring sustained interest in Electric Land’s sites.
  • Long Leases and Permanent Use: The strong demand for Electric Land’s sites results in long leases, potentially permanent use, and ultra-secure rents, with rental values likely to increase over time.
  • Index-Linked Rents: Rents are often index-linked, providing investors with a hedge against inflation and ensuring consistent returns.
  • Increased Land Value: As tenants invest in infrastructure on Electric Land’s sites, the underlying land’s value significantly and permanently increases, offering additional long-term benefits for investors.

Electric Land is now seeking a cornerstone institutional investor to support the growth of the portfolio and Centrus has been retained as the exclusive financial advisor. For more information, please contact Omer Fazal.

UK Affordable Housing Market Update | March 2024

Market update

  • February CPI of 3.4% was lower than the expected 3.5% and interest rate projections fell.
  • Service costs and wage inflation were both 6.1% and remain sticky, stubbornly holding up CPI for now. 
  • Goods inflation is down to 1.1% and with the energy price cap set to fall over 12% in April, expectations are for CPI to fall below 2% in the second quarter.
  • The swap curve is down 20 to 25 bps from a month ago, with most of the fall occurring after the CPI release and dovish tone from the Bank of England’s 8 ‘hold’ – 1 ‘cut’ vote, with two key members no longer voting for a rate rise.
  • House prices continue to fall in real terms, but with rental growth of 9% YoY in February (the largest increase since records began in 2015), falling interest rate projections and a resilient jobs market, a sense of relative strength appears to be returning in the housing market. 


Implications for clients

  • The SONIA curve remains flat, now at 3.7% from 6 years through to 30, meaning clients can hedge over a tenor that suits their loan portfolio. 
  • Interest rate projections and swap rates are falling but are attractive at current levels. Waiting for further falls back to the December 2023 lows, or to new lows, is a gamble. Steady hedging over time and maintaining the right hedging ratio to mitigate interest risk is the objective of a hedging strategy, and we think now presents a good opportunity to lock in relatively attractive rates. 
  • High investor demand and very low spreads creates opportunity for long term covenant light funding from the DCM market and activity continues to pick up in this space.


Recent client activity

  1. Banking transactions and funding mix: As we approach year-end, numerous banking transactions are nearing completion, featuring a blend of Revolving Credit Facilities (RCF) and medium-term funding. The banking market continues to be supportive of the sector and clients are taking advantage of attractive deals from a select few banks offering 10-year funding and above. 
  2. Strategic asset management: We’re actively engaged in and advising on strategic asset disposals and acquisition strategies, highlighting the sophisticated approaches housing associations (HAs) are adopting to unlock capacity and drive growth.
  3. Focus on hedging strategy and covenant changes: Hedging strategy, covenant changes, and the strategic impact of combining business plans remain areas of focus for clients as they navigate evolving market conditions and optimise their financial positions.
  4. Active bond market: Several new bond issues and retained bond sales are currently active or recently completed, with HAs seeking to spread maturities through medium and long-term notes with tight pricing achieved.

To learn more about our work in the affordable housing sector, click here.

For more information, please contact Paul Stevens or John Tattersall.

Centrus Leaders: Advice for Women in Finance

Centrus Leaders: Advice for Women in Finance

To celebrate International Women’s Day 2024, we asked Maria Goroh, Managing Director, Laura Thomas, Director and Myrto Charamis, Director at Centrus to share their experiences and advice for young women in the finance industry. 



As leaders at Centrus, what advice would you give to young women aspiring to build successful careers in finance, and how can they navigate potential obstacles or biases they may encounter along the way?

Maria Goroh emphasises the importance of preparation and flexibility. She states, “Prepare to work hard and be flexible; usually, the bias towards women is positive if you are delivering results” … “don’t forget to have fun along the way!” Laura Thomas echoes this sentiment, adding, “Build and demonstrate more confidence in yourself and reflect that in your communication style. If you see obstacles, identify them, come up with a plan to overcome them, and talk to someone in the organisation to help you.”

Myrto Charamis advises women to embrace challenges and actively network. She says “View challenges as opportunities to learn and grow. Build a robust professional network, make your voice heard, and always maintain your professional integrity.”


