A Sustainability Stand-OffDigital Manager
With the real estate sector accelerating along its path to a more sustainable future, as a development lender, we remain pragmatic, recognising that it simply will not be possible for every new building to meet the high standards demanded from a carbon standpoint. There will be a natural tension between the necessity of delivering essential buildings and developing buildings in the most carbon efficient manner.
Over recent months, Fortwell Capital has worked to establish a framework that enables the development of practical environmental and social solutions for the debt market, while maintaining our commitment to supporting the delivery of essential property, such as residential and care homes.
Fortwell’s new sustainability strategy – developed in coordination with Evora Global – lays out a framework which allows us to evaluate the environmental and social credentials of borrowers and their developments from the outset. Anchored by a scoring system, our sustainability assessment process enables the team to establish, at a cursory glance, where the opportunity sits in terms of its commitment to sustainability – allocating both the borrower and development a numerical sustainability score.
The scoring and data collection process also provides valuable engagement with borrowers on ESG and allows Fortwell, with the support of Evora Global, to leverage sustainability best practice with borrowers that have less sophisticated processes in place.
The data collected from individual projects will be reviewed by Fortwell’s senior management, which means we can track progress against environmental and social elements within our own lending strategies, portfolios and the impact at corporate level. Our performance and evaluation system will also be used to initiate an engagement process with our borrowers to identify and define different ESG improvement opportunities.
We are currently working with one of our care home developers to assess and estimate the amount of carbon produced and embedded in a care home at both construction stage and during its operating life. Through consultation with Evora, we will seek to identify how design, material, construction methodology and operating activities may be improved to reduce carbon across the life cycle of the building. The developer can then assess how they might integrate such changes in future homes – boosting their sustainability score.
Lending capital secured against the value of a property means there is a limited point at which financial partners can exert influence on sustainability, and that is at the very beginning of the lending process. The framework developed will complement our current business offering and will not prevent Fortwell from lending to businesses or projects. It will, at a minimum, be a tool available to Fortwell for engagement with existing and potential borrowers before a loan is agreed, and continually throughout the loan term, ensuring the sustainability agenda is moving forward at pace.
Down the line we see potential for this initial framework to be used to introduce minimum thresholds for scoring on environmental and social credentials, and even become the basis for Fortwell Capital developing new Green Loan Products, which offer financial benefits to borrowers if they reach a certain threshold on sustainable competency.
The road to change is long and requires a collective effort from major international firms to small businesses. By working collaboratively with our borrowers and by making ESG a core part of our underwriting process, we aim to do our bit in the progressive shift towards a more sustainable real estate industry.
Dan Smith, CEO, Fortwell Capital