The current turmoil in the UK’s political and economic spheres have sadly deflected the media’s immediate attention from the importance of continuing to focusing on environmental, social and governance (ESG) metrics, writes Thom Wilkinson, a Partner in solicitors Bishop & Sewell’s Property and Environmental Law team.
A year ago I wrote about environmental law and the rising importance of ESG. It’s interesting to consider what changes the real estate sector has made in the interim. Whilst there is a compliance side to ESG, (often viewed as a tick box exercise along the lines of ‘have we done everything correctly?’) there’s also a bottom line rationale and justification to ESG: ‘Are we making the environment better?’, ‘Are we making social issues better?’, and ‘Is our governance as good as it could be?’
The ideal scenario as a professional adviser is that your client is doing both: by making their business more sustainable and socially friendly with increased governance, they are also complying with ESG targets and ‘ticking the boxes’.
Whilst 192 countries worldwide committed to becoming carbon neutral by 2050 following COP26, the biggest gains to achieving this are going to come via the private sector taking action and the real estate sector in particular.
Around 40 percent of global energy use and carbon emissions come from the built environment, and real estate faces challenges going forward – especially when it comes to property development.
Most UK developers have publicly stated their net-zero carbon ambitions. The financial and investor pressure isn’t quite where it needs to be to force people into more rapid change, in my experience. Not because they don’t care, but because there’s still some way to go to define what net-zero carbon actually means.
The sheer pressure of urbanisation plays its role here too. The UK has been in the midst of a housing crisis for decades where there just aren’t enough homes for the people who need them. That means more building is needed, and with increased construction comes the need for more sustainable actions.
The pressure from an environmental landscape perspective is significant. Building more sustainably would be a good start.
Build better buildings
The average lifecycle of commercial office space built as recently as ten years’ ago was just 25 years. Yet the worst thing we can do for the environment is tear down a building. Ideally they should last for hundreds of years. Such thinking in the current economic climate would be unique, in my experience.
However as I wrote on this blog here earlier this year better use of smart technologies is helping some developers build with energy management systems installed to provide instant feedback on how equipment performs and to make the most of commercial spaces. Not just by switching off the lights when a room is vacated, but giving insights into which desks are the most popular, for example, so that steps can be taken to maximise the floor space across a whole building.
The pandemic heightened our awareness about sustainability. The ESG genie is out of the bottle but it’s now vital that we continue to maintain the dialogue about what should happen next, and that applies equally to lawyers, as it does our clients.
For all the openness surrounding the environment due to the pandemic, it’s still important for all of us to keep considering ESG metrics. The pushback rarely comes from a mindset of not wanting to do better by the environment – it’s often related to the thought process around the costs involved.
It’s understandable that a developer considers a project’s profitability first. But sustainability is a concept that will only become more pressing in the years ahead. Getting ahead of the curve now offers the chance to build high-quality buildings that stand the test of time and contribute to the goal of reaching carbon neutrality.
As ever, if you would like to discuss any of the points raised in this article, please do get in contact, quoting reference CB305. Thom Wilkinson is a Partner specialising in Property and Environmental Law and is contactable on Tel: +44 (0)20 4513 6073 or email: [email protected]
About Bishop & Sewell LLP
Bishop & Sewell is a long-established, full service Central London law firm – with an international reach – specialising in Personal, Property and Commercial legal matters. To learn more, visit www.bishopandsewell.co.uk
