ISSUE 29 SEPT/OCT 2023
Development finance you can depend on Discover development finance solutions structured to deliver, with a choice of fixed and variable rates.
Better property finance, by design
Committed from day one At Atelier, we are committed to providing competitive development finance solutions that are structured to deliver, with a choice of fixed and variable rates. Whether your development is residential, student accommodation or care, we can help. Loans are available from £5m to £40m and are custom-built to match your ambitions. Work with people as committed to your vision as you are, and discover better property finance, by design at atelierfinance.co.uk
Atelier Capital Partners Limited is supervised for anti-money laundering purposes by the Financial Conduct Authority, under reference number 910090. Incorporated in England and Wales with registered number 11888767. Our registered office is 3-5 Rathbone Place, London W1T 1HJ.
ISSUE 29 SEPT/OCT 2023
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BRIDGING FINANCE
Get ahead with Fast Track Bridging the specialist effect At UTB we understand that performance is everything and by combining a premiership team with the very latest in Tech, we deliver quick, flexible, and reliable outcomes for our broker partners. R E G & U N R E G | R E F U R B I S H M E N T | I N S TA N T D I P S | AV M | S E L F S E R V I C E P O R TA L
U T B A N K . C O. U K Email: bridging@utbank.co.uk Telephone: 020 3862 1002
Acknowledgments Editor-in-chief Beth Fisher Deputy editor Andreea Dulgheru Creative direction Beth Fisher Andreea Dulgheru Reporters Elliot Topham Jodie Bradley Sub editors Christy Lawrance Andrea Johnson Contributors Niamh Smith Beth Ure Debbie Walters Sales and marketing Beth Fisher beth@medianett.co.uk Special thanks Jack Izzard, Rhizome Media Group Damien and Michael Wynne, Q New Homes Aaron Bass, Montford Matt Wells, M Public Relations In memory of Russ Thirkettle, Carbide Finger Printing The Magazine Printing Company Design and image editing Jana Rade, impact studios Bridging & Commercial Magazine is published by Medianett Publishing Ltd Managing director Beth Fisher beth@medianett.co.uk 0203 818 0160 Follow us: Twitter @BandCNews | Instagram @BridgingCommercialMagazine
To read about our commitment to the environment and sustainable print publishing, please visit https://bridgingandcommercial.co.uk/page_magazine.
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he UK’s journey to embracing ESG always seems to take two steps forward and one step back. Although we saw some positive developments this year—such as the publication of the Transition Plan Taskforce Disclosure Framework, aimed at helping firms transition to net zero; and the government’s consultation on a future regulatory system for ESG ratings—we also witnessed Rishi Sunak scrap the domestic minimum energy efficiency standard (MEES) in the PRS, and push the deadline for electric vehicle adoption to 2035, among other decisions as part of his new approach to net zero. As such, the message around ESG is ever filled with mixed signals. In our sector, firms have continued to do their part to drive this agenda. Companies have published their annual ESG reports, launched new green finance products—such as TAB’s new mortgage product [p14]—or continued their charitable activities, some of which we highlight in this issue [p102]. However, considering we’ve been talking about ESG for several years now, have businesses truly done enough to drive progress in this area? To uncover the answer, I spoke to several industry experts about the major pain points stopping wider ESG adoption across the sector—and why leaving this to the last minute might cause a bigger headache later down the line [p48]. As the construction market is responsible for one-quarter of the country’s carbon emissions, we also take a look at how the industry can transition to a circular model to reduce the climate impact [p81], and how one particular developer, Q New Homes, is revolutionising sustainable construction with its scheme in Kent [p70]. We haven’t neglected the S in ESG either: Intelligent Health’s Debbie Walters highlights the importance of workplace wellbeing in her column [p17], and eight specialist finance experts share their secret to maintaining a healthy mind [p10].
