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Are your investments climate proof?

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We are currently in the midst of a climate emergency. The latest intergovernmental report released by the IPCC (SR15) states that the world is on course for a disastrous 3 degrees temperature rise, based on the current level of government commitments. On the 15th of January, The World Economic Forum released their Global Risks report for 2020 and climate now tops the risk agenda – dominating the top 5 long term risks in terms of likelihood. This is because climate change is striking harder and more rapidly than anyone had expected. In 2019 we saw extreme flooding in Mozambique, a super typhoon rip through Japan during the Rugby World Cup and of course the fires that still rage today in Australia. Insurance companies estimate these increased climate related disasters have cost $150 billion USD, during 2019.

Long Term Risk Outlook Multistakeholders Likelihood

Long Term Risk Outlook Multistakeholders Impact

Risks to assets and business continuity

As the global population becomes more urbanized, there is an acute need for climate resilient buildings and infrastructure in order to ensure they (and we) are protected from the physical and transitional risks posed by the expected increase in extreme weather. Unsurprisingly, there is a developing concept, supported by academic research, that an asset which is climate resilient will also have an associated increased value, and a discount applied to those without – so if you haven’t got a climate resilient asset, it is probably going to become stranded in the future.

One of the key issues is that, even though many businesses have been considering the environmental, social and governance (ESG) impacts of their businesses or assets, until recently the vulnerability or resilience of a building or infrastructure to cope with or mitigate against the impacts of a changing climate have often have not been considered.

So, what needs to change in order for resilient assets and developments to be the new norm? In the UK, for example, perhaps local authorities will introduce climate adaptation conditions attached to planning consents, above and beyond the commonly applied requirement for a Flood Risk Assessment to be undertaken. Perhaps insurers and lenders will become more discerning and explicit about the future climate risk exposure of the assets they are underwriting and reflect that in their premiums, loan rates and covenants. And perhaps asset owners and managers will find it harder to transact without clear evidence of the resilience of assets and portfolios. Whilst there are signs that many of these things are beginning to happen, future climate risk remains an under-stated consideration in strategies and appraisals.

Unfortunately, there is currently a lack of appropriate methods or metrics available for measuring climate resilience at the building or asset level. The current practice of ESG reporting does not reflect how well a building or company is prepared for the risks posed by a changing climate, as the focus has been on mitigating their contribution to exacerbating climate change – greenhouse gas emission reporting / carbon foot-printing. The TCFD, chaired by Michael Bloomberg for the Financial Stability Board, has been an evident catalyst for change, with an increasing number of companies and funds beginning to assess and explain the resilience of their assets under a changing climate, with scenario analysis being undertaken by a small but growing number of real estate organisations. However, when it gets to the more ‘street level’ questions of “which of our assets are at risk to which climate perils and by what magnitude?”, “how might that impact on the returns they generate?” and “to what extent have the measures we’ve undertaken to improve resilience protected our portfolio from downside risk?”, TCFD does not provide such a framework.

Indeed, ask several climate risk modelling vendors to provide a quantified assessment of risk exposure at the individual asset and portfolio level, and you are likely to get several (sometimes very) different answers. This makes the ambition of the TCFD to encourage the issuance of comparable, decision-useful intelligence for investors and lenders across the market something of a stretch, and also means that individual companies and fund managers will need to be confident about the assumptions, data models and methodologies used for any assessments they commission.

Meanwhile, design codes and related modelling conventions are no longer fit-for-purpose, as they are based on historical weather patterns.  In addition, sustainable design standards such as BREEAM and LEED, do not make it mandatory to account for exposure to future changes to climate to achieving any certification level – meaning you could be investing in a BREEAM ‘Outstanding’ or LEED ‘Platinum’ building, but it may not be designed to cope with what the future may hold. This makes it very difficult for investors or developers to know that their asset will be fit-for-purpose, both immediately and in the future.

What is the solution?