Could you discuss the importance of mentorship in your career journey, and offer advice on how women can seek out and cultivate mentor relationships within the industry?

Maria encourages women to seek mentors both within and outside their organisations. She notes, “Don’t be afraid to seek mentors; usually, people (both women and men) are very happy to help women in finance. LinkedIn and industry conferences are a fantastic tool for this. ”

Laura shares Maria’s positive experience with mentorships stating, “The best mentors I’ve had over the years have been informal. Through those early mentoring relationships, I learned huge lessons about authenticity at work and the value of asking questions.”


The finance sector is known for its fast-paced and competitive nature. How do you maintain a healthy work-life balance, and do you have any tips for other women striving to achieve this equilibrium while pursuing ambitious career goals?

Maria highlights the importance of planning and organisation, noting, “Planning ahead is crucial for me. Mobile devices and post-COVID hybrid work models have made it a lot more manageable to keep on top of things.” 

Laura emphasises the significance of structure and self-awareness, stating, “Maintaining a structured schedule is key. As I’ve grown older, I’ve learned to recognise my peak productivity times and allocate time accordingly. For other women aiming for equilibrium in work and family life, building a true partnership at home is vital – I couldn’t have my career and be the mother, wife, daughter, sister, friend and colleague I want to be without that. Strive to work with others who are also aiming for equilibrium, then we can all achieve true balance and understanding while having the career we love.” 

Myrto also advocates for “setting boundaries, practicing self-compassion and prioritising personal well-being” as essential strategies for maintaining equilibrium in the face of a demanding career.

Maria Goroh, Managing Director – Centrus

Maria Goroh brings 15 years of capital markets experience to her role as Managing Director at Centrus. Her background includes roles at firms such as Nomura, Citigroup, and TradeRisks. She has worked with leading UK, European and US insurers, pension funds and asset managers on transactions backed by housing, student accommodation, social infrastructure and local authorities.

Laura Thomas, Director – Centrus

Laura has over twenty years of experience in the Energy, Infrastructure, and Renewables sectors, spanning Wind, Solar, EfW, Biomass, and CCGT projects. Prior to joining Centrus, she served as Investment Director and CFO at Miller Turner, a renewables infrastructure investment company. Before that, she spent fourteen years at ESB, where she led the acquisition, funding, and finance operations of over 2.0GWs of energy projects across Ireland and the UK. 

Myrto Charamis, Director – Centrus

Myrto has a wealth of experience in London listed investment companies investing in infrastructure assets including renewables, battery storage and energy efficiency. With over 25 years of experience, her career has encompassed roles in leading investment banks in the UK and pivotal corporate finance positions in the US and Europe.



At Centrus, we are committed to fostering a culture of diversity, inclusion, and excellence in the finance industry. If you’d like to find out more about working at Centrus, please contact recruitment@centrusadvisors.com 

UK Affordable Housing Market Update | February 2024

Market Update

  • January CPI was flat at 4.0% against expectations of 4.2%. The market reacted with the 5-year and 10-year swaps increasing by c. 10bps on the day of the announcement. 
  • The 10-year swap rate (3.8%) is pretty much where it was after the last month’s ‘surprise’ CPI release. It was at 3.8% almost exactly a year ago too. It peaked in August 2023 at 4.7% and has bounced from the December 2023 low of 3.2%.  
  • Wage inflation was down from 6.7% in November to 6.2% in December, a sharp fall, but analysts expected a fall to 6%.
  • Natural gas and power futures are down almost 10% in the last month, so a materially lower energy price cap from April 2024 appears ever the more likely. It has certainly been a mild winter.
  • The SONIA curve remains remarkably flat with the 3.8% to 3.9% range from the 5-year through to 30-year swap rates.
  • New issue premiums have decreased significantly in recent weeks with some bond issues reporting premiums as low as 0 bps. This is quite unusual. 
  • The news that the Affordable Homes Guarantee Scheme has increased to £6bn and is extended with flexibility to invest up to 50% in existing stock is an encouraging opportunity for the sector. 


Implications for our affordable housing clients

The flat SONIA curve means clients can hedge over a tenor that suits their loan portfolio and swap rates remain attractive. Why take the risk of variable rates, particularly when you can reduce short term interest costs and remove that risk buffer? 

