Green Investment in Construction – take off and pay off

Green Investment in Construction – take off and pay off

January 16, 2021

As we are all acutely aware, our world has been irreversibly transformed by the global Covid-19 pandemic. Across industry, business’ have struggled, and coupled with unpredictable market behaviour, deciding where and how to spend capital is proving more complicated than ever. But waiting for this to end is certainly not a substitute for future-proofing through sensible action.

Innovation is often driven by economic turbulence, and it is those who can identify opportunities out of this current situation who will come out on top once the dust settles. One such opportunity is within sustainably focused investments, known as Environmental, Social and Governance (ESG) investing, which sets out criteria of a set of standards for a company’s operations that environmentally conscious investors use to screen potential investments, including in the Built Environment. Contrary to a common misconception, sustainable investment opportunities often yield superior investment returns to comparable, non-ESG investments. [1]

REITs, other development companies and sectors have already started to see the impact of this via Negative Screening; a strategy widely used by investors to filter opportunities which do not meet their values, by evaluating against a set of ESG criteria [2]. With the Built Environment sector accounting for 40% of the UK’s carbon emissions [6], Environmental, over Social and Governance, is typically the main driver for companies active in Built Environment. The expectation is the trend continues with an increased focus on strategies that aligns capital investment with both the desired returns and a more positive environmental outcome. [2].

Additionally, a clear indicator of the potential of green initiatives can be seen within the policies and schemes of our government and strategic alliances where post-pandemic Recovery Packages have set tackling climate change at the core of their objectives. Take, for example, the EU’s £2.5 trillion asset purchasing scheme which will be driven by its green objectives [3. Within the UK, the Government has earmarked £3 Bn within its recovery package to green initiatives [1], and The Bank of England has now started tying its loan scheme corporate bonds to green conditions [4]. These, alongside other similar schemes, attest to confirm that lenders aiming for more sustainable, green, and carbon sensitive assets will enable greater access to capital and liquidity through tapping into multiple central bank policies [3].

As shown, recovery packages and investors’ behaviour are being increasingly influenced by Green initiatives. Developers and consultants like Quartz should help lenders with the practicalities and help them through the journey through green and high yield grounds. It is time to acknowledge that doing good and doing well can go hand in hand. In other words, Green buildings do take off and pay off.

By Adib Jazireh, Project Manager

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