Andreea Dulgheru
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Sept/Oct 2023
We’re flexible on larger loans. • We’re able to consider larger loans for many different types of purposes and completion timescales. • Our criteria suits a wide range of circumstances, including self-employed clients. • We can cross charge against multiple properties to leverage equity available. • We accept multiple types of income and we’ll consider up to 100% additional income. • Interest only accepted on transactions with no minimum income level (subject to plausibility). Get in touch with our team:
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Advertisement Feature
Together and Synergy Commercial join forces to provide £2.5m commercial bridge. We teamed up with Synergy Commercial Finance to help a client pay an unexpected HMRC tax bill of £2.5million.
The loan was swiftly completed thanks to the diligent efforts of both parties and the valuation expertise provided by chartered surveyors Eddisons.
The customer had just four weeks to pay the surprise bill to avoid any further costs. With the deadline looming, we were able to arrange the £2.5m commercial bridging loan with Synergy, which was completed against seven different commercial assets.
Thanks to the fast and efficient work, the customer received the funds by HMRC’s deadline, and was able to pay the hefty bill on time. This is an example of how we can work to our average time to fund of 29 days for unregulated bridging.
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This customer came to us via one of our introducers and had an urgent deadline to meet their HMRC requirement. Based on our experience, we knew that Together would be the ideal funder both in terms of credit appetite and turnaround.
Piotr Twaits Managing Director at Synergy Commercial Finance If you have a similar case, or wish to speak to a member of the Intermediary team, please call 03301 739 437 or email newbusinessteam@togethermoney.com
Scan to find out more
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They were able to offer the full funds needed for the customer to pay the bill on time, meaning they were able to avoid any further costs or action from HMRC.
“The bridging market is going to be somewhat challenging for lenders that can’t secure quality, competitive funding” p22
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The Cut News Column Exclusive Explained Interview Cover Story B&C Awards 2023 One Day View In Conversation Limelight Tips and tricks for a healthy mind
A new product with an ESG spin
The importance of employee wellbeing
Full steam ahead
Green homes that don’t break the bank
Christian Faes
The road to success is paved with ESG
An abandoned dairy farm gets a sustainable makeover
Zero waste construction: reality or pipedream?
Female Founder Finance
The industry’s latest charitable efforts
THE CUT
The Cut
Keeping mind and soul together Working in the specialist finance sector—known for its stress and long hours—can take a toll on one’s mind. Several industry experts share their tips and tricks to maintaining their mental health and wellbeing, to inspire others to do the same
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Sept/Oct 2023
The Cut
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William Lloyd Hayward
Group COO at Brightstar
My morning power hour before I start the work day, and my reading time—both of these have been fundamental to my improved overall health and wellbeing. In the morning, I set time aside to make sure I am ready for the day, without answering the phone to get the ‘decks clear’. This helps me face the day and anything that might change within it. My reading time is something I started in 2023—over time as the iPhone and social media took over, I read less and scrolled on social media more, but this year I wanted it to be different. Reading is my escape from the day, a time to learn more about our world and the personalities in it. This has enabled me to break away from the bad habits of life, including being fixed to our phones. I remain someone who loves to capture moments with friends and family, or the latest restaurant I have been to with my husband and that will not change, but getting the balance back in my life means I feel more relaxed and focused.
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Chris Treadwell Deal originator at Zenzic Capital
One of the biggest things I’ve done is give up alcohol 11 years ago—I genuinely don’t miss it or see any potential benefit to my work or personal life by consuming alcohol. The other thing I do is regular exercise. I start my day with running before work, as I always feel amazing once I arrive home—it’s like I have accomplished a task before I have set foot in the office or before most people are even awake. It’s scientifically proven to pump the body with endorphins that naturally increase your sense of wellbeing. I feel happier, more fulfilled when I exercise and it’s also setting an example to my daughter about the importance of looking after your physical wellbeing, which naturally feeds into your mental wellbeing.
Paula Purdy Head of sales for bridging at United Trust Bank
Walking is my thing, particularly first thing in the morning. My role sees me sitting at a desk or in a car for most of my day, so being able to get outside, regardless of the weather, makes me feel so good. It gives me time to either switch off from life’s pressures or to process things that are worrying me without other distractions. You don’t have to be super fit or walk miles, even a gentle stroll really helps clear my mind. I enjoy the early morning air on my face and listening to the birds and the breeze in the trees—it’s nature’s music! The best thing of all is when I get home and walk through my front door; I feel ready to crack on with the day, an adrenaline rush hits me, and I feel I can take on the world!
