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Implications of the UK Green Finance Strategy for real estate

July 4, 2019/in Insights /by Jon Lovell

The UK Government has published its Green Finance Strategy, which seeks to tune capital markets to the ambitions of its Industrial and Green Growth Strategies and its commitment to the Paris Agreement on Climate Change. Significantly, the new Strategy looks beyond aligning and unblocking capital flows to green assets and solutions (“Financing Green”) by placing equal emphasis on the imperative to integrate climate and environmental factors into financial decision-making across all asset classes (“Greening Finance”). In addition, it seeks to cement the UK as a global centre for green financial products and services (“Capturing the Opportunity”).

The new Strategy gives a strong signal of intent, with some notable measures, but it is lacking in the detail and level of commitment that owners and managers of commercial and residential property ought now to expect.

Objectives

The two central objectives of the Green Finance Strategy are:

to align private sector financial flows with clean, environmentally sustainable and resilient growth, supported by Government action; and
to strengthen the competitiveness of the UK financial sector.

There are many parallels to be drawn with the ongoing efforts of the European Union, through its Action Plan on Sustainable Finance, to:

reorient capital flows towards sustainable investment, in order to achieve sustainable and inclusive growth;
manage financial risks stemming from climate change, environmental degradation and social issues; and
foster transparency and long-termism in financial and economic activity.

The combined and accelerating weight of effort both domestically and at the European level to address capital market deficiencies in relation to the climate and ecological emergencies should, therefore, not be underestimated by investors or their fiduciaries. Indeed, the new Green Finance Strategy commits the Government to at least match the ambition of the three key objectives included in the EU Action Plan.

Climate and environmental integration

Considerable emphasis is placed on clarifying and enhancing the roles and responsibilities of an array of market regulators, such as the Financial Conduct Authority and Prudential Regulatory Authority, combined with a commitment to develop Sustainable Finance Standards. There is also a clear signal that Government policy will drive stranded asset risks, including through its push for complete divestment from unabated coal facilities.

Alongside the European Union’s own regulatory programmes for improved ESG disclosures, there are also specific proposals to mandate disclosure in accordance with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) for listed companies and large asset owners by 2022. This is catalytic; within the real estate sector, whilst some REITs such as the BMO Commercial Property Trust and LandSec have begun to incorporate disclosures expressly aligned to TCFD, these are very much the exception to the market rule.

Financing green buildings

For real estate owners and managers, there are a number of notable declarations, some of which have admittedly been trailed previously. Examples include the commitment to explore further the disclosure of operational energy use within buildings, including a strong nod to the Design for Performance work of the Better Buildings Partnership, as well as a commitment to consult formally on the future trajectory for Minimum Energy Efficiency Standards (and for which a programme of Government dialogue with the industry is already underway). For the domestic sector, funding support for private sector pilot projects to trial green mortgages and other innovations are notable, especially bearing in mind that all existing PRS leases will fall within the purview of Minimum Energy Efficiency Standards in nine months’ time. Potential financial measures to support the existing aspiration to upgrade homes to EPC band C by 2035 are also set out, including the possibility that lenders will be mandated to help homeowners finance energy improvements, alongside improvements to the much-maligned Green Deal framework.

Hillbreak verdict

In our view, the new Green Finance Strategy is significant for real estate asset owners and managers, particularly in relation to the measures proposed to green the finance system through, for instance, enhanced mandatory disclosures, improved sustainable finance standards and clearer oversight responsibilities. However, although there are several notable statements that relate specifically to the financing of climate and environmental solutions in property, these remain, for the most part, tentative and subject to further consultation and investigation. Given the pivotal role of the built environment in the context of the climate emergency and environmental breakdown, together with the extensive work and engagement that has already been undertaken on many of these proposed measures over the last decade, the time for provisional measures has arguably now passed. Whilst there are several welcome elements within the Strategy, as a package of measures it falls short of the market transformation that is needed.

