On breaking down the barriers, luxury sustainability and dense and muddy arguments

24 November 2011 – Each of the key leaders featured in Lynne Blundell’s special report on Colonial First State reveals an expanding sense of responsible and responsive investment.

From the chief executive officer, Mark Lazberger, to head of sustainability, responsible investment, Amanda McCluskey, manager ESG research and engagement, Nick Edgerton, and head of sustainability property, Rowan Griffin, all are working on pushing their own set of boundaries and second-guessing the future.

In McCluskey’s case, the Occupy movement is a warning shot. “Mainstream shareholders are getting upset and they will continue to put pressure on corporations to be accountable,” she says.

Edgerton asks how environment, social and governance issues contribute to the risk of credit default.

In property, Rowan Griffin points to the change in attitude from analysts.

“Sustainability was never on the radar for analysts before,” Griffin says. “Now they see the risk for property in not acting and they are looking at it more and more.”

For most however, it is still “not material”.

But the industry is on the move.
Delegates to the Australian Property Institute/Property Funds Association conference in Sydney last week heard more about the new superstar on the block, 76 Berry Street North Sydney, a 25-year-old building now rated six star NABERS Energy.

Judging by the reaction at the conference, owners Local Government Super, has not only snapped at the heels of industry leaders, but “come from nowhere” to leap ahead.

LGS property chief, Brian Churchill, provided fascinating details of how his team did it – the technology, the business case (which he says is the most exciting part), the leadership and the incentives.

Now, the delegates were amazed to hear, the LGS board has instructed that the team move the entire portfolio to a five star average by the end of 2012. Retail included.

Incentives were key. Without the Federal Government’s Green Building Fund, it was unlikely that at least one of the major new technologies would have been applied.

Churchill said the cash flow element of the GBF was hugely important in providing the comfort level to attempt the project.

Would LGS have made equal use of the $1 billion Tax Breaks for Green Buildings program announced by the Federal Government last year but currently under review?

No, said Churchill. The problem is that super funds and many other managed investment vehicles struggle to benefit from tax-driven schemes.

The simple fact is that generally they pass on tax – and therefore tax benefits or losses – to the end beneficiaries.

As Churchill put it, super funds pay 15 per cent tax and by the time they claim normal depreciation and other deductions, really hope to pay no tax at all. So tax incentives have little to no effect.

Another problem is that any investor that can claim a useful tax break needs to wait for the tax reports to feed through the system, which could be 12 to 18 months away.

Our inside sources at the round table discussions on the tax breaks say there is currently an impasse in negotiations.

The industry has proposed that the tax breaks be claimed under the quarterly Business Activity Statement (BAS) level rather than the end-of-year tax report.

It sounds good. And the Department of Climate Change and Energy Efficiency has no problem with this. Neither does the Australian Tax Office, we hear.

Not so Treasury, however.

It seems this bringing forward of the tax break would blow out the cost of the scheme by more than $200 million. Treasury’s solution is to deduct the amount of blow out from the $1 billion.

The industry has gone to the mattresses.

Luxury footprint
In what we could dub a fun article – except for the volume of resources involved – Jacqueline McArthur, new to The Fifth Estate and a former property writer for the Australian Financial Review, delves into how the rich do sustainability.

In the case of Al Gore, his role as ambassador to save the world sat at odds with his power bills: a hefty US$30,000 of energy a year.

But let’s not be smug. Australia has a few of its own Al Gores, McArthur discovered. Along with some architects trying to persuade their clients that green, not greed, is good.

On that subject, you might want to test your suburb’s footprint, with the Australian Conservation Foundation’s consumption atlas.

See https://acfonline.org.au/consumptionatlas/

Dense and muddy
Published this week in The Conversation was Jago Dodson’s views on density and suburbia. https://theconversation.edu.au/the-carbon-devil-in-the-detail-on-urban-density-4226

Dodson, associate professor and director at the Urban Research Program at Griffith University, tackled one of the truly tough – and controversial – questions in the sustainability industry: Is high-density living more sustainable than low-density suburbia?

We know some studies say that highrise buildings consume way too much energy. There is embodied energy, energy to run the lights in the common areas and lifts, not to mention the energy and water needed for communal luxury items such as pools.

But there is much more to sustainability than direct energy consumption: transport to get around, access to jobs, and the cost of providing infrastructure and services in a never-ending city.

Tthere is personal consumption to add to the urban consumption.
Dodson points out that each person in downtown Sydney produces 37 tonnes of total CO? compared with 16 tonnes produced by residents of Blacktown in Sydney’s west.

He says ¬– and he is not the first – that the most energy efficient housing model is “mid-level suburbanism”: “focused nodes of three to six-storey development – terraces, walk-ups and low-rise apartments”, dispersed across an entire metropolitan area, not just inner zones.

The problem is that you can count on one hand, and only recently, the developments of mid-level housing anywhere in the outer suburbs.

A little disconcerting is that Dodson muddies the waters of the rational and scientific debate he advocates by suggesting that anti-sprawl advocates could be caught up in a cultural-cringe type of anti-ugly-Australia debate, instead of being genuinely worried about building a low-density, never-ending city (since developers don’t believe suburban buyers will buy medium density products in outer areas).

Dodson alludes to the “pernicious bias in Australian environmental debates in which less affluent suburban dwellers are treated as environmentally unsophisticated ‘bogans’.”
He says: “It fits within a long and regrettably continuing Australian tradition of denigrating suburbia whose recent version sneers at ‘aspirationals’ in suburban ‘McMansions’ driving ‘monster-trucks’.”

But poking fun at anti-sprawl advocates is not helpful and shifts the argument away from the science and rational thinking Dodson advocates.

Where is the evidence that “inner-city, chardonnay-sipping greenies” (not his words) are driven by aesthetics and cultural cringe rather than the fear of having to pick up the financial and environmental externalities that the developers pass on to everyone else?

Dodson himself, as he mentions in the article, has done huge work on the oil price vulnerability of outer-suburban residents. For a start.

In the US, there has been a major rise in poverty in the suburbs as the recession kicks in.

There is also the inbuilt deceit of the suburban offering: low-cost product for low-income people without making it clear how much recurrent expenditure it will personally and directly cost them to fund their suburban idyll.

We understand that Allen Consulting recently did a report comparing the energy consumption and embodied energy of various housing types. It was briefly referred to before going underground.

But it is precisely Dodson’s challenge, and whatever it was that Allen won’t tell, that needs to be thrashed about in the light of day.

Sustainability cannot prosper if it’s going to create its own politically correct straightjackets. And any greenie worth their salt will want to know the science and figures before passing judgment on ideal urban development. If they are wrong they will change their minds. Like rational people who want to survive.

It’s not helpful to have a leading academic denigrate anti-sprawlers, but it will be something the business-as-usual crowd will seize upon.