The ESG ‘Wild West’ and the Integrated Retirement Community Sector: Part 1.


Ryan Horder, Project Director

What it means to be a business is changing.

What does ESG really mean, and why bother?

The climate and biodiversity emergencies are getting exponentially more severe at local and global levels, with regions facing everything from extreme weather to food and water scarcity. These events are, in turn, driving greater levels of poverty, modern slavery, and social inequality. We are fast approaching an ecological tipping point at which there is no going back. In practice, this could mean the extinction of keystone species or glacial melt that releases trapped pockets of methane (80 times more potent than carbon dioxide in terms of trapping heat).

In 2004, anxiety-inducing projections like these spurred the secretary of the United Nations (UN) to ask major financial institutions to collaborate with the UN and the International Finance Corporation to identify ways of integrating environmental, social and governance (ESG) pillars into capital markets. Fast forward to the present day, and there is now an abundance of global frameworks and reporting mechanisms to support companies in assessing and disclosing their ESG performance. Public visibility is now driving competition between businesses to be the best.

Consequently, what it means to be a business is now changing. In addition to regulation, increased public awareness and investor requirements are forcing companies to re-evaluate their purpose. Organisations are now expected to not only minimise their negative impacts but contribute to society and the environment.

We’ve identified four key ESG challenges that need addressing within the Integrated Retirement Community (IRC) sector:

  • Carbon commitments without robust regulation/framework
  • Key stakeholders with different goals and aspirations
  • Vulnerability to physical climate risks
  • Housing crisis and the NHS overload

ESG in the Integrated Retirement Community Sector

For most corporates, ESG is still the Wild West, and there is no standard approach; headline-grabbing claims and ‘greenwashing’ roam free.

According to Net Zero Tracker, 88% of global emissions and 92% of GDP are covered by net zero carbon pledges. However, the robustness of these pledges should be called into question, particularly with no regulated framework against how they are assessed.

For the UK, the aim of the emergence of the Sustainable Disclosure Regulations (SDR) – new regulations being developed by the Financial Conduct Authority is to provide investors and stakeholders with greater transparency and consistency in sustainable investment products and ultimately prevent companies from greenwashing. The intention is that this will improve trust in the market for sustainable investments. The full standards won’t come into effect until approximately mid-2024.

In the meantime, to make sense of the noise, leading organisations prioritise the ESG risks and opportunities that are most material to them. Material issues can vary significantly between sectors but with financial interdependencies become a core determining factor. These interdependencies can include resource inefficiencies, fines and missed green premiums.

For Integrated Retirement Community (IRC) developers and operators, identifying the most material considerations requires a balance to be struck between the priorities of two key stakeholders: their residents and investors.

A common criticism by residents against ESG is a lack of conviction that there is an imperative for them to participate because they won’t be around to see the negative impacts of climate change or biodiversity loss.

Also, because they won’t be the ones paying the associated cost of a sustainability premium, despite their willingness to continue within a brown market where costs of non-renewable energy are fluctuating.

One challenging roadblock – if not the most challenging – to adopting ESG principles is how we, as an industry, change the mindset of residents.

Senior ESG Consultant Robert Winch discusses this in part 2.