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Uliana Kuzmis
Deputy managing director for development finance at HTB
My personal secret to my mental health and wellbeing is the ‘positive pod’. Whenever I feel that things are getting out of control, I make space for the little things that make me happy. Contrary to popular belief, there is no magic solution to wellness—our cup gets filled by doing small things that top up our energy level: phone-free walks in nature, dancing when nobody is watching, catching up with friends, a run, or a cuppa and a book. These should be done in addition to the basic things, like getting enough sleep, eating healthy and maintaining a worklife balance. My advice to anyone would be to know your triggers. The earlier you identify the warning signs, the faster and better you can help yourself and come back to a better, more balanced place. Mental health and wellbeing is an individual affair and we need to take that first step and reach out for assistance when we need it.
The Cut
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Juliet Baboolal Partner at Seddons
One key thing that I have adopted in my life to maintain and improve my mental health and wellbeing is practising mindfulness meditation—this is a technique that involves focusing one's attention on the present moment, and acknowledging and accepting the thoughts, feelings, and sensations that arise without judgement. To begin my mindfulness meditation practice, I find a quiet and comfortable space where I won't be disturbed, sit in a relaxed position, gently close my eyes and bring my attention to my breath. As I start my meditation, I allow my thoughts to come and go, without getting caught up in them. If my mind wanders, I gently redirect my attention back to my breath. I observe any physical sensations or emotions that arise, acknowledging them with curiosity and compassion, but without holding onto or getting carried away by them. Incorporating mindfulness meditation into my daily routine has been a transformative practice for maintaining and improving my mental health and wellbeing—it has provided me with a valuable tool to navigate the challenges of life with greater resilience, equanimity, and inner peace.
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Jason Berry
Group sales director at Crystal Specialist Finance
The mortgage sector is an emotionally charged and frequently stressful environment, so the ability to talk with either likeminded professionals who can empathise or family/ friends who can provide important perspectives is vital to my ongoing wellbeing. I have a strong circle of colleagues, friends and family around me who encourage regular conversation, which I embrace. A problem shared is a problem halved, so I find that explaining hurdles with colleagues usually provides a fix, while chats with family and friends simply ensure that I recognise other non-work related, but equally important priorities. We must come together as a sector to share best practice ideas, hints and tips. As a first step, I’d encourage business owners to become signatories to the Mortgage Industry Mental Health Charter (MIMHC) so they pledge to have mental health and wellbeing on their company agenda and so they can retrieve useful resource materials.
Karl Wilkinson CEO at Access Financial Services
Starting each day with a clear and focused mind is vital. I will begin my morning by assigning time in my calendar to help me focus on priority tasks, support our advisers, and dedicate time for clients and partners. A structured day helps me keep a healthy work-life balance, ensuring that I am ready to lead Access, while setting aside precious time to spend with my family. Being able to plan ahead for the day's challenges and act accordingly brings me stability, which increases my ability to provide individual advice and guidance to our team of advisers. It is also important to mark time out of your calendar to do the things you love—take the dog for a walk, go to gym, watch a bit of TV or go to the driving range. Also, make sure you get out of your chair for at least ten minutes every hour. 13
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Sonny Gosai
Senior sales and development manager at Norton Broker Services
Running has been a revelation to me. I used to look at runners and think there was no way I would do that, but it really helps to alleviate stress and gives me a way to decompress after a busy day—being outside running after a day of calls is truly liberating! I’m not running long distances, but just being out on my own for up to an hour has made a world of difference to my mental wellbeing, and I hope this makes me more present with my wife and kids, which is so important to me. My advice to anyone looking to improve their mental health and wellbeing is to find something that works for you. I know many in the industry go for long walks, some go and find random historical sites, others box! We are all in busy jobs, so we all need to find ways to get away from it all. Sept/Oct 2023
‘This is a case of putting your money where your mouth is’ TAB is showing it is serious about ESG with its new mortgage product, which offers financial incentives linked to sustainability and social elements. The firm’s founder and CEO Duncan Kreeger talks about longlasting, sustainable buildings and targeting investors with expertise WORDS BY ANDREEA DULGHERU
News
“Throughout my life, I’ve tuned in more to funding for the short term, with longerterm financing being left to the next tier of lenders. However, that’s had a negative effect on the economy and climate. As I’ve got older, I’ve started to think more long term about properties. I think that if something isn’t done soon, properties will go from being tired and worn to being derelict and, eventually, these properties won’t be here,” says Duncan.
