A more sensible approach to ESG and the climate is emerging, but beware unintended consequences

Since the pandemic, we have seen quiet revolutions in many parts of our lives and the property industry in almost every sector has been changed irreversibly.

In less than a decade, the role of the office has altered. Now, thanks to the growth of technology, even the largest institutions are wary of committing themselves to leases longer than a decade, knowing that in the course of the next 10 years they will either need twice the staff or half as many. When I hear people say 40% of the offices in the City of London are effectively not fit for purpose, you can grasp the impact on values. WFH may be more restricted but is now built into most businesses in some form or other.

Retail too has altered dramatically. Department stores are now effectively dead, with a few honourable exceptions, and while sheds have come off their peak, in my household parcels still arrive almost daily that a few years ago would have been bought in a shop. Boutiques thrive, but our high streets are changing radically as a result.

Residential has probably changed least. While there was a panic dash for the country during the pandemic, life has gone largely back to normal. What the house building industry now needs is for the next government to reinstate mandatory targets for land supply, which would enable changes to the planning system that shorten delay and take a more intelligent approach to growth. It is encouraging that Labour seems to accept the challenge. In this area at least, it offers a much more attractive future than the current government.

There are two areas in particular that will be significant battle grounds over the next few years. First is a more sensible approach to ESG. Environment, Social and Governance sounds mom and apple pie, but at its heart is the assertion that doing good is more important than making a profit for your shareholders. I could never see the sense of that proposition, but when none other than Larry Fink, who sits atop Blackrock’s $9trn, became its most powerful advocate and his company enforced compliance across some of the world’s largest businesses, we all were obliged to take notice.

Now, however, Mr Fink appears to have undergone a Pauline conversion, and not before time. It clearly makes sense for any business to care about how it impacts the environment. In a world dominated by the impact of climate change, it would be stupid not to. Equally, decent businesses care about their staff and run their operations ethically and accountably. But good riddance to slavish adherence to the notion that business is somehow about something other than doing good by shareholders.

Equally significant is the gradual realisation among voters, regardless of political affiliation, that net zero appears to be a goal worth attaining regardless of its impact on ordinary citizens. The most egregious example of this is London mayor Sadiq Khan’s outer London ultra-low emission zone, which charges poor people for not being rich enough to afford to upgrade their car or van. If a Tory mayor had even thought about such a horrific notion, they would have been castigated royally.

But this is only the start of a policy that in almost every area, including home-related issues around green energy, boiler replacement, ground and air sourced energy, not to mention the forced adoption of electric vehicles, risks impoverishing a large section of the population for gains that in the context of a global challenge are so minimal as to be practically irrelevant. Yet, to even say this invites outrage from climate zealots.

Of course, eliminating carbon needs to happen. But if we approach it in a way that hits poorer people significantly harder than their richer neighbours, then expect the political consequences to be severe.