Hillbreak comments on Building Regulations & Fire Safety review

December 19, 2017/in Insights /by Miles Keeping

Following the tragedy at Grenfell Tower on 14 June 2017, a review of Building Regulations & Fire Safety (separate from The Grenfell Tower Inquiry) is underway and led by Dame Judith Hackitt. Her interim report stresses the need for “a new intelligent system of regulation and enforcement for high-rise and complex buildings which will encourage everyone to do the right thing and will hold to account those who try to cut corners.”

The interim report goes on to say: “Everyone’s focus must be on doing the right things because it is their responsibility as part of a system which provides buildings that are safe and sustainable for those who will live in and use them for many decades.”

Although we can expect regulations to change (“the current regulatory system for ensuring fire safety in high-rise and complex buildings is not fit for purpose”), everyone involved throughout project lifecycles – design, specification, construction, use, management and refurbishment – will need to be accountable for decisions and actions. The interim report identifies the following “direction of travel” and the full report is likely therefore to address the following key issues:

Regulation and guidance

The rules for ensuring high-rise and other complex buildings are built safe and remain safe should be more risk-based and proportionate. Those responsible for high-risk and complex buildings should be held to account to a higher degree.
The sector to specify solutions which meet the government’s functional standards.
Regulations and guidance must be simplified and unambiguous.

Roles and responsibilities

Primary responsibility for ensuring that buildings are fit for purpose must rest with identified senior individuals who commission, design and build the project.
Roles and responsibilities across the whole life cycle of a building must be clearer.

Competence

There is a need to raise levels of competence and establish formal accreditation of those engaged in the fire prevention aspects of the design, construction, inspection and maintenance of high-rise residential and complex buildings.

Process, compliance and enforcement

There needs to be a golden thread for high rise residential and complex buildings so that the original design intent, and any subsequent changes or refurbishment, are recorded and properly reviewed, along with regular reviews of overall building integrity.
There is a need for stronger and more effective enforcement activity, backed up with sufficiently powerful sanctions for the few who do not follow the rules.

Residents’ voice and raising concerns

Residents need to be reassured that an effective system is in place to maintain safety in their homes.
There must be a clear, quick and effective route for residents’ concerns to be addressed.

Quality assurance and products

Products must be properly tested and certified and there is a need to ensure oversight of the quality of installation work.
Marketing of products must be clear and easy to interpret.

Calling for action across the industry and government to ensure a change in culture, it is proposed that a summit of industry leaders and experts will be held early in 2018 to discuss how to take the work forward.

Hillbreak comment

We welcome the Dame Judith Hackitt’s Interim Report. It is far beyond time that regulatory regimes pertaining to buildings and their safety were reviewed. Amidst this review, we hope that there is a focus on improving overall building quality which follows a “safety first” approach. First and foremost, it is imperative that those living in and using high rise buildings now are safely preserved from inherent defects in buildings and are assured that this is the case. Thereafter, we must ensure that future occupiers of buildings can be equally confident.

It is noteworthy that this Interim Report comes at a time when general standards in the construction industry are again found to be woeful. The National Housebuilders Federation recently suggested 98% of those who had bought new homes reported defects to their builder within a few months of moving in, with 41% reporting more than 10 problems.

We further hope that those who would do away with Building Regulations, as previously called for by the Conservative party’s Quality of Life Group (who proposed in 2009 to abolish Building Regulations because they were considered to be “very prescriptive standards, which tell you how to do things”), realise the importance of prescriptive standards which help to save lives in the short and longer terms. Further, the inspection and enforcement aspects of the regulatory regime simply must be better resourced – and this should not mean developers and product suppliers self-certifying their own schemes.

The Interim Report also thankfully stresses the need for individuals to take responsibility for their part in buildings’ procurement and management. Our built environment has been very significantly changed over the last few decades and will do so again over the short, medium and long terms. Taking responsibility for the quality of this as Dame Judith requires may come at a cost. But this will always be less than that cost we saw being paid in June at Grenfell Tower.

Hillbreak verdict on Government “MEES” guidance

March 3, 2017/in Insights /by Miles Keeping

The Government recently published its guidance to landlords on Minimum Energy Efficiency Standards for non-domestic property, a matter on which much confusion and uncertainty has prevailed. So, have the outstanding issues now been resolved, or do material unknowns continue to cast a headache for the real estate industry? Miles Keeping, who chaired the succession of commercial property groups which advised Government on the regulations, provides his comprehensive take on the new guidance.