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t was this specific desire to boost the number of long-lasting, sustainable properties as well as support the commercial market that drove Duncan and his team at TAB to launch the firm’s mortgage product on 13th September. “We want to build a sustainable business and continue to work with customers throughout the life cycle. Property is a very long-term investment, and I’m hopeful that a lot of, if not all properties in the UK [that we fund] will still be here long after I'm gone.” The new mortgage option offers loans of between £150,000 and £2.5m at a maximum 65% LTV on terms between 3–10 years. The product is priced at 4.99% over the Bank of England base rate, with interest serviced monthly, and is available for residential, commercial and mixed-use properties. In terms of borrower profiles, Duncan confirms the proposition is mainly aimed at investors—including UK individuals and limited companies—with some degree of expertise. “We won't take a one-size-fits-all approach; we will consider loans where borrowers have varying levels of experience," he explains. Re w a r d i ng s u s t a i n abilit y
What makes this product unique is that ESG is at its core. The new mortgage comes with a 2.5% exit fee regardless of when the loan is redeemed—but meeting ESG criteria brings discounts. Depending on the degree of ESG initiatives taken on in relation to the property, a borrower can reduce the exit fee by up to 50%—meaning the final fee could fall to 1.25%.
To determine the ESG discounts, TAB will look at three main areas of ESG: EPC ratings, sustainability and social elements, with an emphasis on activities that reduce carbon emissions, improve energy efficiency and support sustainability. For example, the lender is offering a tiered discount that applies depending on the EPC rating of the property at the time the borrower exits the loan—a 25 basis point cut off the exit fee for an EPC C, increasing to 50 basis points for B and 75 basis points for an A rating. Further exit fee discounts will be applied if the borrower can demonstrate social ESG outcomes that align with specific UN Sustainable Development Goals related to health and wellbeing, education, economic growth or industry innovation and infrastructure. For instance, a client could lower the exit fee by 25 basis points if the property acquired with the mortgage is let to a social enterprise or charity. A ny t h i ng c on sider e d
With these discounts on the table, I am curious to learn how exactly TAB will assess the ESG improvements taken on by borrowers looking to get them. Duncan tells me candidly that the lender isn’t basing this on a very strict list of targets, but is open to any degree of ESG improvement in the hope that this will drive more investors to take on this type of work. “We’ve been to the big four accountancy firms and to other businesses to try to figure out the mechanics of how these things are benchmarked, and the reality is that they don’t really exist—it
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is a worry for me that people are imposing these extraordinary targets but they don't really have a way to track or monitor them. There isn't at the moment a robust testing system where we can send out someone to do a report—and, actually, we have found those reports to be incredibly lacking. What we intend to do is give people a certificate to tell us what they've done, which they can supply with their request for a redemption. And our commitment is that we will try to include everything that we possibly can,” Duncan elaborates. In addition to the unique ESG characteristics, borrowers applying for the TAB mortgage will benefit from the lender’s comprehensive tech application process and fast service levels to meet the business’ goal of bringing the speed of bridging into the commercial space. “One of the reasons why people get a bridging loan in the first place is because they're up against it time-wise. We're bringing that DNA into our mortgage product through the work that we've done on technology, including being able to issue terms electronically and instantly start the application process online—these are all really important things.” Although he does not confirm the size of capital TAB has ready to deploy for this product, Duncan tells me the business and its funding partners are eager to lend as much as possible through the new mortgage. “We've never been constrained by capital before. We have multiple different funding channels and almost all of them are supportive of this new product, and we have aspirations to lend much more than we have,” he says, adding that TAB aims to have a £500m loan book by 2024. With the proposition now officially available to the whole of market, Duncan is optimistic that the new mortgage will be well received by brokers and borrowers alike. “I think people will welcome a fresh approach from a tried-and-tested brand. We are trying our best to cut through the market by designing a product that has real ESG value, and I believe the market is going to absolutely love it.” As for Duncan himself, he is proud to see the product come to life after many months of working on it in the background, and of its potential to improve sustainability in the UK property market. “I feel incredibly passionate about this problem, and we want to be known as a firm that will try the very best to have an impact on this market, and this is a case of putting your money where your mouth is.”
