ESG – Walking the Walk

“ESG is no longer optional and it’s absence will have an adverse effect on asset value, the procurement of furniture now plays a key part in this” says Julian D’Arcy (LCDG Chairman and former HMG PRS Government Taskforce)

Issues raised by environmental, social and governance (ESG) are coming to the forefront of both corporate investors and tenants alike, as they become more ethically and environmentally conscious and adopt a more holistic approach to their investments and places to live. Paired with a growing societal concern, real estate must ensure new developments and their contents are at the peak of environmental, social, and governance practice. This brings an abundance of fresh opportunities and challenges for investors and suppliers involved.

Every year, GRESB assesses and benchmarks the ESG performance of real estate assets worldwide and is guided by what investors consider to be material issues, international reporting frameworks, goals, and emergent regulations. For example, these policies include Waste Management, Inclusion and Diversity, and data protection, which is no small fee for the issues at stake. For many years as an industry, we have been guilty of paying lip service to many of these policies and seeing ESG values coming at a price, but when it comes down to it will investors now be putting their money where their heart is? Although the conversation surrounding ESG has been going for the past ten years, it is now time to put it into action or risk assets becoming unsellable.

There is an appropriate concern regarding the procurement of furniture within a BtR scheme, as items with a relatively short life cycle, and therefore low cost, are shipped halfway around the world releasing harmful emissions into the atmosphere. Meanwhile, and in addition to this concern, we are now seeing the cost of shipping from north Asia to Europe has risen dramatically in recent months, raising costs for all importers which is likely to be an enduring problem.

Now is the time for a change, and London and City Design Group (LCDG) are leading the way within the industry, bringing competition and experience to the BtR furnishings marketplace. Founded in conjunction with a very well-funded 25-year-old interior design business, with an understanding of the BtR business model of investors/ operators and the financial drivers behind it. Since we launched the business last year LCDG has carried out detailed vetting processes to guarantee the UK and European-based supply chains meet ESG criteria such as ensuring the provision of responsibly sourced materials, carbon emissions, and their social responsibility.

Subsequently, total life cycle costs have been a priority aligning with ESG issues and the ability to offer differentiation by design. Additionally, LCDG also maintains ESG responsibility by sourcing recycled furniture, refurbishing, and charity partnerships. Partnering with Re-Use Network to discard unwanted stock to charities such as Emmaus homeless charity in Greenwich who provide a home and work for people who have experienced homelessness or have been excluded from society.

In short, Interior Design and Furnishing should be considered a key role within the investment lifecycle, highlighting the importance of a durable, timeless, and replaceable product. The costs associated with ensuring an ESG compliant development must be budgeted for as part of the overall investment or developers run the risk of even greater cost through the diminution of value.

Do get in touch with me at [email protected] or give me a shout on 07990732021.