At Hillbreak, we believe that the industry needs to develop, collaboratively, a unifying climate resilience framework for real assets, that can help to address the ‘street level’ challenges of climate risk – particularly from a physical risk perspective. This tool would enable a clear understanding of whether an office building, for example, has enough capacity to provide cooling in a hotter summer, or if it could be subjected to regular flooding due to more intense rainfall predicted, or if the wind loading is sufficient to withstand predicted future hurricane, typhoon and storm intensity.

In order to make it simpler for investors and developers alike, the logical solution would be to integrate it into existing sustainable assessment tools, making it a mandatory, pre-conditional element to secure any form of rating. However, if these existing tools are not able to change fast enough (history suggests that would be highly probable!), a standalone ‘climate resilience’ certification may have to be most transparent way to communicate and facilitate this, at least in the short-term, applicable to both new and existing assets.

We would be really interested to get your views on this, so please do comment or email us if you have any observations, questions or suggestions.

Cladding

Hillbreak comments on Building Regulations & Fire Safety review

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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.

Rain 122691 1920

Climate Risk & Resilience – A Hillbreak Call to Action

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Hillbreak was privileged to be invited to participate in the inaugural GRESB Spring Conference at Siemens’ inspiring building, The Crystal (dual-rated BREEAM Outstanding and LEED Platinum), in London earlier this month. Miles Keeping, co-founder of Hillbreak, was asked to join the first panel of the day, to discuss Climate Risk & Resilience,  a session moderated by Sarah Ratcliffe of the Better Buildings Partnership. Specifically, Miles was asked to provide a challenge to the industry on what more needed to be done to ensure that climate factors are better incorporated into investment and asset management decisions, and professional practice across the sector more broadly.

That’s not the sort of invitation that needs extending to us twice! We were more than happy to oblige with a no-punches-pulled provocation to a number of key industry actors: investors; owners and managers; vendors; and industry bodies. Our headline messages to each are stated clearly in our short slide-deck, which you can view by clicking on the image below. The headline warning to all concerned was that disinterest in climate risk now amounts to a form of professional negligence and/or incompetence; those failing to give it due regard or demonstrate the capabilities necessary to address it are simply not providing the duty of care that is required of them.

Hillbreak Slides for GRESB Spring Conference

Miles was joined on the panel by Professor Sven Bienert from the University of Regensberg, who discussed his research for the Urban Land Institute on climate change and extreme weather, their effects on property values and the so-far inadequate response of the real estate sector to factor these into strategic asset allocations. Tatiana Bosteels, Director of Responsible Investment at Hermes Investment Management, discussed a number of key industry initiatives which have sought to bring better decision-making frameworks to bear in the market, whilst Andrew Rich, Fund Manager for TH Real Estate‘s flagship European Cities Fund, talked candidly about how sustainability and climate risk are integrated into the Fund strategy and its decision-making processes.

Miles Keeping, Hillbreak on the Climate Risk & Resilience Panel

The slides of all speakers can be found here.

Strategic Foresight: Stage 3 – Forecasting Alternative Scenarios

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Forecasting Alternative Scenarios

Essentially, forecasting involves generating the widest range of creative possibilities, then consolidating and prioritising the most useful for an organisation to consider and prepare for as it moves ahead. Appreciating that a key tenet of strategic foresight is that the future is inherently unknowable, and efforts to get it exactly right are futile, our role as consultant and facilitator is to offer an expansion of the range and depth of possibilities for the organisation to consider, thereby reducing the likelihood and magnitude of surprise. The principal means of challenging the official future, one favoured by Hillbreak, is to develop alternative futures in the form of “Scenarios”.

What Are Scenarios?

Scenarios are instruments for ordering people’s perceptions about alternative future environments in which today’s decisions might play out. Scenario planning is now widely regarded as a basic tool for thinking strategically about the future. And scenarios have long been used by government planners, corporate strategists and military analysts as powerful aids in decision-making in the face of uncertainty. In practice, scenarios resemble a set of stories — possible, plausible, probable and preferable — built around carefully constructed plots. Such stories can express multiple perspectives on complex events, with the scenarios themselves giving meaning to these events.