Sept/Oct 2023
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95% OF BROKERS SAID THEIR ALLICA BANK BUSINESS DEVELOPMENT MANAGER WAS GOOD OR EXCELLENT. Source: Allica Bank’s Q2 2023 Broker Survey of 201 brokers
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Workplace wellbeing: A cornerstone of ESG Looking after employees’ physical and mental wellbeing is a commercial imperative, essential for attracting and keeping the best staff—and the right thing to do Words by Debbie Walters, operations director at Intelligent Health 17
Sept/Oct 2023
Column
Workplace wellbeing has become a hot topic… and rightly so. The finance industry is feeling pressure to demonstrate it is equipped to manage ESG issues, and staff health and welfare are central to this.
E “Neglecting wellbeing and ESG issues increases the risk of being left behind by the smart, new, ambitious generation” Bridging & Commercial
ach year in England, one in four people will experience some kind of mental health problem—more so since the Covid-19 pandemic. This is leading to less productivity for those in work. In addition, a record 2.3 million people of working age are now suffering from long-term sickness (491,000 added between May and August this year), for which poor mental health in younger people is a major cause. Alongside this, one in six people in England report experiencing a common mental health problem (such as anxiety and depression) in any given week. Financial services are not exempt from these statistics, with research by Mental Health First Aid England finding that 83% of employees in this field it surveyed had considered changing jobs because of the effect of work on their mental health. There is strong evidence that companies which focus on improving wellbeing increase their productivity and outperform the average. A study in the US showed that stock values for companies that score highly on a health and wellbeing assessment appreciated by 235% compared to S&P 500 Index appreciation of 159% over six years. If ESG strategies are well planned and implemented correctly, there is a higher chance of reaching and engaging the core of an organisation and influencing company culture as well. Although the original outputs of ESG concentrated on health and safety, there is an increasing focus on wellbeing to help achieve the social and governance aspects of ESG.
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CONNECTED VS ISOLATED Connection with other people has huge benefits to mental health and wellbeing. Since the Covid-19 pandemic, the working environment has changed beyond recognition. For many, the office has become a distant memory—or at least a place you might visit once or twice a week rather than a base where you work and meet up with colleagues. Online meetings have replaced face-to-face ones, and real connection to others has become a thing of the past. When we interact with someone face to face, we release a hormone called oxytocin that elicits trust and wellbeing, helping teams bond and work together. Companies may need to shift the balance of working by attracting staff back to the office to meet colleagues in person to help them be more supported and creative. The hybrid environment has taken away not only much of our connection, but also, along with it (for some), structure. Being able to leave work at the end of the day is so much harder when we are operating from home. Smartphones mean some people are unable to switch off from work. Many roles within the specialist finance industry are client facing; businesses may find that remote working can make it more difficult to provide emotional support to colleagues who are having difficult conversations with customers or to train leaders to support their teams. This involves trying to understand employees better and accommodating their diverse needs.