High investor demand and very low spreads creates opportunity for long term covenant light funding. 


Latest client activity

  1. Interest rate risk analysis: Using Resi Analytics, we’ve conducted thorough analyses of the interest rate risk buffers in our clients’ 2023 FFRs. The results showcase a spectrum of risk appetites, from no risk buffer to a cautious outlook.
  2. Strategic deal closures: Following strategic reviews and lender negotiations, several deals are set to close before year-end (31st March 2024). These initiatives aim to bolster liquidity headroom and improve covenant definitions. It is a busy time of year for banks, advisors and lawyers. 
  3. Active advisory on various fronts: Detailed strategic thinking is vibrant across our client base, we’re actively advising clients on strategic asset disposals, hedging strategies, covenant changes, and the impact of combining business plans.
  4. Private placement mandate launch: Amidst high investor demand and low spreads, we’re gearing up to launch an active private placement mandate. We anticipate increased private placement activity in 2024, providing valuable opportunities for our clients.

To learn more about our work in the affordable housing sector, click here.

For more information, please contact Paul Stevens or John Tattersall.

UK Affordable Housing Market Update | January 2024

January in numbers

  • December CPI of 4.0% surprised to the upside against expectations of 3.8% and the market reacted with the 5-year and 10-year swaps increasing by c. 20bps on the day of the announcement.
  • Expectations for rate cuts probably got a bit ahead of themselves, and following the correction, the market now expects the Bank of England to begin cutting in late summer 2024 steadily down to 3.5% in 2026 where it is expected to remain for some time.
  • Regular wage inflation of 6.6%, down from 7.2% in the prior 3 months, was in line with market expectations, and energy prices are expected to fall in the spring. The Bank of England is unlikely to be too concerned.
  • The SONIA curve remains remarkably flat at 3.8% from the 5-year through to 12-year swap rates.
  • The Government has launched the consultation on Awaab’s Law with a proposal that providers must investigate hazards within 14 days, start fixing within a further 7 days, and make emergency repairs within 24 hours.


Implications for our affordable housing clients

  1. Trouble in the Red Sea and connected geopolitical events are upside risks to inflation and interest rates. Predicting further volatility would not be a particularly brave call. It is important to include a risk buffer within the floating rate assumptions in the business plan.
  2. The flat SONIA curve means clients can hedge over a tenor that suits their loan portfolio and swap rates remain attractive. Why take the risk of variable rates, particularly when you can reduce short-term interest costs and remove that risk buffer?
  3. Housing Organisations should consider the benefit of longer dated and covenant light debt capital market funding, particularly when funding long term investments. Activity has been picking up in recent months.


Latest client activity

1. Hedging transactions for interest cost savings: Centrus has successfully advised several clients through hedging transactions, saving interest cost in the tightest years and creating additional headroom and certainty in our client’s business plans.

2. Strategic support for Newlon Housing: We provided analysis and advice to Newlon Housing on options as a £50m swap matured and supported through the execution of a new 10-year swap that closed in December at 3.6% plus margin.

3. Successful £400m public issuance for Sovereign Network Group: Sovereign Network Group completed a £400m new public issuance this week, pricing at 108 bps over gilts and a coupon of 5.5%. SNG are A3 Moody’s / A S&P rated, and the pricing highlights investor demand and the benefit of scale. Centrus provided advice on the transaction

4. Advising on mergers in a growing trend: We are currently advising on 6 mergers and note an accelerating trend of non-profit Housing Associations seeking to improve financial resilience and sustainability by combining resources.

To learn more about our work in the affordable housing sector, click here.

For more information, please contact Paul Stevens or John Tattersall.

Scotland leading the onshore wind industry | The Scotsman

Last year, the Scottish Government set out a deal with the onshore wind industry to deliver 20GW of onshore wind in Scotland by 2030. David Craig, Director at Centrus, describes the deal as a “blueprint for the rest of the UK”, and an example of the regulation and reforms needed to facilitate energy transition to net zero and build a green economy. 
 
Click here to read David Craig’s article in The Scotsman
 

For more information, please contact David Craig