How Do You Create Scenarios?

The process is highly interactive, intense and imaginative. It begins by isolating the decision to be made, rigorously challenging the mental maps that shape people’s perceptions, and hunting and gathering information, often from unorthodox sources. The next steps are more analytical: identifying the driving forces, the predetermined elements and the critical uncertainties. These factors are then prioritised according to importance and uncertainty. Subsequently, three or four thoughtfully composed scenario “plots” are constructed, each representing credible alternative futures, against which policy options can be tested and implications identified.

Why Use Scenarios?

Scenarios are powerful planning tools because the future is unpredictable. Their main characteristics being:

  • Scenarios present alternative images instead of extrapolating trends from the present.
  • Scenarios embrace qualitative perspectives as well as quantitative data.
  • Scenarios allow for sharp discontinuities to be evaluated.
  • Scenarios require decision-makers to question their basic assumptions.
  • Scenarios create a learning organisation possessing a common vocabulary and an effective basis for communicating complex – sometimes paradoxical – conditions and options.

Good scenarios are conceivable and surprising. They have the power to break old stereotypes; and, by rehearsing tomorrow’s future, they produce better decisions today.

Example Scenarios developed by Hillbreak for a Strategic Foresight workshop for a leading global fund manager

How to Establish Scenario Logics

Scenario logics are the basic  building blocks from which the final scenarios will eventually evolve. Establishing them correctly, therefore, lays the foundations for the scenarios and is a vital prerequisite of good scenario planning as it:

  • produces the logical rationale and framework for the scenarios;
  • determines the underlying theme, structure and background of each scenario;
  • establishes the plot of each; and,
  • captures the dynamics of the situation in each scenario, so that they can be communicated effectively.

The most common method is to construct a cross-matrix formed by selecting the two most critical pivotal uncertainties which might play the most prominent roles in shaping the future for the organisation concerned. Selecting the pair of pivotal uncertainties can involve long debates between participants in the exercise, but if the group wants to create coherent, creative scenarios then a reasoned explanation of the rationale behind the selection can itself be richly rewarding.

Fleshing-out the Scenarios

There is no ‘correct’ way to flesh-out the scenarios, but there are a number of important guidelines that can be followed regarding ‘factors’ and ‘actors’.

With regard to ‘factors’ there should be:

  • a beginning, a middle and an end state;
  • an approximate time-line;
  • key events that make things happen;
  • early indicators of change (signals that the scenario is unfolding); and,
  • an evocative title.

In respect of ‘actors’ they should represent:

  • main players in the field of interest;
  • large, small and traditional stakeholders;
  • new entrants;
  • what regulators are doing; and,
  • what society is demanding.

The scenarios should be fleshed-out and exaggerated in opposite directions to create images of future worlds that are as different from each other as possible. The best scenarios are not only compellingly believable, but also present distinct alternatives, are internally self-consistent, vividly memorable, individually challenging, and sufficiently insightful and powerful enough for decision-making purposes.

A Layered Approach

Change occurs on many levels. Most organisations, short on time and beset with operational issues, spend insufficient time examining and understanding the deeper levels of change. This can be done by taking a ‘layered approach’, both ‘horizontally’ and ‘vertically’.

Horizontally, trends and drivers can be organised into areas or sectors by means of “STEEP” analysis (Social, Technological, Economic, Environmental, and Political) as explained in Part 2 of this blog series. Time-scales can also be examined horizontally by means of the “Three Horizons Method”, which, at Hillbreak, we apportion as “Evolutionary” (business developing as usual),”Transitional” (surveying emerging innovation and responding to present shortcomings) and “Transformative” (future systems of living, working, developing, operating and investing).

Vertically, a method known as “Causal Layered Analysis” (CLA) is employed to enable comparison of vertical ‘slices’ of reality and change. Popularly, most exponents of CLA identify four layers: surface/litany; social causes/systems; discourse/world view; and, metaphor/myth. At Hillbreak, we have devised a simpler version: Exploratory; Interpretive; and Empirical.

