Will Sustainable Development Pay? asks ULI and RREF

Triple bottom line - People, Planet, Profit

I attended an event last night, focused around this question of whether sustainable development pays. It was co-hosted by the Urban Land Institute Young Leaders group based in London and the Reading Real Estate Foundation and was probably one of the first sustainability-themed events I have been to where the discussion went beyond energy efficiency and carbon reduction and began to address the social impact of development.

Steve Downing, Associate Professor at the Henley Business School, Reading University opened the presentations and highlighted the triple bottom line model for “profitability” - assessing the financial, environmental, and social impact of activities and investment.

Opportunities in Sustainable Property

Paul McNamara, Head of Research at PRUPIM described the investment opportunities in sustainable real estate:

1. Green developments, which themselves could be neutral or destructive if the demolition of existing buildings to “build green” creates a greater carbon expenditure than it reduces;
2. Dark green funds meaning investments in environmentally friendly buildings occupied by environmentally-conscious tenants; or
3. Improver funds which would invest in future-proofing buildings and retrofitting existing buildings through capital improvements implementing energy efficient, carbon-reductive technologies.

I was pleased to hear Mr. McNamara's support was for improver funds. He cited this investment option as having the greatest actual impact on environmental protection and viewed it as least risky. This is an area I am interested in pursuing so if you have any thoughts regarding investing in sustainable capital improvements for property and real estate, please get in contact with me. I would love to hear your views and discuss potential projects.

During the panel discussion, Charlotte Eddington, formerly of CBRE, compared the single asset, single building approach to development that is typical in the UK to a more sustainable, community-minded approach experienced in Scandinavian countries. Sustainable communities are built around community infrastructure whereby collaborations can lead to greater energy savings and more efficient transport networks. This leads to the distinction between micro-sustainability (for example the energy efficiency of a building, the environmental and social impact within a single asset) and macro-sustainability meaning where a building should be situated, how it interacts with its community, transportation links, and social impact within its surroundings. In my mind, sustainability must also encompass this broader idea of how buildings fit in with the fabric of their community. A technologically capable, energy efficient, “green” building is certainly not sustainable if there is no one to occupy it, if it alienates some people within the community, or if it promotes other unsustainable activities such as car use or excessive consumption.

Challenging growth and profit as the motivation

The theme of the evening leant slightly towards expressing the intangible benefits of environmental conservation and protection, social inclusion, and community engagement in financial terms, in a manner that could win the support of the CFOs and Finance Directors to fund sustainable development endeavours. Having a financial background myself, I used to think this way too. But what if chasing enhanced financial returns itself is unsustainable? If rental growth and increased property values justifies sustainable development practices, but growth itself is unsustainable we face a big problem. This challenge begins to be addressed in a paper and book written by Professor Tim Jackson, of the UK's Sustainable Development Council entitled “Prosperity Without Growth”. More on this subject will follow in subsequent posts. In the meantime, perhaps we should continue to focus on what is measurable and also on the intangible benefits to developing and redeveloping properties with the long term in mind. Sustainable development translates into buildings, public and private spaces which can be enjoyed equitably by people and communities both in the present and in the future.

This article originally appeared on www.compositionadvisory.com/ideas.