Column
Our bodies are remarkable things and are often able to tell us when things are not quite right. That aching back, feeling tired after a full night’s sleep, lacking concentration, feeling irritable and having an unsettled stomach are signs that all is not well. The pressures of work and the need for many to show they are in control and on top of things can cause people to ignore these signs. Many businesses now recognise the need to look at the physical and mental wellbeing of their employees; however, the huge range of staff welfare offerings in the market make choosing the right option very time consuming and what should be a key consideration becomes little more than a tick-box exercise. A main barrier to implementing workplace wellbeing programmes is the cost. Budget limitations and the availability of resources can be significant problems. Companies must navigate financial issues to ensure the programme they choose is sustainable. New workplace wellbeing initiatives and strategies will be truly successful only if employee wellbeing is central to the organisation. A mutual effort of CEOs and directors investing their time is what it takes to really make a positive, long-lasting impact. Below are some issues that can be addressed to build wellbeing into the culture of a company.
FEELING SAFE
FEELING THEY Psychological safety means staff can BELONG share their concerns about their mental health as well as speak the truth about problems without fear of judgement from management. All bullying and discrimination should be identified and dealt with swiftly. Despite the pressures in the finance industry, a culture of acceptance and kindness can be developed, allowing those with health problems to be understood and supported.
FEELING VALUED There should always be time for managers to actively listen in person and at the time when the employee most needs it. Active listening can identify potential stressors and unhealthy work behaviour before staff become unwell or suffer burnout, thus helping to reduce employee turnover and improve the organisation’s reputation. The working environment is important for wellbeing; it should be clean, light and with quiet areas, and offer opportunities for exercise and a healthy diet to demonstrate to staff that they are valued and respected.
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A well-communicated and clear vision of the future of the company unites the workforce and helps staff to feel part of a greater cause. Staff working part time, remotely or in peripheral offices should all have ongoing support through regular contact and, where these are possible, social activities should never be underestimated as a way of creating a strong team. The induction of new staff should create a strong first impression of the core values of the company. Wellbeing can and should be the new cornerstone of ESG. This will get the best out of staff, ultimately increasing productivity and making your company a great place to work. The best staff are choosing companies whose values align with their own, so neglecting wellbeing and ESG issues increases the risk of being left behind by the smart, new, ambitious generation.
Sept/Oct 2023
Heavy Works Bridge-to-Let Up to 80% LTV day 1 + 100% Works 1yr Bridge at 0.99% pm & 1yr BTL at 7.49% p/a Flexibility to extend or transfer to BTL early 18m - 24m Terms (half bridge & half BTL) Loans up to £2m net
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10th Nov 2023 I 9:30-16:30 I Olympia London Network with the leading lights in specialist finance at our all-day expo, boasting 70-plus exhibitors. Swing by the Conference Theatre to place your deals live with lenders! For enquiries, contact Megan Goncalves at megan@medianett.co.uk
Exclusive
Lending a hand in volatile times
Words by
ANDREEA DULGHERU
Bridging & Commercial
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Exclusive
Aspen Bridging’s founding director Jack Coombs talks about the current market instability and its impact on the specialist finance sector, and shares the firm’s plans and ambitions for the near future
Jack Coombs
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Exclusive
How has Aspen performed over the past 12 months?
“Bridging lenders’ funding lines are intervening more than they have been historically. Lenders are operating in a slightly higher risk environment where margins are thinner, and that creates nervousness—and the way to assuage that as a funder is to have more oversight”
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We had a fantastic period of growth in 2022, during which we built some brilliant new relationships. The last quarter of that year was more challenging for the market in general, when everyone’s previously established BTL exits—which form about two-thirds of our loan exit plans—were suddenly far less reliable, and the Bank of England base rate continued to soar. It’s been a roller coaster so, during the last quarter of 2022 and Q1 2023, we were cautious as we didn't know where the cycle of rate hikes would end, and temporarily we got ahead of the market for a period in terms of pricing. Since Q2, we have become more competitive and have chosen to focus on good-quality deals and customers. We're concentrating on working with great developers on quality schemes and being a nimble, accessible and more competitive lender. Currently, we’re writing plenty of loans around the £5m mark as well as lots of smaller facilities, and the foreign national market still represents a substantial chunk of what we do. Over the past five months, Aspen has achieved a run rate approaching £20m a month in new deals. We just lent £51.6m the quarter ending September 2023 and we’re on track to increase new lending by 15% this year compared to 2022. Looking forward, we are very positive and will be planning to grow both our overall lending and loan book by at least a third in 2024.