Layered approaches are important because organisations often become too narrowly focused on immediate problems, neglecting a broader and deeper exploration and understanding of the environment in which they operate. By adopting them, an organisation might realise that it has been focused on the wrong things, identify profound issues and changes that will impact upon it, and prompt the organisation to develop the necessary foresight to address those deeper drivers of change early enough to influence the outcomes — rather than just reacting to them after the event.

Stress Testing

Most organisations have used scenario analysis to examine the likely development of core risk factors over time. An approach that can work well in an era of gradual change. At times like the present, however, it is extreme risks, (especially the “unknown unknowns”), not the everyday ones, that most concern some organisations in such fields as finance, energy and health. More recently, therefore, a new form of scenario planning has emerged — “Stress Testing” — to tackle the prospect of chaotic and immediate change. At Hillbreak, we recommend to clients operating in fields within international financial frameworks that stress-testing should be an element within their risk-management system. Notably, the recently published Recommendations of the Financial Stability Board Task Force on Climate-Related Financial Disclosures position scenario analysis and stress-testing as a central feature of decision-useful financial reporting in relation to climate change impacts. Performed properly and more widely, it can be a valuable tool in building the resilience that today’s business environment demands across myriad trends and uncertainties.

Conclusion

Thus, scenario planning, in all its manifestations, can: help explore and identify future possibilities; make people aware of risk and uncertainties; stretch the imagination; trigger the learning process; promote people’s participation in long-term decision-making and planning; and, evaluate current choices regarding the future. Nevertheless, always remember that you are NOT predicting the future but are trying to imagine it.

Foresight

Strategic Foresight: Stage 2 – Scanning the Horizon

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Scanning the Horizon

In this second article in our six-part series on Conducting Corporate Foresight, we focus on the Scanning the Horizon phase, which follows on from having established the Strategic Question that the Foresight process seeks to answer.

Purpose

A prerequisite of all serious strategic policy studies is “Horizon Scanning”, alternatively known as environmental scanning. This stage in the Corporate Foresight process is not about making predictions, or even forecasts, but is a systematic exploration and investigation of evidence and ideas about future issues and trends. Sometimes it is described as creating a ‘systems map’ of the activity or organisation under consideration; but we prefer to add the power of ‘radar’ to this simile. Profound change invariably starts as a ‘blip’ or ‘weak signal’ on the periphery, and companies in complex, rapidly changing environments require well-developed peripheral vision and an alert sense of anticipation.

Conceptual Method

Effective horizon scanning needs structure. Probably the most familiar framework for searching the external contextual system for emerging trends surrounding an issue or organisation is “STEEP”, an acronym which we have modified to mean:

  • Societal and Cultural;
  • Technological and Innovative;
  • Economic and Financial;
  • Environmental and Ethical; and,
  • Political and Governance.

Essentially, STEEP allows for a broad examination of the environment, identifies the major forces of change and detects signals that might drive, disrupt or deflect them.

Alongside the STEEP taxonomy, at Hillbreak, we employ a “Three Horizons” framework which gives a richer meaning to the more traditional ‘short-medium-long’ term thinking commonly adopted:

  1. Evolutionary; operating and developing within today’s dominant pattern along the lines of “business-as-usual” and extending the core.
  2. Transitional; a zone of ambiguous innovation where new ways of doing things are appearing and potential ‘rising stars’ are emerging that could, over time, become pioneering core business.
  3. Transformative; a future pattern and fresh landscape of conducting commerce arising from changing conditions, new knowledge and altered priorities and values which convert the very nature of the particular industry.

More of an exploratory perspective than a planning tool, the Three Horizons technique can be used as a second axis with STEEP in providing a fuller framework for researching and recording potential change over time. Metrics can also be applied, where appropriate, to the drivers and issues involved. Such scanning has been sophisticated over recent years with the rise in knowledge management software, but we would still verge on the qualitative rather than the quantitative side of consultancy practice at this stage in the corporate foresight process.