Brief background

The Energy Act 2011 (the Act) introduced the concept of MEES in England & Wales. As we know, this introduced a timetable to make unlawful the letting of privately rented property which failed to meet a minimum energy standard of efficiency. In its wisdom, the government decided that energy efficiency should be measured by virtue of an Energy Performance Certificate (EPC) rating, and the minimum standard would be an E (on a scale of A (most efficient) to G). The timetable is:

1^st April 2018 New non-domestic leases and lease renewals
1^st April 2020 All residential privately rented properties
1^st April 2023 All existing non-domestic leases

New guidance was issued by the government on 23^rd February 2017.

Uncertainty & doubt

At the time of the publication of the Act, there was a deal of uncertainty as to whether subsequent regulations would actually be enacted – that it would all be too difficult to organise and that the necessary political will would fall away in response to business opposition. Indeed, at the time, there was seemingly a lot that needed to be arranged if regulations were to be forthcoming. The then Department for Energy & Climate Change (DECC) reached out to the commercial and residential property sectors to ask how best to frame the regulations. I was asked the chair the commercial property group and, with significant support from Patrick Brown at the British Property Federation, populated the group with a range of environmental, commercial, legal and technical specialists. The group worked hard, efficiently and openly to support DECC officials.

The regulations (inconveniently named the “Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015”) arrived and, barring certain issues, were a decent attempt to incorporate a balance of policy intention and commercial practicality. What was clear, however, was that guidance was certainly required in order to put some flesh on the bone in terms of how the regulations should be applied – to get Rumsfeld about it, there were definitely some unknowns, both known and unknown. Some of those concerns related to factors such as how the regulations might apply with regard to Listed Buildings, buildings with whole or partial EPCs and where voluntary EPCs had been registered. There was also confusion as to how MEES might be affected by other law, e.g. the 1954 Landlord & Tenant Act and would MEES apply to licences or just leases?

The commercial property sector reached out to government and offered to pen some guidance. I again chaired the working group which delivered draft guidance to government, after which there was a long hiatus that inevitably refuelled the doubters into voicing opinions that the regulations wouldn’t be implemented. And then, last week, the guidance was published unheralded.

So what does this new guidance tell us that we didn’t already know?

Perhaps the key question to ask is whether the guidance addresses the known unknowns? Well, it does a bit. Let’s have a look at issues settled by the guidance… and where some confusion still exists…

First to remember is that the guidance only covers the non-domestic property regulations; we’ll have to wait for the residential counterpart. Secondly, it only covers England & Wales, Scotland’s s.63 Regulations and Northern Ireland’s 2014 Energy Efficiency Regulations being quite different kettles of fishes.

“Sub-standard property”

The guidance sets out its stall early on by noting that a property which fails to meet MEES is to be known as “sub-standard property”. A small point perhaps, but it’s a phrase which would no doubt stick in the craw of most letting agents; how many landlords would want to go to market with sub-standard properties?

MEES relies on EPCs

Yes, I know you know that, but what some still perhaps don’t appreciate is that MEES only apply to properties where a valid EPC is in place for the property in question and that this has implications in the following situations:

Voluntary EPCs: Some buildings have EPCs which were commissioned for general asset management purposes (i.e. were not procured because they were legally required such as for a letting of a property). The guidance states that in such circumstances, the existence of a voluntary EPC will not trigger a MEES compliance requirement. Clearly, this will only be relevant at the 2023 trigger date.
Where whole building EPCs exist but only part of a building is being let: Some buildings, e.g. shopping centres, have EPCs to cover the whole asset as well as for individual units. In such cases, the guidance states that where a whole building EPC exists, only the property being let (e.g. a retail unit in a shopping centre) needs to be improved.
Listed Buildings: The guidance notes that there is a misconception that listed buildings or those in a conservation area do not require EPCs, because they do unless energy efficiency improvements would unacceptably alter their special character. This is a significant issue and many landlords have chosen to ignore MEES in listed buildings – more about this below.

