Fresh perspectives
New voices of the built environment
Robert Winch, ESG Consultant
Climate risk is investment risk.
But nature has the answer.
LET'S TALK
PEOPLE
Global markets are at the start of a seismic shift. It’s a shift that will see traditional ‘minimal questions asked’ capital rejected in favour of sustainable investing.
Research carried out by PwC estimates that ESG (Environmental, Social, and Governance) funds will increase from a 15% share of the European sector to 57% by 2025. This transition away from business-as-usual can, at least in part, be accounted for by three key factors:
1. A growing recognition that ESG funds have fewer risks and generate greater returns.
ESG scoring provides a granular view of assets and acts to filter out investments that carry higher environmental, social and governance risks. Investors are always looking to avoid real-estate assets becoming stranded and asset value depreciation, and today these risks include flooding, overheating, water scarcity, storms and cold snaps. ESG portfolios were also found to have greater resilience during the 2015-16 and 2018 market downturns.
2. Regulators and governments are expanding their focus on ESG reporting.
In the UK most business will be obligated to report on their physical and transitional climate-related risks using the Task Force on Climate-related Financial Disclosures (TCFDs) framework by 2025. This surge in data availability will enable investors to make more informed decisions about the investments they make.
3. Financial decision-makers are seeking more sustainable solutions.
Increasing disclosure and public awareness of sustainability is impacting investor allocation and demands are being made of companies to take action. BlackRock surveyed 425 investors in 27 countries representing $25 trillion assets under management, finding 54% consider sustainable investing to be fundamental to investment process and outcomes.
Yet the benefits of this move to an ESG-led investment landscape extend beyond the horizon of mere risk avoidance… and into that of opportunity. Financial returns, thanks to greater operational efficiency, better stock price performance and enhanced reputational and asset value, are sitting there for the taking.
The natural world is our multifunctional solution to physical risk. It’s been calling quietly to us for centuries, but now we’re ready to listen.
So what does this mean for our buildings? The answer, unsurprisingly, is nature.
The natural world is our multifunctional solution to physical risk. It’s been calling quietly to us for centuries, but now we’re ready to listen. Our industry is waking up to nature-based solutions – their benefits in reducing energy consumption, improving air quality, creating social value, and supporting our mental and physical health. Nature-based solutions are structures like green walls, green roofs, parks and Sustainable urban Drainage Systems (SuDS). The financial value of these solutions? In the UK, it’s estimated at £958 billion according to The Office for National Statistics. Defra also predicts the value to increase over time due to:
• demand for the benefits heightening • the impacts of climate change intensifying • the user base increasing through population growth • nature becoming scarcer in abundance and distribution
The message is clear: nature-related risks can be overcome in the built environment by embedding nature-based solutions into real asset design. It’s wonderfully and inspiringly simple.
LET'S TALK