Future returns from green moves today
CDL's eco-friendly practices have not only won the developer most Green Mark Awards but also raised its public profile
Emilyn Yap, Business Times 6 Sep 08;
AS the call for environmental protection resonates around the world, property developers in Singapore have not missed the message and have begun riding the green wave. Ninety-five Green Mark Awards were given out to environment-friendly buildings in 2007, a jump from 17 in 2005.
But 'building a green development is more than just placing a couple of eco-friendly features within a property', said Kwek Leng Joo, managing director of City Developments Ltd (CDL). 'It takes concerted and sustained efforts that cut across the entire development chain and its stakeholders.'
Even before the green movement gathered such a momentum, CDL says it was already engaged in eco-friendly practices. They have become an integral part of property development and management, as well as corporate social responsibility (CSR) activities today. Green initiatives in property development undoubtedly contribute to environmental sustainability. But less known, perhaps, are the other rewards CDL reaps from its efforts. Eco-friendly practices have raised CDL's public profile, it says. 'Going green equates to value for home buyers and enhances our reputation and goodwill,' said Mr Kwek.
BT approached several industry watchers who generally agreed. The initiatives are 'definitely beneficial in terms of the image' and will 'probably reinforce CDL's credentials and standing in the Singapore property market', said CIMB-GK analyst Donald Chua. At a conference here in May, Merrill Lynch singled out CDL as a case study for strong CSR practices. Not just CDL, companies around the world believe environmental issues can shape their image. In a McKinsey Quarterly survey last December of more than 2,100 global executives, 68 per cent felt climate change is a somewhat or very important factor to consider when managing corporate reputation and brands.
Besides winning public favour, green initiatives can help launch companies onto institutional investors' radar screen. 'CDL is the only Singapore developer listed on the FTSE4Good Index series since 2002,' said CDL's chief financial officer Goh Ann Nee.
The series measures the performance of companies which meet globally recognised corporate responsibility standards and facilitates investment in those companies. Benchmarks like these are useful to the increasing number of professional investors who watch out for how environmental, social and corporate governance issues can affect the performance of their portfolios.
For instance, more than 400 global investment institutions managing assets exceeding US$15 trillion have signed up to the United Nations-backed Principles for Responsible Investment. These are best-practices for incorporating such issues into mainstream investment decision-making and ownership activities. 'Most of our major shareholders are institutional Western-based funds who are familiar with socially responsible investments (SRI) and even have proactive investing policies,' said Ms Goh . 'We have found that increasingly, investment funds are asking more questions relating to the company's CSR efforts and commitment, beyond just financials.'
Even small acts can impress. After a meeting at CDL's office recently, '(three European institutional investors) commented that they noticed the green stickers on switches which highlight the importance of switching off lights after using the room', said Ms Goh. 'They were pleasantly impressed that CDL was taking proactive steps towards cultivating eco-friendly habits within the office.'
However, some industry watchers believe that the broader market still needs time to warm to developers' green initiatives. As one analyst pointed out, 'SRI funds are still very small right now' and many are pure environment funds which focus on sectors such as green energy.
Some investors could also be concerned that going green incurs higher costs. CDL typically allocates 2 to 5 per cent of a project's cost to green features. For its residential project The Oceanfront @ Sentosa Cove, it earmarked 3.8 per cent of the construction cost for green features. But CDL seeks to draw out the bigger picture. 'It is a common misperception that an eco-friendly approach to building happens at the expense of the bottom line,' said Mr Kwek. At the end of the day, the triple bottom line - financial, economic and social - also counts.
Going green also leads to savings in the long term. CDL's City Square Mall, for instance, could enjoy cost savings of $48,000 per year from water-efficient designs alone.
Another analyst said with tongue in cheek that beyond impressing the investment community, eco-friendly property developers could 'score some brownie points with the authorities'. The government has certainly been paying attention to environmental issues. Under legislation that came into effect on April 15, all new buildings and major retrofittings under certain criteria will have to meet minimum Green Mark certification standards.
'(The legislation) has no impact on our business as we have already been practising this for some time,' said Mr Kwek. 'Being an early adopter of these practices has enabled us to harness extensive knowledge and expertise.' Ultimately, 'the fundamental motivation behind our green practices is our care for the environment and our future', he added.
Since the introduction of the Green Mark Awards in 2005, CDL has attained the highest number of Platinum and Gold Plus awards among developers. And it looks like it will be going strong with its green initiatives.