MEES applies to lettings

I know you know that too, but what constitutes a letting? The guidance is both clear and unhelpful when it states: “the PRS Regulations only apply to properties which are let under a tenancy, non-domestic properties which are occupied under other arrangements, for example properties let on licence, or ‘agreement for lease’ arrangements, are unlikely to be required to meet the minimum standard”. “Unlikely”… What makes it “unlikely”? We need to know whether marketing a property for occupation under a licence would trigger MEES or not? I think we can take it that licences are out of scope of MEES. But what about tenancies at will, for example? Again, our discussions with legal specialists suggest that these would also be out of scope, but a more definitive line from government on such matters would be welcome.

Other exemptions

Other exemptions from MEES exist and it had been thought that an exemption of any nature could negate any need to comply with MEES. The guidance carefully explains that this is not the case – a thread running through various of the exemption categories is that exemptions must be considered as individual issues, rather than in blanket terms. For example, if a suggested improvement measure to a building would have the effect of devaluing the property sufficiently to trigger that exemption, other measures which would not have that effect would have to be undertaken (provided no other exemption applied). Whilst we’re on devaluation, the guidance makes it clear that claiming devaluation will be a rarity.

Another exemption exists when legally required third party consent to undertake improvements cannot be received, such as from a planning authority, superior landlord or tenant; some leases require landlords to obtain a tenant’s consent to undertake improvements within their demise. In such circumstances, the guidance states that landlords must “make, and be able to demonstrate to enforcement authorities on request, ‘reasonable effort’ to seek consent” and thereafter register the exemption in that they “could not carry out the proposed improvements without the consent of the tenant or tenants of the property, and one or more of the tenants refused to give consent”.

Such an exemption would only be temporary, lasting for up to five years or until a tenancy change enabled a new tenant to be approached regarding the improvement. A question which landlords would need to ask themselves is whether the lease provides for them to be able to enter the property to make improvements – presumably, if so, such an exemption would be negated.

Part 2 of the Landlord & Tenant Act 1954 provides security of tenure provisions to tenants at lease end. The guidance is clear that sub-standard property status does not provide a complete exemption from MEES in such circumstances but does allow for a six months exemption from renewal for necessary works to be undertaken. Equally, landlords cannot refuse a renewal nor tenants prematurely terminate a lease because the property is sub-standard.

Landlords and tenants seeking to let or sublet sub-standard properties will need to be aware that whilst any measures which fail the seven year affordability payback test will not need to be undertaken (but registered as such, with three quotes from suppliers and calculations which prove that point) but any measures which do meet the affordability test will have to be undertaken. In other words, one expensive measure does not negate the need to undertake cheaper measures, so landlords will need to ensure they check all potential measures included in their energy assessor’s reports. Furthermore, assessors may suggest that measures which individually fail the affordability test be packaged together such that they then pass the affordability test. However, landlords are not required to install packages if they opt to install a discrete measure instead.

Registration of exemptions

All exemptions must be registered on the publicly available PRS exemptions register – importantly, this must be undertaken prior to an exemption being relied upon. It is also worth noting that should an affordability exemption be relied upon, its registration must be made before any price changes (e.g. in energy or potential improvement measures) have the effect of making potential measures affordable.

Those registering exemptions will need to provide evidence to support their view that an exemption is appropriate and in some cases this might be quite extensive. For example, exemption from undertaking potential measures because they would fail the seven-year payback affordability test will require the submission of a spreadsheet of calculations for all suggested measures and quotations from three suppliers/installers with cost information to support the exemption case.

So where are we now?

The new guidance does give us some clarity relating to how MEES will need to be implemented but it also throws up some new uncertainty. I feel certain, for example, that landlords with listed buildings will be rightly unsettled by the guidance which reminds us of the poorly drafted EPC regulation: It’s a nonsense, impractical and open to differing interpretations. I’m also sure that the uncertainty in the guidance about licences being “unlikely” to be required to meet MEES will delight the legal profession but not landlords and tenants. There will no doubt be some confusion about which EPCs might be considered as “voluntary” and those relying on exemptions will perhaps be surprised by the amount of work which will have to be undertaken for these to be able to be relied upon.

