I went to a fascinating property seminar focussed on the charity sector in London last Wednesday (May 15th) where the challenge of Sustainability was among the topics illuminated during the day.
Mayfair Capital’s Annual Seminar, “Charity Investment: Turning Challenges into Opportunities”, was well worth the time spent and interesting because charities have large property portfolios and their remit is to maximise the income/yield from them.
One of the topics covered was sustainability and was led by Louise Ellison, Responsible Property Investment Manager at PRUPIM and Kate Brown, Group Director – Sustainability for property group Grosvenor. They advised that Sustainability is a challenge that is not going to go away and should be met by all organisations.
They suggested that charity sector should not to feel fear around Sustainability but should treat it as another part of their risk profiles when focussing on the risk/reward equation for property yields.
Knowledge is power and the charity attendees were advised to ensure that they have accurate data and other information to help make effective sustainability decisions. This knowledge would underpin the understanding of what charities want to achieve.
The seminar highlighted the pressing concerns and issues around the UK Government’s introduction of improved standards of energy efficiency – MEPS (Minimum Energy Performance Standard) for commercial buildings. MEPS is a specification that has a number of performance requirements for an energy-using device, and that effectively limits the maximum amount of energy that may be consumed by a product in performing a specified task.
Although the exact details of MEPS are to be advised, a new area of risk has already been introduced into the market which needs to be quantified now. The standard will make it harder for landlords and occupiers of the worst-performing properties to let properties after April 2015 in Scotland and April 2018 for England and Wales.
Progressive landlords and occupiers should assess which of their buildings are affected and quickly adapt current strategies to manage their potential risks. As property is all about income/return, MEPS clearly demands better sustainability strategies – if a building is less likely to perform then there is a substantially higher risk to income.
The words “steward” and “stewardship” were used quite a bit in the seminar I believe that this means shaping Corporate Social Responsibility strategies to move beyond simple compliance and into proactive, effective areas that embrace fully the challenge of sustainability.
Buildings are long-term investments and therefore sustainable stewardship is now, practically, a given requirement.
The seminar audience also were advised of increasing social and political pressures that demand better sustainability strategies. For example, 50% of populations currently live in cities but by 2050 it will be 70%.
These pressures may have an impact on the UK’s commitment to EU carbon reduction strategies, with a national target of 35% reduction (below 1990) levels within seven years. The UK has also signed up to the climate deal, which means delivering reduction in carbon dioxide emissions by 80% by 2050. This will require very robust monitoring and measurement.
On other items of interest to the charity sector, Mouhammed Choukeir CIO, Kleinwort Benson, spoke about “Preserving Purchasing Power”, James Thornton CIO, Mayfair Capital Investment Management gave an overview of the Property Market and Dame Clare Tickell, CEO, Action for Children presented a case study: “Raising Funds and Investment in a Challenging Environment”, supported by actress Jenny Agutter OBE, who is an Ambassador for the charity and who gave a personal perspective of her involvement.
The day was also illuminated by panel session contributions from Andrew Cunningham CEO, Grainger plc who offered views on the Private Rental Sector, David Faulkner Fund Director, UNITE, who addressed themes around the student accommodation sector and Mike Adams CEO, MedicX, who advised on the Health/Medical sector with Graeme Rutter, Head of Property Multi-Manager, Schroders acting as panel moderator.
The investment seminar, attended by more than 100 charity professionals, trustees and their advisers, examined the asset allocation challenge facing charity investors as they seek to maximise returns from their endowments at a time when economic difficulties remain, inflation continues to erode returns and many asset types continue to produce negative real returns.
The sustainability perspective is one that I think every organisation could engage with now to help achieve the targets set for the short-, medium- and long-term. What’s more, they can do so in ways that reduce carbon footprint while making effective cost-reductions. It seems to make sound commercial sense to embrace proactive sustainability strategies.
Charities are not alone in trying to meet a number of financial challenges and the adoption of solutions that reduce energy and water consumption while providing quick Return on Investment is perhaps something that every financial officer should be championing
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