Insight - Property Week
He Knows ESG Makes Sense
In his annual letter to shareholders in January, Blackrock CEO Larry Fink laid out how the company was pivoting to putting environmental, social and governance (ESG) principles at the core of its investment strategy. Rather than the tokenistic corporate social responsibility initiatives seen in prior years, Fink’s push for sustainability was grounded both in environmental concerns and solid economics.
Blackrock manages $7.5bn (£5.7bn) of assets and its primary goal is to deliver strong returns on those assets to its investors and shareholders. To prevent the value of its assets under management from plummeting and ensure those returns, its portfolio had to be aligned with global ESG targets.
There is a good reason why the property world and those in residential in particular must heed Fink’s thinking. In the world beyond Covid-19, the UK has a net-zero carbon target for 2050 fast approaching.
Get Your House In Order
With the built environment contributing 40% of the UK’s carbon emissions and housing 14%, the sector needs to get its house in order, especially if it is going to attract investment from broad capital pools.
The “NEW NORMAL”
Apache Capital’s Richard Jackson says: “Increasingly, investors are saying they will not put their money into vehicles that back projects harmful to our environment. This is becoming more than just a fashion for a small minority; it is and should be the new normal.
Top Down Pressures
“Our industry is not immune to this trend. As a major contributor globally to emissions there is a vital role for the industry to play. Property will face top-down pressure from the government, lenders, investors and insurers to ensure that assets are sustainable, meaning they can remain profitable in the long-term and do not become stranded with other industrial relics.”
Barclays Confirm Trend
Encouragingly, this trend is already under way, according to Jess Tomlinson, head of real estate – London, at Barclays Corporate.
“Over the past 12 months we have seen large parts of the real estate market shift from regarding ESG as a corporate responsibility theme to seeing it as a significant commercial opportunity – or, if not addressed, a key commercial risk,” she says.
Green Values to investment fore
“In the residential investment space, clients are acutely aware of customers’ focus on their green values, particularly among younger demographics, and the need to align the homes they create with those values. Equally, as investor capital becomes more focussed on the green agenda and more ESG-linked funds are raised, having a clear sustainability strategy helps clients access a broader pool of capital.”
The ESG push provides as many opportunities for residential as it does challenges.
Tom Hill, director at Savills Planning Economics, says the government may have to offer incentives to accelerate the number of investors and homeowners that make their properties and developments greener.
“If the government is to nudge homeowners and residential property investors to future-proof their properties by making them net-zero compatible, then it will need to introduce stronger incentives to encourage them to do so,” says Hill.
Green Homes Grant
He adds that to an extent this is already happening; the government’s £2bn Green Homes Grant scheme has been designed to provide at least two thirds of what homeowners and landlords spend to make their properties more energy efficient, up to £5,000 per property.
Pumping Cheaper Heat
“Less well publicised, but perhaps more significantly, increased scrutiny is now being placed on the mismatch in taxation of gas and electricity – the latter is taxed at a much higher rate than the former. As the government looks to shift houses away from use of gas boilers towards electricity, using heat pumps, one might expect it to rebalance the scales by reallocating taxes so it becomes consistently cheaper to use an air source heat pump than a gas boiler,” says Hill.
“This transition is already happening in the commercial sector and we expect that the government will come under increased pressure to apply a similar logic in the residential sector too.”
Waste No More Time
Real estate cannot waste any time in ensuring that all new developments are at the apex of sustainable practice. Recent developments in manufacturing provide the means to make this change.
Modular Off-Site as ‘World Leader’
The UK’s modular, off-site sector looks like a potential world-leader in providing more carbon efficient homes, while the innovative technologies of a burgeoning proptech sector can cut pollution, from materials sourcing right through to day-to-day living.
Winning the Future
Residential has proved itself a winner throughout the pandemic — a continued strong ESG commitment would add another string to its bow and ensure that its winning days continue long into the future.
Off-site, MMC and DfMA underline the need for Modular to be Customisable. The wish of Self-Builders as well as most UK Builders to deliver excellent customer service and top notch homes is now driving an increasing number to choose Modular Off-Site for their developments. And as ‘OffSite Hub” notes, architects and designers are moving toward DfMA, something we have been encouraging for over 20 years. The emergence of LA Developers will only speed up this process
Learn & Earn with DfMA
Applying DfMA (Design for Manufacture & Assembly) to lightweight structures defines the process of taking these to the next level. For example, standard designs from our very low rise ‘SolidLox’ brand enable us to provide buildings that do not require massive foundations and which can avoid harming tree roots while delivering on time and within budget.
Such projects require a systematic, solution driven approach which brings discipline to the process, sharing information and communications.; a welcome change in the overall approach to project management and development – and to those who just ‘talk about it’!
Saving Waste – from Concept to Clearance
Modular Off-site MMC SIP & Timber Frame structures provide excellent ways to save waste and deliver top energy rated homes. Working with architects, planners and environmentalists to satisfy all types of design, we are already well on the way to incorporating waste reduction measures into our procedures and processes. This means our ‘Volumetric’ and ‘Flat pack’ modular building solutions envisaging ultimate demolition and clearance can ‘tread lightly on the earth’ as we adapt business innovations and developments to environmental needs.
Partnering for Modular Progress
All of this entails a shift in thinking to that already practiced by established ‘Off-Site’ MMC manufacturers. It can be quickly and easily incorporated into procedures and processes of building and development. Better still, you can make partnering arrangements with such manufacturers to gain all round benefits.
Greater Speed, Accuracy, Quality and Lower Costs
Greater collaborative ‘partnering’ between architects, builders and manufacturers will deliver these. The greater speed, accuracy and quality that can result from manufacturing components in a dry, controlled factory environment, together with the ability tom incorporate (yet to be invented) ‘Smart Ware’ gives home builders perhaps the only way of achieving this, together with improved on-site build quality AND controlling costs.
Easy Timber Frame
To assist them in doing so our “Easy Timber Frame “ now offers standard size modular timber frame elements for them to use as a design base, cutting down on technical design and engineering to produce win-win results. This virtually provides any housebuilder or architect with their own bespoke design factory facility.
Better all-round Savings