I attended a very thought provoking webinar by BPF Futures with its Introduction to ESG (Environmental, Social and Governance) on 23 June 2021 with panellists William Day (PWC), Annabelle Bloch (JLL) and Charlotte Hopkinson (Grainger).
William Day gave a fascinating presentation on ESG and the world implications. This presentation will be placed on the BPF Youtube Channel (https://www.youtube.com/channel/UCwZgsp-C_yKfJBFJd-Dqtuw). I would highly recommend watching this for an introduction to environmental issues (noting the changes to the warmth of the planet post 1950, the issues with our growing population and the stretch on our resources – a quick canter through some of the biggest issues facing our planet and a good use of your time!)
ESG is such an important matter which must be seriously embedded into all company policies going forward. Those with better ESG credentials tend to be better run/managed companies – indeed adopting ESG strategies makes a company more relevant and resilient. To quote William Day, "we have a responsibility to do the right thing but we can do well from doing it too."
A few takeaways from a property perspective:
- What to do with older buildings? No-one wants to have a stranded asset on their books but will owners actually do the work to retrofit now or will they sell them off to clear their books to a less savvy owner, which will hamper the likely improvements needed. The age of the building often makes it harder to know exactly what changes are needed and these buildings often do not have the space for all the new equipment required (like heat pumps) but this must not put off owners/developers from doing the right thing.
- Expect to see more (and tighter) regulations to have ESG incorporated. You can be a leader or a follower in this but better to be ahead of the curve rather than behind. There can be a financial benefit to making these improvements (i.e. increased rents). COP26 later this year should produce tougher pledges and commitments - watch this space.
- There needs to be behavioural changes in all parties. Whilst commercial tenants are now seeking more "environmentally friendly" properties, residential tenants are not yet at this point and we need to have a cultural change.
- Attitudes in deals need to change. These ESG credentials are not just a "nice to have" that can be cut out of a negotiation for a better price, they are essential to help meet the net zero target and protect the planet. There also needs to be a move away from "environmental tokenism" – serious thought has to be given to approach development from a holistic environmental perspective to genuinely embed environmentally friendly requirements into all buildings.
- We need a longer term plan from the Government about what changes are to be required so that numerous costly retro-fittings are not necessary i.e. replacing gas boilers with what? EPCs are interesting but do not reflect the actual performance of the buildings (and not all properties are covered due to exemptions) so this needs to be examined.
We must take a long term view and recognise the seriousness of the issues we are facing. We only have one planet but our attitudes to date do not reflect that. We must act now.
We have a responsibility to do the right thing but we can do well from doing it too. William Day (PWC)