Sustainability, speed and surnames

Sustainability statements   10 years ago, ‘sustainability’ denoted something vaguely to do with the environment and a box to be ticked on a business’s annual report. Over the past few years it has risen to encompass a broader agenda of social, governance, ethical and economic issues, and has become a lever for competitive advantage in some markets. This year it will become so baked into business thinking that if you want to let, fund or sell property, you will need to have a clearly articulable proposition on these issues. Two recent disclosures support this contention. Firstly, Blackrock chief Larry Fink has written letters to both CEOs and clients setting out paradigm changing commitments. The letter from the world’s largest shareholder with investments in most FTSE 100 businesses is worth reading in full here. In this Fink cites a ‘fundamental reshaping of finance’ which will call into question existing instruments, such as the 30-year mortgage, and result in ‘a profound reassessment of risk and asset values’. The impact of capital allocation, he states, will take effect sooner than the climate change itself, because ‘capital markets pull future risk forward’. Blackrock goes on to set various policies around disclosure, purpose (‘the engine of long-term profitability’) and ‘putting sustainability at center of how we invest’. Whilst this will cover many factors, the environment is a key focus. What standards will Fink expect from the businesses in which he invests? Perhaps another clue comes from Microsoft. Satya Nadella (blog here) has made a commitment that the tech giant will be carbon negative by 2030, which will include actions in its direct business, supply and value chains. They will achieve this by shifting to 100% renewable energy consumed by all occupied buildings, creating an internal carbon tax, and creating a new procurement regime for suppliers. Where these two businesses go, others will follow, and real estate suppliers are likely to be in sharp focus. This, together with technological change, are my top trends to watch for the next 5 years. #environment #sustainability

Last mile  The UK is a country where 90% of adults now use the internet regularly – we are in the mature stages of adoption. Whilst e-commerce continues to grow, we are a global frontrunner for some of the challenges associated from a transition to the new age of digital business. From a global perspective, e-commerce sales tripled between 2014 and 2019, and other cities with less mature infrastructure are paying attention. A report released this week by the WEF suggests that last mile logistics deliveries will increase globally by 78% by 2030. The city level impact will be significant increases in congestion and worsening air quality. This has all the hallmarks of something that will need to be regulated in the coming years. However, the WEF (in conjunction with industry partners) makes suggestions for a series of voluntary and regulatory supply chain interventions that might assist. Above all, they advocate for an ‘integrated ecosystem approach’, including: electric vehicle only zones for inner cities, night time deliveries, dynamic rerouting based on live traffic conditions, load pooling, and multi-brand parcel lockers. The contention is that much of the infrastructure challenge comes from market competition, rather than demand; and that a coordinated industry approach with shared infrastructure would be more effective both for operators and for the city. This feels like a Herculean task, that can only really be driven in the long term by municipal authorities through policy, planning, subsidy and direct intervention. However, we might realistically see pilots emerge in the UK in the short term that try to address elements of commonly owned infrastructure, or cooperation between the big logistics operators. #infrastructure #lastmile

Construction speed   In development, one of the key success factors is speed of delivery. By minimising the time between project start and practical completion, the risk of intervening demand and financing shifts is curtailed, and the absolute cost of financing is reduced. Historically, construction of large buildings could have been a generational activity; St Paul’s for instance took ~40 years to build. Some things haven’t changed. Gaudi’s Sagrada Familia in Barcelona commenced construction in 1883; it is expected to be complete by 2030. Most commercial construction by contrast has become more efficient, with typical build periods of around 2 years for an office scheme. Much depends on things like ground conditions and site constraints, but new forms of modular, prefabricated and 3D printed construction techniques are pushing the envelope. Notwithstanding this progress, the news this week that China has completed the construction of a fitted-out 270,000 sq ft hospital in 6 days feels astonishing. China leads the world in super-fast development. In part this is due to ability to focus large publicly owned construction firms in a concerted endeavour, without the need for complex contracting arrangements (four government owned firms developed the hospital). Public delivery also facilitates ready land supply, and the construction activity itself has lighter governance than in Europe. Nevertheless, there are examples of quick delivery in the West. ‘Homeshell’ for instance, a Rogers Stirk Harbour 3-storey concept house can be assembled on site in a day using prefabricated materials. Meanwhile in Alabama, volunteers constructed a 1,200 sq ft home in 3 hours. #construction  #development

Cashless   The cost of using cash in the post digital era is significant. Counting, moving and reconciling bits of metal and paper creates an additional operating burden, an increased risk of theft, and the slowing down of sales in, for example, fast food outlets where speed is king (contactless has changed the game here). For this reason, a recent trend has been the emergence of stores that only accept card payments (particularly among smaller, digitally savvy businesses). Are we in a position yet to get rid of the tills and move to vendor held terminals? No, according to New York City Council which last week banned cashless-only F&B / retail stores, with associated fines of up to $1,500. Why? Over 10% of New Yorkers still don’t have a bank account, and a larger 25% often rely on other forms of payment. These tend to be the less privileged, and minority groups that suffer from other forms of social exclusion. This is an interesting curtailment of the business operations of retailers, that could feasibly be extended to others that provide quasi-public infrastructure. Could for instance banks be obliged to offer ATMs or retain branches? #retail

Michael   A number of Aviva’s insurance clients this week received an email addressing them as ‘Michael’. These things happen – it was put down to a ‘temporary technical error’. Obviously those actually called Michael didn’t notice this mistake, although later on Twitter many confided that they were actually just pleased not to have been called ‘Mike’. Nevertheless, one wonders why Michael? Once very popular, the name has fallen out of favour in recent years. It follows a list of other names that have quickly descended the ranks (including Richard; #3 when I was born and now outside the top 100). Some have fallen so low that they are now at risk of extinction (Wayne, Tracey, Malcolm, Gary). However, unlike Mike, others have found new favour in an abbreviation (Frederick has disappeared, whilst Freddie is now top 20). Some names in particular seem to rise and fall in long wave name cycles (Harry and George were in, then out, then back in). So what influences naming? In the UK, royalty has always been a solid influence. In the early settlement of the US, many settlers chose religious names, but as time progressed these transferred to the celebrities of the time (independence fighters and politicians). However, the evidence shows that political naming is much dependent on one’s own affiliation (probably not many Borises this year in Liverpool?). ‘Implicit egotism’ theory suggests that one’s name will go on to affect many things in life, including, believe it or not, your preference for letters. So as a Richard (Rich is fine BTW), I am naturally predisposed to Reeboks and Ray-Bans. Studies have also shown a disproportionate career and activity focus based on surnames (e.g. John Baker becomes a baker). Be thankful that your surname isn’t Shufflebottom, (unless it is; in which case apologies). #names