Homing in on sustainability

Survey shows financial advantage for ‘greener’ house builders It’s official: property developers who embrace sustainable development are financially better off. Estate agents may be slow to seize on the unique selling points of low carbon housing [see GF53, ‘Home truths for carbon’], but builders stand to reap big business benefits when they adopt better practice in design, regeneration projects and investing in employees. “There’s a prize for the companies that think ahead”, says Sally Uren, director of the business programme at Forum for the Future, drawing out the implications of its survey of 10 residential property developers carried out with Morley Fund Management and Igloo Regeneration Partnership. It’s the first time the link has been made in this sector between corporate social responsibility and financial performance. Berkeley Group, for example [see 'Living down the carbon'], bought land strategically in urban regeneration areas and is paying its staff fairly. As a result, its financial returns are undoubtedly better than some others in the sector. The report also noted that:

• a good reputation on sustainable development can help a developer get access to land and speed up planning permission;
• encouraging staff involvement in interesting regeneration projects leads to a higher trading profit per employee;
• the creation of ‘better living spaces’ through the regeneration of an area can lift selling prices (one company cited a 20-30% premium).

Integrating sustainability into strategic decision making (rather than adopting a compliance-driven approach) improves efficiencies and reduces business risk, says the report. Social and environmental risks can be assessed before buying a site, for example. Improvements in waste management, energy use and safety can all be made a regular part of the construction process. But the report reveals that there’s still an important missing link. Sustainability may be improving long-term financial performance, but this factor isn’t yet getting the appreciation it deserves from mainstream investors. Companies are perhaps not explicit enough in reporting the direct benefits of their unique approach, explains Uren, but neither are investors asking for this information, which they often regard as “unquantifiable and irrelevant”. Melissa Gamble, of Morley Fund Management, puts the onus on the government to create interest in the issue by introducing stricter building regulations: “Investors would adapt their evaluation of these companies if regulation were to bite,” she says. - Hannah Bullock Building the Right Future: The Impact of Sustainable Development Issues on Investment is available from Melissa.Gamble@morleyfm.com

20 September 2005

Hannah Bullock