Investing profitably and sustainably in UK residential property
It is now increasingly important for investors to allocate their funds in a way that is sustainable as well as profitable. This means focusing on investments which are economically resilient and with positive Environmental, Social and Governance (ESG) metrics.
ESG investing now amounts to over $30 trillion in Assets Under Management globally, which highlights how the simple goal of profit maximisation has been replaced for investors the world over. Investors of the future care more about the impact of their investments than ever before.
So how do you make sure your property investments are sustainable? At SPI Capital we have decided to approach it in the following ways:
Aligning with the UN Sustainable Development Goals (UN SDG) of Sustainable Cities and Communities
In order to make the communities we invest in inclusive, safe, resilient and sustainable, we act as a professional, responsive landlord and offer discounts to key workers.
Our tried and tested management systems, including cloud-based infrastructure and regional hubs, ensure swift, professional responses to maintenance issues. As a result, our tenants always have a safe place to call home.
Our asset allocation model is resilient, split across the Northern Powerhouse and Oxford-Cambridge Arc. Our algorithm helps us to identify attractive assets quickly, through analysing substantial supply and demand data.
The assets we invest in have a track record and strong future forecast of consistent cash flow and growth, throughout market changes. By focusing on groups of assets with a low average unit cost (eg typically £50,000-250,000), investors benefit from a more resilient portfolio as they minimise exposure to individual units.
For example, if you invest £3m into a high end London property, housing a single family, then the risk of your portfolio is as high as the risk associated with the asset.
If instead you invested the same £3m into four blocks of apartments or portfolios housing, you might have 35 individual flats and houses in total. An issue with one unit will have a minor impact on the performance of your portfolio, and the portfolio risk is reduced.
Aligning with the UN SDG of Reduced Inequalities
By providing well-managed, affordable housing where needed, and offering discounts to key workers, we align with the UN SDG of Reduced Inequalities.
We act as a fair, non-discriminatory and responsible employer and also donate a percentage of profits to local housing-based charities.
As a predominantly female-led business, we understand the importance of avoiding discrimination, promoting gender equality and ensuring equal pay and opportunities. We foster a meritocratic, incentives-aligned structure.
Aligning with the UN SDG of Climate Action and Responsible Consumption and Production
We make use of the embodied carbon footprint of existing buildings by investing in and optimising pre-built assets, rather than constructing new buildings, which has a high carbon cost. In fact, construction reportedly contributes to up to 50% of climate change and landfill waste.
A popular example of our approach from another industry is buying quality second hand clothing. This is more environmentally friendly and sustainable than manufacturing, shipping and retailing new clothing. Reusing what has already been produced halves the carbon cost.
Like in the clothing example, quality second hand stock is typically more affordable to the buyer as it avoids the premium that is so often paid for ‘new’. This generally enables investors to not only get a better return on their investment but also to invest in a more sustainable way.
Value investing
The way we combine sustainability with profitability is through acting as long term value investors in UK residential property. Like great ‘value investors’ such as Warren Buffett, we focus on buying assets at good prices, that deliver long term value to communities, and are affordable to their customers. This approach is inherently more sustainable than ‘quick return’ alternatives.
For us, investing profitably and sustainably is at the core of SPI Capital’s mission, vision and values: wealth preservation and growth for our investors.
If your values align with ours, and you would like to discuss building your portfolio with SPI Capital, get in touch via info@spi.capital to arrange a confidential, no obligation conversation.