The “S” in ESG: What could it mean for bridging lenders?
By Hannah Duncan
Society. Look it up in a well-thumbed dictionary and you’ll probably find the kind of dry definition you weren’t looking for.
“The aggregate of people living together in a more or less ordered community”, reveals the Oxford Dictionary. Yawn. “A large group of people who live together in an organized way, making decisions about how to do things and sharing the work that needs to be done”, drones the Cambridge counterpart like a 90s plug-in vacuum cleaner.
They give a basic indication of the word, but don’t really say what society MEANS. And in a world where every Tom, Dick, and Harry (or Thomasina, Ricarda, and Harriet) is busy slapping “ESG” on their bridging products, we need a clear definition.
Society needs a champion… Many champions!
Unlike environmental sustainability (the “E” in ESG), “society” hasn’t had the same amount of legal scrutiny and attention yet. YET.
And so, at the time of writing, the criteria for what counts as a “social” economic activity are pretty flimsy. The CFA Institute, for example, list normal legal requirements like, “Human Rights” and “Data Protection” as qualifiers.
Clearly, the standard is low. If something smells a bit fishy, it’s because the bar is basically at the bottom of the ocean.
The “E” in ESG: What it means for bridging lenders
But just because the regulatory bar is covered in sea gunk somewhere around the Titanic, doesn’t mean that our impact should be.
Over the past years and months, we’ve witnessed heart-breaking events which threaten to rip our society apart. Police brutality. Systemic racism. Devastating wealth gaps. A worrying cost of living crisis. Food poverty. Fuel prices. Women deprived of basic reproductive rights. Partying politicians. And so much more.
There is a lot to focus on. A lot that needs to be fixed. And bridging lenders – yes bridging lenders(!) – have the influence and the means to make a big difference. Really.
How Bridging Lenders can support with affordable housing
One of the most poignant issues of our times can be seen on our streets every day. Stagnating wages compete against soaring living costs, making housing unaffordable. Throughout the UK, rent prices now come to 37% of an average person’s pre-tax income. Head to the capital and that soars to an eye-watering 52%.
This vicious cycle makes it even harder for renters – who are usually in the lower income brackets – to save up to buy a property. Especially as property prices are swelling with unstoppable force. As Mayor of London Sadiq Khan recently put it, “In the last 20 years, the cost to buy an average property in London has risen from just under seven times average earnings to nearly 14 times average earnings”.
Combine these issues and it’s little wonder that 14% of tenants say that the rising rates have triggered symptoms of depression. It’s no surprise that key workers are squeezed out of cities. Or that people in their mid-thirties are forced to rent tiny flat-shares instead of finding a family home. Feeling depressed is, to be fair, quite a reasonable reaction.
But… Good news. There are two ways bridging lenders can help with the affordable housing crisis.
The first one probably seems obvious, but it’s worth saying anyway. Be brave enough to refuse potential clients who are making the problem worse. You know the types. Sickeningly rich people who want to buy-up vast properties only to leave them empty for most of the year.
Talk to any architect around Belgravia or Mayfair and you’ll hear stories of iceberg houses with full-length swimming pools in the basement, cinemas, spas and even snow rooms. All while homeless people shiver on the streets outside.
Stroll down North London’s infamous Bishop’s Avenue – also known as “Billionaires Row” and stare at the rows of abandoned mansions. Purchased for tax reasons and left to decay in haunting splendour. Those kinds of clients.
Be courageous enough to say no to the hedge funds who profit wildly from the most vulnerable people. Based in the British Virgin Islands, Seychelles or Barbados, the shelf companies that have no traceable director, but a hell of a lot of money. It’s not fair that incredibly wealthy people get even richer from these kinds of ventures.
This means protecting students for example, as well as renters. On top of the £9,200 a year tuition fee, students now pay 60% more for their halls of residence than a year ago. A single room in private student accommodation is more expensive than renting a family home. And property “investors” are among the guiltiest culprits. We need to stop enabling this. One lender at a time.
Another way bridging lenders can help to fix our crumbling society is, of course, to proactively find partners who seek to fix these problems. By collaborating and plugging financial gaps for organisations that develop affordable homes, bridging lenders can make a real difference.
How bridging lenders can support vulnerable people
There are a good handful of organisations out there that are making a real (and profitable) impact on society.
Take the Hull Women’s Network for example. This local initiative buys and develops homes for women and children fleeing domestic violence, among other things. It gives them an affordable sanctuary to start again AND makes a fair profit for investors – up to 12% return on your property after tax. This kind of investment– at least to my mind – is the kind of “ESG” lending that deserves the label. It’s truly impactful and sustainable for society.
With a couple of hours’ research – time to crack open the coffee and reading glasses – you can find more organisations like this.
Many of these initiatives have a focus on a particularly vulnerable groups affected by the housing crisis. For example, rough sleepers, immigrants, low income families, people with disabilities, students, those fleeing domestic violence and the elderly.
Finding a group that speaks to you and your values, and simply getting in touch could be a wonderful way to make your bridging firm more socially sustainable. And remember… It’s not “charity”. It’s an investment.
Inclusive lending boosts society
Another way bridging lenders can make a positive impact on society is simply to make their products accessible. For generations, people have been cut out from traditional forms of lending. One of the most obvious examples is the Muslim community.
According to the laws of Islam, followers cannot engage in any form of finance which includes interest. As you may be able to imagine, this cuts out almost all mortgages and bridging loans. But it doesn’t have to. A few simple changes could make property finance viable for everyone.
For example, if bridging lenders offer a payment plan product with fixed monthly costs – rather than an interest-bearing loan – Muslims would be able to take part without compromising their religion. This would, of course, benefit the bridging firms as well, opening a new universe of potential clients.
What every UK lender needs to know about Islamic bridging finance right now
Inclusivity within bridging extends far beyond different religions too. For decades, huge groups have been left out of the picture. Caucasian businessmen tend to have been prioritised to the detriment of everyone else (possibly because the senior leadership was traditionally male dominated). But taking a moment to include as many different groups and communities as possible with real and tailored products could prove to be revolutionary – for profits as well as people.
Diversity within the office is paramount
Achieving these aims starts within the team. And as obvious as it may sound, to represent different members of society, firms need to be made up of them. It’s been proved that boards which contain at least 30% women perform better. Both for ESG goals and the balance sheet. This is because teams which are made up of different backgrounds, experiences and beliefs avoid “group think” and come up with sparkling new ideas.
Perhaps the simplest and most effective way to start making a difference, is with a few strategic promotions.
The problem with paying White British men more than everyone else
Hannah Duncan is a freelance writer with a passion for finance, sustainable investing and fintech. She loves writing engaging content for industry magazines and investment services, as well as keeping a personal blog at www.hdinvestmentcontent.com
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