Practical Guidelines

Just over a decade ago, a revelatory survey of 140 corporate strategists, showed that fully two-thirds of respondents had been surprised by as many as three high-impact competitive events in the previous five years, and a shocking 97% said that their companies lacked an early-warning system. Little, we would argue, has changed since then, as subsequent happenings have surely demonstrated.

Horizon Scanning should be a permanent, structured and continuous process, embedded into the policy and planning procedures of any organisation. In doing so, and in addition to framing the right question, we would suggest the following practical guidelines:

  • Adopt a global perspective and a longer, broader view.
  • Start by looking backwards, assuming that the patterns of the past will largely continue into the future.
  • Do not reinvent the wheel; there are many excellent studies of future possibilities already published from which to draw.
  • Be wary that past success can lead to complacency and constrained thinking; remembering that all performance across organisations tends to follow the familiar “S-curve”.
  • Conduct a stakeholder analysis with the following questions in mind:
  • Who is key to decision-making at this time?
  • What really matters to the parties involved?
  • Who are the customers with a high interest in the organisation?
  • Which predatory stakeholders seek to do the organisation harm?
  • Integrate the internal workings of the organisation with the external developments of the world around.
  • Explore unfamiliar areas and consult ‘remarkable people’.
  • Organise effectively for scanning with responsibilities properly assigned.
  • Identify past blind-spots and question what is happening in these areas now.
  • Search to see if there is an instructive analogy from another industry.
  • Check to find who in your industry is skilled at picking-up early signals and acting on them ahead of everyone else.
  • Make sure you are not ‘rationalising away’ any important signal, for nearly all surprises have visible antecedents, yet people have a powerful tendency to ignore warning signs that contradict their own preconceptions.
  • Listen to what your maverick colleagues or informed ‘outliers’ across the industry are trying to tell you.
  • Find out what your peripheral customers and competitors are really thinking, for there is much to be learned from complainers and defectors, as well as obscure and less immediate rivals.
  • Ask what future surprises could really hurt, or indeed help, the organisation; as well as what emerging technologies could fundamentally change the game. Is there, in fact, an ‘unthinkable’ scenario?

Organisations with a constant horizon scanning capacity and strong peripheral vision will always gain significant advantage over their rivals. They will recognise risk more readily and reorganise accordingly. They will perceive and act on opportunity smartly and in front. As the business environment changes apace and becomes more uncertain, payoffs from scanning and vision will be greater than ever. As Charles Darwin popularly pronounced:

“It’s not the strongest of the species who survive, nor the most intelligent, but the ones most responsive to change.”

Foresight

Strategic Foresight: Stage 1 – Framing the Strategic Question

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Framing the Strategic Question

It might seem an overused assertion, but leadership in the corporate realm faces new uncertainties greater than at any time before. The global pace of change, and the ramifications of it, seriously tests the capacities of businesses, of all scales and sectors, to formulate and implement resilient plans and adaptive strategies.

It is why, at Hillbreak, we advocate frequently the adoption of ‘Strategic Foresight’ by our clients, whether as a feature of developing or refreshing Responsible Investment strategies, or as part of business planning processes more broadly. The concept, and the six-stage approach that we adopt, is one that we have summarised in a previous introductory article.

This post, the beginning of a new, monthly series that will provide greater depth on the six stages in the Strategic Foresight process, focuses on the first: Framing the Strategic Question.

Purpose

All too often insufficient time and thought is given at the outset of a project to defining the scope and focus of the issues facing an organisation. Not infrequently, studies end-up addressing the wrong problem or discovering the real issue halfway through having generated considerable confusion along the way. It is therefore not simply a matter of asking the right question, but of framing it within the context and purpose of the organisation. To achieve this, we have a few key guidelines, as follows:

1.    Understanding the organisation

No two organisations are alike; what works well with one might easily backfire with another. Central to our process is an opening series of tailored ‘strategic conversations’ with selected players from within and, where appropriate, outside the organisation.