What should landlords be doing?

Example of a Hillbreak dashboard highlighting F&G rated properties within an investment portfolio

As in most circumstances where there is uncertainty or doubt, landlords facing the prospect of MEES will be best placed if they can reduce the potential impact of uncertainties. In this regard, ensuring that they have as much relevant information as possible will be vital and to do that, landlords must review their portfolios with a view to understanding where there MEES risks lie at individual asset level. Having high quality information is vital, as is drawing upon sufficient expertise to undertake risk-based thinking which accounts for EPC data in the context of factors such as rental income at risk due to lease events, lease types and provisions as well as forthcoming asset management activities. Savvy landlords will also review their leases to better understand how they can provide protection of rental income from MEES risks.

Final thoughts

The MEES regulations rely upon EPCs which are not an ideal basis for such regulations given their all-too-frequent inadequacies. The blame for this can be spread far and wide but should in part land on those who procured EPCs very cheaply and got sub-standard results – they are now reaping what they sowed. There is a role for landlords, the property industry generally and for government in dealing with inevitable mess:

Landlords must attend to the risks in their portfolios by procuring high quality advice and data reviews;
the property industry, principally professional and accreditation bodies, must ensure that EPC provision improves radically and quickly; and
the government must clarify outstanding and confusing issues with competent guidance, keeping an eagle eye on how MEES is rolled out.

Hillbreak responds to new Housing White Paper

February 7, 2017/in News /by Jon Lovell

The Government has today issued a new Housing White Paper for England, “Fixing our broken housing market”. It includes out a broad range of welcome reforms to increase the supply of new homes and to make housing more affordable, including:

Compelling councils to produce a current plan properly to confront housing demand;
Requiring developers to avoid low density projects where housing land is scarce;
A new emphasis on affordable renting;
Reducing the currency of planning permissions;
Employing a £3 billion fund to help smaller building firms compete; and
Putting the question of further tightening of energy performance standards back on the agenda, albeit without any specific proposals at this stage.

This patchwork of measures, however, comes nowhere close to fixing a shattered system, as our response below highlights.

The Present Situation

Successive governments over the past 50 years have failed to properly to address the ‘housing problem’. The stark reality now is that:

House prices in the UK are the highest in the world, except Monaco.
Construction of new housing has been decreasing steadily since the 1970’s.
Housing in Greater London is exorbitantly expensive, with a price to income ratio of 8.5 compared to 5.0 for the rest of the country.
There is an overall shortage of inexpensive (‘affordable’) housing across all forms of tenure, almost everywhere.
New houses are about 40% smaller than those in similar European countries.
The housing stock is not just deficient in absolute terms, much of it is in the wrong place and is of very poor quality.

Current Complications

The situation is further complicated by such factors as:

A planning regime so unimaginative, rigid, restrictive and subject to locally vested ‘NIMBY’ interest, that housing tends to be built where the development constraints are least, rather than where effective demand is greatest.
Green Belt policy that is not just obsolete or outmoded, but conceptually wrong. Land, and landscapes, of truly high environmental quality should actually be better protected, if not positively enhanced. Meanwhile, swathes of ‘brownish’ urban ground and poor-quality peri-urban farming terrain could readily be released. Greater sense and selectivity should be the watchwords.
Housing markets are insufficiently flexible in terms of size, style, type and tenure. They cater badly for the old, the young, the alone, the mobile, the transient, and the home-worker – let alone the poor and the destitute.
Many government perceived ‘solutions’, such as Help-to-Buy, Inheritance Tax Reform, higher taxes on Buy-to-Let, and ‘Bedroom Tax’, might play to the electoral galleries, but are, in practice, invariably counter-productive.
Even the differential Stamp Duty imposts, widely acclaimed, have the effect of reducing mobility and stagnating the market.
Council Tax has not been subject to a proper revaluation since 1992, so that the tax levied bears little relation to underlying property values, and the consequent ‘equalisation’ system plainly works against more progressive planning authorities.
Few politicians dare to embrace and promote really radical reform. The housing crisis is capable of mindful rectification, but momentary ministers lean towards policies that treat the surface symptoms, rather than tackle the root causes.

