VERTICAL VILLAGES-THE MAGIC OF MIXED-USE DEVELOPMENTS Weekly Newsletter Edition 7

What?

As I said at the beginning of Newsletter #6, so much has been published about Environmental, Social and Governance (ESG) in recent times that most people's heads are left spinning after they read just a sampling of the many articles available today. It is a very big subject of course, but the blizzard of information out there is...dizzying...and in the end, not a lot of it clarifies Why we should do it, What it is that we should do and How we should do it.

In that Newsletter, I described a summary of the reasons Why you should implement ESG in your strategies and practices. Admittedly, it scratched the surface, but it was intended to stimulate your thinking, and I hope I succeeded. Of course, there is so much more to it, but the road-mapping needs to begin somewhere. As baseball legend and popular wit Yogi Berra once said "If you don't know where you're going, you'll probably end up there." Better for you to avoid that trap!

So now that you have a grounding in the Why of ESG, it's time to consider What it is and how it applies to you. Remember, we asked the following questions at the outset, and if we have answered them in the affirmative, then that will guide us in deciding What our action plan should be:

1. Will our clients and customers benefit, (or even notice)?
2. Will we benefit by improving our bottom line and our reputation with our customers?
3. Will our efforts actually work?

So, let's begin by considering Question #1, namely, what is it that we can do to benefit our clients and customers? And will they even notice?

Let's start with Investors. After all, it was that group that led the way by paying attention to ESG matters impacting their investments, wasn't it? They were motivated by their concerns for the "E", that is the environment, initially, (sustainability, climate change, pollution), quickly followed by their understanding of the impacts of those forces on the "S", our society and the appropriate human reactions to those issues. Next came the "G", governance, namely, how to adequately ensure the quality of the implementation of controls to ensure it's timely and completeness of application for each project and for the industry overall.

While all investments described as ESG compliant, were not (and more than a few still are not) as they simply did not do what their Sponsors claimed. But the growing vigilance of Investors, followed now by that of Regulators, has reduced this number greatly. Helping this trend along has been the growing number of projects which have reported superior investment returns produced by those which are compliant over those that are not. While some of this effect might be explained as a self-fulfilling narrative, the increased attention of project Sponsors generally has resulted in the superiority of their results becoming more and more true. Most of us, and more importantly, Investors, would describe this as a good thing.

So, now, to the project Sponsors, it is noted that many more are understanding what is needed for real compliance. And besides pleasing more and more Investors, the rising attention being paid to their satisfaction with the latest results, and what is producing them, namely compliance, answers the second part of the question...yes, they do care!

This brings us to Question #2. While the answer seems obvious since compliance and good results should logically be able to drive more business in keeping with this fast growing investor trend. But there are a lot of actions on the part of the Sponsors, Developers and Asset Managers needed to realize said increased earnings for Investors. I'll leave it to our next Newsletter to try to answer the question "How" and describe some of the detailed actions required from that Design, Delivery and Operational Managers. Suffice it to say for now that we need to scour the culture of our own organizations for all of the re-inventions we will need to make in order to be able to "walk the talk". This is understandably a big job but not one we can do only half heartedly. We need to educate ourselves in the intricacies of ESG and then to imbue our cultures with it so that for our colleagues and ourselves, it will become second nature. I can only say, "Start doing this now" . This requirement will only increase with time so we shouldn't put it off for one more minute.

Of course, we all want the answer to Question #3, "Will our efforts actually work?" but that will only come over time when we observe the results of others efforts as well as to identify our own results. But to do the latter, we will have to embrace ESG and go through all of the steps I've described above to first answer Question #2, a formidable and time consuming exercise for any of us. While I can't help you with the second part of the answer, I can share with you the results of other earl(ier) adopters than yourself. And...the results are...well, mixed, but trending in the right direction.

Part of this effect is caused because it is still early days in measuring the industry-wide effects of implementing ESG in any organization. That is magnified by the fact that there are at least FIVE recognized measurement systems (!) and they don't necessarily correlate with one another. And when you add in the early (but improving) investment not-always-great, results even from all ESG compliant projects, more confusion is possible. But the measurement systems are becoming more reliable and more similar to one another. As well, Western and/or Global organizations such as that of CPA's and Chartered Accountants, is insistent in reducing the chaos and they are making good headway in doing so. Standardization is being forced on the system because investor and industry interest is so strong...and appropriate measurement is being demanded. There is light at the end of the tunnel and it's not blowing a whistle!

So is this an argument to "go slow"? Or even to "not go at all", at least for a while, in relation to taking the needed steps? The answer to that question is highly individual because it is existential for so many of us. We are in this business because we have developed our own risk tolerances but there is admittedly, a wide range of the,m. However, we know from past experience with mitigation measures we have used to generally improve matters, that the risk of delaying adoption of principles such as ESG, is likely going to be offset by the loss of the competitive advantage to be gained by proceeding soon. That is the conundrum we all face but it cannot be ignored.

So that's my short answer to What you should, and really, Must, be doing to learn more about ESG and how it will affect your prosperity. You can then more self-assuredly adopt its principles into your development and operations and satisfy your social conscience at the same time!

We are very knowledgeable about ESG and can advise you on the application of its principles and practices in our respective areas of specialty. Here's how to arrange to share your challenges with us and to learn our solutions:

Our Team of 16 Subject Matter Experts and Contributing Authors collectively have over 500 years of seasoned experience contributing our specialties to the successful development of commercial projects in North America and Internationally. Imagine having that rich knowledge at your service?

To learn more, please email me, Professor Phil Richardson at:

PhilR@BlackOpalPA.com

OR

to get really fast answers, schedule a free and confidential 15 minute Zoom call with me soon, at a time convenient for you at:

Calendly.com/phillrdev

We look forward to sharing our knowledge with you.

Thanks

The Black Opal Property Advisors Inc. Team

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