Delivering the E of ESG in BTR
We were delighted to be joined by Dr Sophie Taysom and Hannah Durden on a UKAA webinar on 6th September 2023 to kick off a series of three discussions on ESG with a focus on moving from strategy to practice. The focus of this first discussion was on environmental considerations.
Sophie started by outlining what ESG means in the context of Build to Rent (BTR). While there are a number of ESG material considerations applicable right across the built environment, BTR requires additional focus on both tenant experience and community engagement.
She went on to detail trends in the global and UK markets. In the UK BTR accounts for less than 1% of privately rented homes but the market is rapidly growing. It is estimated that the market could be worth £170bn by 2032 (BPF / Savills).
And on ESG within BTR, there are a number of key drivers worth noting including significant OPEX margins which impact profitability. Another key driver for developing actions across ESG is maintaining liquidity for both for investors and operating partners and maintaining values. Whilst we’ve been focussed on brown discounts up to now, 2023 has seen research that demonstrates a premium being paid for ‘green’ assets.
Hannah then began to drill down into what the ‘E’ of ESG considerations were for BTR. She set the scene with a timeline of global climate events and action, moving swiftly onto the regulatory context within the UK and highlighting some areas where change is expected. She considered some of the key challenges for BTR along with why we want to take the climate crisis seriously: availability of insurance and protecting income are critical.
Thereafter we had a whistlestop tour of the headline actions relating to emissions and designing for resilience (insulation, ventilation, heat exchange systems, electrification, battery storage and biophilia) and operational energy targets (kWh) ranging from Passivhaus new build (15 kWh / sq m pa) and deep retrofit (25 kWh / sq m pa) to an EPC D-standard refurbishment (100-135 kWh / sq m pa). When applying the cost per kWh to these figures it becomes clear how energy efficient buildings with all-inclusive rents will really drive OPEX margins.
She then considered the concept of circularity at both a community and building level before drilling down into materials innovation including case studies on recycled steel and examples of cementitious materials that sequester carbon. Are there more R&D and collaboration opportunities that the BTR industry can explore?
We then re-visited emissions but this time in the context of indoor air quality: the importance of BTR customer retention being directly linked to their experience within the building. Well-designed buildings will positively impact the health, wellness and productivity of their occupants.
The final bit of the ‘E’ jigsaw focus was on data, data and data. The importance of being able to collect that data, how you might do so and what to then do with it. We touched on the various platforms out there to help with this collection and analysis as well as the investment (financial and time resource) required to get this right.
Questions at the end from UKAA CEO, Brendan Geraghty, looked at the cost implications of some of the ESG actions discussed, as well as the level of stakeholder engagement needed to deliver a sustainable design brief and where the responsibility for this can sit. Ultimately upskilling our workforce, behavioural change (owner and occupier) and time will be key to delivering the ‘E’ of ESG.
Sophie and Hannah will be delivering further sessions on ‘Delivering the S of ESG in BTR’ on 17 October, and ‘Bringing it all together – The G of ESG in BTR’ at the UKAA Annual BTR Conference on 2 November in London.
The speakers
Dr Sophie Taysom, Director and Founder of Keyah Consulting, works with clients across the built environment to develop their approach to ESG. This is done in line with international standards and best practice, and with a view to ensuring clients can respond proactively to new and emerging requirements and stakeholder expectations. She speaks on these issues on national and international platforms.
Hannah Durden has worked in real estate for 18 years in the private sector and for clients across the UK. She is the Founder and Director of CNZW as well as Circular Community UK. Based in the UK, she advises on development management strategy for buildings and businesses: considering carbon, waste and wider ESG opportunities across every element of the property and business life cycle.
A copy of the presentation slides can be found here.