We also favour the familiar, yet forever fruitful, Strengths-Weaknesses-Opportunities-Threats (SWOT) analysis. But it is important not to over-sophisticate the process; large measures of common sense are critical.

2.    Aligning attitudes and expectations

Getting all client stakeholders to buy-in to the strategic foresight process is not always easy. Internal participants can be sceptical and may perceive that the foresight consultant is not paying sufficient attention to the immediate concerns of the financial bottom-line. Time spent explaining the rationale and the method is, therefore, never wasted.

Neither is crafting a positive depiction of the future and exploring the biases of both the participating client groups and the facilitator. Too many foresight exercises concentrate narrowly on highlighting hazards and negative impacts. Of course, researching and evaluating risks is crucial, but it is only one side of the futures coin.

Primarily, foresight requires the ability to recognise patterns involving relationships and systems that are complex and non-linear. This often entails a significant realignment of mind-sets among participants.

3.    Clarifying the rationale

The essential purpose of employing futures-thinking and foresight methodology is to gain a better understanding of the opportunities and challenges that lie ahead, so that superior decisions can be taken today. Fundamentally, therefore, the client organisation must resolve what it wants to achieve. This is not as simple as it sounds. Aspirations and perceptions vary considerably over corporate time-horizons and across business imperatives.

Firms can be quite unclear as to what decisions they need to make to secure their future. Investing time and effort up-front clarifying the focal objectives, motivations and reasoning pays enormous dividends. In our experience, a prime outcome of foresighting is getting client companies to balance successfully the exploitation of the near-term (day-to-day operational management) with an exploration of the longer-term (blue-sky strategizing). The two, ideally, should feed off each other.

4.    Establishing clear objectives

Defining the purpose of the strategic foresight project and the related objectives of the organisation is imperative. Some of these might be quite specific, addressing a known issue (e.g. merger, relocation, new product development, re-organisation etc.); others more ethereal (e.g. creativity, innovation, corporate citizenship, responsible investment, well-being or enlightened leadership etc.).

Generally, the overriding objective is to bring fresh thinking, new ideas and a change of mind-set into organisations all too often stuck in self-constructed ‘silos’ of planning and operation. An effective foresight project should help a client focus on ‘outcomes’ not ‘outputs’ and work across multiple time-horizons.

5.    Choosing the right participants

It is essential that the support of the Executive is in place. That said, strategic foresight is a ‘team sport’. From experience, the core group driving the project should be no greater in number than five or six, whilst strategic conversations should be conducted with around a dozen or so carefully chosen ‘players’. It is often preferable for this to include a few well-informed, external stakeholders.

Strategic foresight workshops should comprise anything from 12 to 30 participants who are truly representative of the organisation. They should ideally be complemented by some provocateurs who can offer differing views of the organisation and the world at large.

It is important to recognise throughout that strategic foresight requires creative, collaborative and challenging thinking. The ultimate message might best be formed in a favourable light so that recommendations are evaluated positively, but we do not exist to tell organisations what they want to hear. In our experience, clients today place far more value on candour and integrity.

Hillbreak Postcard 2

Professor John Ratcliffe joins Hillbreak

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PRESS RELEASE

27 January 2016

Eminent professor joins forces with Keeping and Lovell at specialist training and advisory firm, Hillbreak

John Ratcliffe

Professor John Ratcliffe

Professor John Ratcliffe, a globally eminent chartered surveyor and consultant, has joined Hillbreak, the specialist training and advisory start-up fronted by former Deloitte duo, Jon Lovell and Miles Keeping.

Ratcliffe joins the growing firm, whose client book includes marquee real estate organisations including TH Real Estate, British Land and BMO Real Estate Partners, as Head of Strategic Foresight.

With over forty years of working in academia and industry, Ratcliffe brings a wealth of experience to Hillbreak.