What is the current split in terms of the types of loans you’ve completed so far in 2023? Around 70% of our facilities are currently provided to UK developers. Of that 70%, roughly half are for new refurbishment and conversion projects, where we fund up to 80% LTV on the purchase and 100% of build costs. We offer loans for a variety of these projects, ranging from commercial conversions in Coventry to specialist high-end developments in prime central London or Bath. The other half are development exit loans, which often help release funds for developers’ next projects and redeeming their existing development facilities. The remaining 30% of our business is from foreign nationals, particularly from China and Nigeria investing in property across the UK. Overall, more than 50% of the loans we write complete within the month they are first submitted in.
Exclusive
What are the biggest trends you've seen in the bridging market recently? I think people have been holding off to a certain degree when it comes to finding the right refurbishment and conversion deals, and I would imagine that's also been the same in development markets. I think people have been a bit more conservative and have waited to try to get better bargains. However, I think that the pricing is starting to move into a more realistic sphere for people purchasing properties that need to be done up. There is also a large number of re-bridging requests around in the market, because exits are severely challenged on many loans, but this is not something that we try to do a lot of. We are willing to consider re-bridging but only if material progress has been made—such as either gaining planning permission or completing construction works. Our bridge-to-let proposition has seen more traction and is a viable solution for developers looking to do works during the bridging portion of the loan and use the one-year BTL facility as a development exit solution while they are selling some units and potentially retaining others. We believe that there is substantial demand for a marginally longer-term product and we will be exploring that with our closest introducers, with the aim of putting together a meaningful solution for our borrowers and brokers. The other thing I have noticed is that bridging lenders’ funding lines are intervening more than they have been historically. Lenders are operating in a slightly higher risk environment where margins are thinner, and that creates nervousness—and the way to assuage that, as a funder, is to have more oversight. However, we have zero-intervention funding lines. The great strength that we have as a company is that we are a family business that is low geared. S&U—our parent company—has about 40% debt and 60% equity, which combined makes half a billion of funds. That means that we have a lot of freedom, resilience and capacity, so we are in a very fortunate position.
What are your plans for Aspen for the near future? We recently instituted our company values, which we hold across the parent firm as well: TRUST—that stands for teamwork, respect, understanding, supportive and truthful. These are our values that we try to demonstrate to our borrowers and brokers, as well as among ourselves as a team.
We’re also undertaking a rebrand, which will feature a totally new and restructured website, in order to showcase our professionalism, our determination to treat customers fairly and our drive to be a major leading player in this market. Aside from that, we’re hiring new people as part of our expansion phase—in fact, we’ve recently issued two job offers. Our intention is to continue to build the business and to be a leading face within the bridging market. In terms of lending, I would expect us to review our loan sizes in the next financial year, to increase our maximum loan size for the majority of our products. We also need to develop our systems alongside managing our business growth, so we’re putting a lot of time and effort into automation of various elements of what we do, including loan book management. We’ve got an in-house management system, but we can automate more of it, which is what we’re aiming to do over the next six months so we can put ourselves into a position where we are totally capable of managing the book when we are bigger. It’s not about replacing the human in the process, but rather saving time and unnecessary repetition, having more sophistication in our ability to communicate with our customers and being able to implement processes without too much manual action.