The one overriding feature of vital housing policy reform remains, as it has endured for the past half-century, the fundamental prerequisite to concentrate crucially on the ‘supply-side’ of the market (in terms of both quantity and quality), and not continually tinker with ‘demand’.

Options

In addition to the simple imperative of making more land available, Hillbreak would offer three options to help solve the persisting shortage of affordable housing.

Meaningful urban intensification complemented by more Garden Cities, Towns and Villages. We need to place even greater emphasis on executing good urban density, for which the contemporary examples in the UK are few and far between. The intensification and continued renewal of our towns and cities, including a key focus on suburban neighbourhoods and hubs centred on decent public transport and green infrastructure, is vital. In this regard, our work last year with British Land and Deloitte on meeting the needs of London’s growing population is pertinent. In parallel, we have a few new ‘Garden’ projects popping up as a testament to the enduring legacy of Ebenezer Howard, and admittedly more promised. However, it really requires a multiplicity of these numbers to have a meaningful and meritorious effect. Perhaps the “Development Corporation” approach merits a revisit.
A Unified Infrastructure Fund. International investment monies are seeking long-term, certain and secure havens almost as never before. We propose that the government should orchestrate the assembly of top investors – insurance, assurance, mutual, private equity and sovereign wealth – to form a Unified Infrastructure Fund, independent of, but underwritten by (not debt!), government, to finance planned new developments and the necessary framework of services and facilities.
Tax Increment Finance (TIF). Although the idea of TIF has been around for quite a while, and successfully deployed in many countries across the world, especially in the United States, where it started in the 1950’s (Illinois alone has over 900 districts), somewhat surprisingly it has not caught-on well at all in the UK. This is despite strong campaigning from such organisations as the Core Cities Group, The British Property Federation and many Chambers of Commerce. Put very simply, TIF is an investment tool for funding infrastructure and other related development which promotes growth and captures locally generated value and revenues. The potential for TIF’s is, we believe, utterly enormous.

In all this, we believe that quality and ‘placemaking’ should be central to the planning and development of new homes and neighbourhoods, inspired by and capitalising on local assets and potential. The intention always should be the creation of excellent places that promote health, happiness and well-being.

A ‘Royal’ Recommendation

We think a Royal Commission on Housing should be established to inquire into the persisting housing crisis. This would ‘imagine ahead’ to envision the prospect of a healthy market tomorrow for all types of tenure across all locations, and ‘plan backwards’ to identify today the necessary policies, plans and programmes to achieve it. It would have a fixed timetable, say two years, be politically, professionally and societally ecumenical in its membership, headed by remarkable and respected figure(s), and consult widely, wisely and well. Surely, it is not beyond the wit and wisdom of governance at all scales and across all divides to unify for such a noble and common purpose?

Post-BREXIT environmental policy changes

Navigating environmental policy following the UK Referendum on membership of the EU

July 6, 2016/in Insights /by Miles Keeping

It would be an understatement to say that the outcome of the UK referendum on its membership of the European Union has caused something of a stir. Aside from the ongoing civic debate, some of which has been civil, about whether the vote by a third of the British people to leave the EU was informed and sensible, the impact on the UK political landscape has been nothing short of spectacular. The dust will take a good while to settle, with a changing of the guard within three parliamentary parties in various stages of advancement and in various states of acrimony.

The impact on markets has been no less abrupt. The £ has plummeted in value to its lowest levels in well over 30 years, $2 trillion was wiped off the value of global stock markets in the immediate “BREXIT” aftermath, the UK’s credit rating has been eroded significantly, and several property funds have ceased trading in light of significant value write-down concerns.

The extent to and timing over which both political and market disruption will be steadied remains to be seen, and will no doubt continue to capture much of the media and industry attention. Certainly, these issues will be front of mind as the UK and global real estate markets look to navigate the testing and uncertain waters of a post-Referendum transition. The fundamental question of whether Article 50 will actually be invoked remains somewhat unanswered, not to mention the countless scenarios that could follow if it is (and, indeed, if it is isn’t).