Until 2007 he held the position of director at the Dublin Institute of Technology, where he remains Emeritus Professor, as well as being a visiting professor at Henley Business School and the University of Salford,

He has worked as a consultant to countries, cities, companies, colleges and communities in the area of strategic foresight and is currently conducting several projects on the future of sustainable cities and sustainable real estate development.

Currently, he acts as president of the Futures Academy, an applied research and strategic consultancy organisation that was established in order to promote a fresh and more effective approach towards long-term planning.

His work has gained global recognition as a new way of encouraging business and investment management leaders to strengthen their focus on strategic foresight as a means of future proofing policy and leadership strategies.

Ratcliffe will lead the firm’s work on anticipatory leadership through strategic foresight, helping business leaders prepare for a range of future scenarios and making sure their business plans are both adaptable and resilient.

His appointment comes at a time when the firm is expanding both its advisory and training services, particularly in the field of Responsible Property Investment strategies for international asset owners and investment managers.

Professor Ratcliffe said:

“With unprecedented geopolitical uncertainty an acute issue for businesses across all sectors and financial markets, the need for CEOs and their Executive teams to take a more structured and anticipatory look at future operating scenarios has never been greater. Investors and other stakeholders expect rigorous and inclusive approaches to risk management. The volatility, complexity and ambiguity we are witnessing demands exceptional adaptability which can only be realised with a solid approach to strategic foresight.”

For most of my professional career in and around real estate, cities and the built environment, I have championed the cause of thinking farther, wider, deeper and differently about tomorrow’s future, so as to take better decisions for today’s business. Joining Hillbreak is a very special opportunity to promote strategic foresight and anticipatory leadership for the advancement of the real estate industry and the betterment of the communities it serves. I am genuinely very excited at the prospect.”

Miles Keeping, co-founder of Hillbreak and Chairman of the Green Property Alliance, said:

“We are delighted to combine forces with John, whom we have known for and collaborated with over many years. Responsible investment practices and resilient business models require an ever deeper understanding of futures trends and operating scenarios, and John’s knowledge and talent are a perfect fit for Hillbreak in this regard. We’re really excited about the added depth of capability that he will bring to our clients”.

Notes to Editors

About Hillbreak

Hillbreak provides training and advisory services to organisations seeking competitive advantage in a changing urban world. Its mission is to expedite the transition to a sustainable policy, business and investment environment by bringing intelligence, challenge and inspiration to its clients and stakeholders.

GRESB 2016 Results

Reflecting on GRESB 2016 Results

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The 2016 GRESB Results – published yesterday – show a record level of participation and a continuation of year-on-year growth in the quantum and value of real estate assets included in the Survey. With 759 entities across 63 countries participating in 2016, accounting for 66,000 assets with a combined GAV of $2.8 trillion, there’s little doubt that GRESB is tightening its hold on the market and is here for the long-haul. Resistance is futile, it seems!

Launched to a packed JLL house in London, the headlines of the Survey results were presented with the customary swagger and aplomb of GRESB CEO, Nils Kok.

We suspect that plenty will be written in the coming days about the results and what they mean, both for the reputation of individual entities in the responsible investment arena and their ability to attract capital from discerning investors, as well as on the extent to which the industry overall is addressing particular global challenges such as climate change and resource conservation. On this latter point, let us mention that the two percent reduction in carbon emissions reported this year on a like-for-like basis across the GRESB ‘universe’ falls a good way short of being sufficient to deliver the real estate sector’s fair contribution to the goals of the Paris Agreement. Let us not deny, however, that this is progress.

Market sentiment

Rather than focusing too heavily on the nuts and bolts of GRESB though, some of which we continue to believe are rather loose and ill-fitting, we thought we’d channel the mood music of those on the receiving end of the results. The real estate market is, after all, driven just as much by sentiment as it is by science.

