The ESG ‘Wild West’ and the Integrated Retirement Community Sector: Part 2.


Robert Winch, Senior ESG Consultant

In part 1, we looked at what ESG means and its value to the Integrated Retirement Community (IRC) sector.

For part 2, we will be discussing heightened physical climate-related risks for vulnerable occupants, and EPC regulation change particularly relevant for IRCs operating under long-term management models.

Investors have woken up to both the risks and opportunities that come with the climate and biodiversity crisis.

Pick any investor, go to their home page and, nine times out of 10, its focus will be on ESG. Positioning ESG at the centre of investment decisions will lead to fewer investment risks which could ultimately lead to asset devaluations, stranded assets, supply chain instability, and lost reputation.

Climate-related risks, both transitional and physical, are the most significant risk type that could lead to stranded assets. Failing to set and achieve science-based targets, aligned to 1.5oC average global temperature rise, can leave assets at risk of falling behind government policies and suffering the costs of retrofitting.

For investors, buying back IRC stock presents an opportunity to retrofit properties and add value through uplifts in sustainability performance. Assets can be future-proofed for turbulent energy markets by increasing utility efficiency and making use of on-site renewables. Given the impending governmental changes to EPC regulations, this is particularly relevant to IRCs which typically operate under a long-term management model.

For IRC communities, physical climate-related risks are heightened due to occupant vulnerability, making physical risks a key consideration. As an example, during 2022 heatwave periods, the total excess mortality in England and Wales for those over 65 was 2,803 – 85% of the total excess deaths.

Retirement Villages Group (RVG) is an IRC looking at how to be to be resilient and adaptable to transitional and physical and climate-related risk. We jointly participated with them in UKGBC’s pilot programme to test the application of UKGBC’s Framework for Measuring and Reporting of Climate-related Physical Risks to Built Assets.

Key challenges identified were:

  • Insufficient industry best practice to identify inherent vulnerabilities and resilience measures
  • A lack of guidance on safe building performance thresholds – the point at which a physical climate-related risk becomes an issue
  • Understanding the interdependencies of physical risks
Nature offers a means of adapting to physical climate-related risks while also creating additional value. For instance, in terms of food security, the provision of allotments for growing produce can bring people together and so reduce loneliness among IRC residents.

One of the most talked about topics in the IRC sector is the social impact of IRC on residents, their families, employees, and local communities. IRC, if done right, offers a means of reducing the pressure on our healthcare system. IRC also frees up the housing stock, alleviating pressures of the UK’s housing crisis where affordability continues to decrease. Attempts are being made to ease this crisis through a significant build-out of new homes. However, the knock-on effect of this is the generation of carbon and waste, exacerbating the climate and biodiversity emergency. It is hypothesised here that, given the role of IRC developments in facilitating the process of downsizing, they have a positive impact on the environmental balance sheet.

Take away

A shift is occurring in the general public’s awareness and perception of the associated risks of inaction. This is opening the door for the children and grandchildren of IRC residents to start having conversations not about what they did to help during the war but rather what they are doing now to live a sustainable life and protect our future.