It would be easy to think, therefore, that the status of the plethora of legislative instruments pertaining to the environmental performance and impact of the UK built environment, a good deal of which has stemmed from EU laws of one form or another, is in a similar state of disarray. We’ve seen commentary to this effect from several industry voices, including from fellow advisors. However, there are no immediate parallels to be drawn between the political and market consequences of the Referendum and the anticipated effects on environmental policy. Our message on this matter is clear: it’s business as usual for the time being, and the direction of overall travel very likely to continue whatever the outcome of BREXIT negotiations both here in the UK and in wider Europe markets.

Sure, if the UK does leave the EU, it will have to negotiate with its counterparts within the Union on the sort of relationship that will exist between them in future. The UK Government, no doubt with the backing of most UK businesses, will be keen to retain favourable access to the Single Market, but this will almost certainly come with policy strings attached; it will have a key determining effect on which EU policies and regulations the UK will need to retain or adopt in future. Even if continued access to the Single Market is not realised, it’s important to remember two key things:

much of the environmental requirements for business, property and construction are enshrined in UK law and it seems unlikely that repealing secondary legislation will be a priority for the UK government; and
the UK Government has, since the Referendum, strengthened its commitment to the legally-binding goals of the Climate Change Act (a novel piece of UK legislation, with no European provenance) by adopting a seriously ambitious carbon budget for the period 2028-2032 (with budgets requiring substantial carbon reduction between now and then already in place).

Some evolution in the policy landscape is inevitable, though. A good deal of that is already in the pipeline, notably under the auspices of the Business Energy Tax Reform. A focus on the implementation of Minimum Energy Efficiency Standards also continues to make progress; just this week, Hillbreak’s Miles Keeping was part of the property working group he has helped to coordinate which is advising the Department of Energy and Climate Change on the preparation of detailed guidance for non-domestic properties.

So, in this era of post-Referendum uncertainty, we think it’s important that:

Policy-makers:

show leadership in maintaining and developing regulatory and market-based instruments to strengthen the commercial benefits of climate action and environmental stewardship;
understand that robust environmental and climate standards are essential for the UK’s competitiveness in the global economy;
stay true to the principles of effective policy and policy-making, for which the recommendations arising from the analysis of Carbon Penalties and Incentives for commercial buildings in the UK commissioned by the Green Construction Board and the Green Property Alliance provides a useful framework; and
in particular, provide as much certainty as possible to the market on the intended direction of travel, building on the recent adoption of the fifth Carbon Budget;

Businesses:

stay focused on your existing compliance obligations – don’t let them slip – and take full advantage of the commercial benefits of over-compliance where they exist;
don’t lose sight of the business case for sustainability – outperformance in the market almost always rests with those who attend effectively to their Environmental, Social and Governance responsibilities;
engage positively with policy-makers – either directly, through the industry bodies with which you have membership, or through us – to inform sensible policy debates and outcomes; and
stay close to your advisors in navigating the policy framework as it evolves – change is certain, irrespective of the recent Referendum and its potential outcome – being ready for those changes will yield competitive advantage and business productivity benefits.

Of course, we stand ready to support all of our clients, both governmental and private sector, on how best to navigate and deal with the issues that the prospect of a UK exit from the EU throws into the ever-present mix of future uncertainties.

Regulatory Update – Key Recent Sustainability Changes

May 16, 2016/in Insights, Resources /by Miles Keeping

Miles Keeping delivered a presentation at the annual breakfast seminar of the Investor Property Forum on recent changes to the policy and regulatory landscape in the UK relating to sustainability. These included an overview of:

• Budget 2016 – What can we expect?

• Business Energy Tax Reform – Where will it take us?

• Future of environmental regulation – What hope is there?

The IPF has published a synopsis of the key topics covered during the event, which also included an update on valuation matters from Philip Parnell of Deloitte Real Estate.

A copy of Miles’ presentation slides can be viewed here:

IPF Regulatory Update

IPF Regulatory Update Miles Keeping (March 2016)

policy ARCHIVE