Questions and challenges posed by members of the audience at the results launch were limited but somewhat perennial in nature. They were concerned with the efficacy of the approach to scoring performance on asset-level indicators for energy, water, waste and carbon, and to the new method of ascribing a GRESB Star rating to each participant depending on their score relative to the total GRESB universe (thereby ignoring geography, entity type or portfolio composition when arriving at a rating).

These questions, and others which crop up frequently when GRESB is a topic of discussion, are perfectly justified. And sure, GRESB still means that many sustainability professionals, whether working in-house for asset owners or externally as consultants, put much of their lives on hold for the three months or so leading up to the Survey deadline. This continues to be the subject of much eye-rolling when chatting with peers and there is, perhaps, an irony in the fact that the submission process can become an overbearing feature of a real estate sustainability professional’s workload, taking them away from the business of facilitating and delivering practical change within business and asset-level operations.

Heightened engagement

But we sense that attitudes to GRESB by many participants are changing; there’s a genuine acknowledgement of the fact that GRESB results now create a real point of engagement on ESG issues with the Executive Committees and Boards of property companies and fund managers. In this sense, rather than being seen simply as a burden, GRESB is actually becoming a catalyst for the empowerment of some heads of sustainability or responsible investment who have hitherto been peripheral to internal strategy conversations and the execution of core business.

The impact is not limited to internal engagement either. It remains clear from our discussions with investors that many of them view the Survey and its results with a dose of scepticism – its relevance to what they’re really interested in when it comes to the entities in which they are invested (and the governance of them in particular) is, by-and-large, limited. By the same token though, they’ll usually admit that it’s the best tool available to them for providing an indication of the rigour with which property companies and real estate fund managers attend to a range of ESG issues. Whilst imperfect, it provides a basis for structured engagement with their fiduciaries and some are taking a more sophisticated, proactive and discerning approach in this regard.

Market transformation?

Perhaps this is a sign of GRESB beginning to realise the ‘market transformation’ to which it aspires?

Admittedly, there is still some way to go; many (but by no means all) of our fund manager clients continue to find investor engagement quite weak. But as Nils Kok pointed out, the impending ratification of the Paris Agreement on Climate Change will almost certainly put a rocket up a good number of those who are only flirting with climate change – and ESG more broadly – in their real estate allocations.

In the meantime, we hope that GRESB will become more focused on matters of real importance to fund managers and their investors and, because of that, less burdensome on those having to spend so much time counting beans rather than sowing the seeds of change.  Goodness knows we need the change and at a faster rate than is evidenced in these results.

Broadgate

Addressing Minimum Energy Efficiency Standards at British Land

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Hillbreak has recently completed an assessment of British Land PLC policies and systems in relation to the Government’s Minimum Energy Efficiency Standards (“MEES”). The MEES Regulations will restrict the letting of properties which have poor energy performance ratings from 2018, and are a therefore a key issue to address for responsible landlords and their investors.

We conclude that the company is well prepared for the Regulations and has proactively managed potential risks to value, albeit that continued vigilance and proactive risk management is required. An overview of our findings are captured in this blog, published by British Land.

Blur

Investor Briefing on Minimum Energy Efficiency Standards

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Commercial Real Estate Investors need to ensure that their fund and asset managers are fully prepared to deal with the liabilities that will almost inevitably exist in relation to Minimum Energy Efficiency Standards, and that they have robust procedures in place to deal with these and any future risks. We’ve put this Briefing Note together to guide investors through the key elements and implications of the Regulations, and with the key questions they need to be asking of those mandated to manage their real estate allocations.

Hillbreak Investor Briefing On MEES (Sept 2015)

Hillbreak Investor Briefing On MEES (Sept 2015)

MEES Briefing Note For Investors

This is intended as a high-level and general introduction to the issues. Please contact us if you would like to discuss them in more detail. Hillbreak has helped a number of landlords to consider how factors such as lease type, lease events, tenants, income profiles and regulatory timetables present particular risks to their portfolios which could result in significant income loss, liquidity impacts or capital works being required.  With careful planning, Hillbreak has been able to minimise these types of risk with its clients.