You have already introduced several ESG initiatives over the years. What results have these yielded, and what other steps have you taken to build on your ESG strategy? For our team, we’ve permanently adopted a flexible working approach of three days in, two days out, to ensure a work-life balance. In addition, we’ve implemented a feedback and suggestions approach within the team, and we’re doing quarterly socials as well—just various things to ensure that our staff are taken care of. We run an annual training programme, which provides a refresher for existing team members and education for new staff, and we also support our employees with professional qualifications. We're a supporter of the new CPSP programme and we’ve already put half of our teams through it. We’ve also signed a lot of our members up for RICS training, since we do in-house monitoring as well. Plus, we’re implementing an enterprise car scheme for our staff, to provide them with rentals to undertake visits. In terms of our scope 1 and 2 obligations for all directly contributed CO2 emissions from Aspen, we can proudly state that we have fully offset these so far in our 2023/24 25
financial year. Our plan is to continue to calculate every year our scope 1 and 2 emissions, and then to fund the offsetting through professional organisations.
What are your predictions for the specialist finance market for the next 12 months, and how do you expect Aspen to perform? I think the idea that the Bank of England base rate is going to miraculously return to a much lower level in a short period of time is fanciful. I don’t make predictions any more, but I would like to think that the base rate will stop at 5.5%. The bridging market is going to be somewhat challenging for lenders that can’t secure quality, competitive funding. I also think the BTL market is probably going to shrink, and it will be interesting to see how people who previously made money in a more passive way through property investment may need to be more interventional and consider refurbishment. Landlords may temporarily need bridging to pay off their BTL mortgage, as they can't afford or refinance in order to try and sell that property. This is inherently a lastchance solution, so that’s not necessarily a fantastic scenario for a bridging lender. However, we are cautiously optimistic about the UK property market. Yes, there could be price corrections—which have occurred to a degree already—but, fundamentally, we have a country with a large population and a chronic supply issue, so we don’t believe UK property values will be majorly revised. As for Aspen, our ambition is to build on the good work that we’ve done, continue to grow and increase the volume of business we’re doing. I would expect the next 12 months to be a rapid period of growth for us—with our run rate nearing £20m a month meaning we can really propel our business forward.
Sept/Oct 2023
Advertorial
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Bridging & Commercial
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LDS unlocks 52 new homes in Leeds in largest deal to date Alongside senior lending partner Pivot, LDS provided its largest Sales Guarantee to date to support a part refurb, part new-build scheme of 52 apartments in Leeds, with a GDV of just under £14.9m. As well as removing sales risk to the benefit of both Pivot and the developer, a £750,000 cash release significantly reduced the developer’s equity contribution. “Our client was keen to bring forward this site on the fringe of Leeds city centre. In this volatile market, while sale options are available, they come with concerns,” commented Marcus Wood, CEO at River Commercial, the brokerage which worked on this deal. “The Sales Guarantee provided our client with a significant upfront capital provision which aided cashflow and reduced interest overheads. LDS should be presented by all brokers to clients as part of their intermediary offering.”
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LDS supported the construction of 27 new-build apartments close to Hornchurch underground station in Essex, a project with a GDV of close to £10m. Working with United Trust Bank (UTB) as the senior lender, the LDS Sales Guarantee—completed in just over four weeks—reduced the cash input required from developer Laugan International via a deposit release of £780,000. George Logan, director at Laugan International, stated: “Throughout my interactions with the teams at LDS and UTB, Mark [Roberts, relationship director at LDS] and Orla [Costello, senior director for property development at UTB] ensured I experienced a level of dedication and professionalism that truly sets them apart. “I was consistently impressed by their problem-solving skills. They took ownership of any issues that arose and worked diligently to find effective solutions, ensuring that I was fully satisfied with the outcome.” Ashley Marks, head of real estate at Excellion Capital— the brokerage which worked on this deal—said: “This is an excellent example of expanding a developer’s capacity while completing swiftly on the deal at hand—made possible through great partnership between UTB and LDS’s unique offering.”
Sept/Oct 2023
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Explained
IS BUILDING AFFORDABLE SUSTAINABLE HOUSING
PROFITABLE Building green homes is usually viewed as an expensive endeavour by developers—however, with the right support and mindset, affordable sustainable homes can be a reality
Words by
BETH URE
Half-timbered medieval cottages in Lavenham, Suffolk
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Sept/Oct 2023
Explained
“WE NEED TO SHIFT THE CONVERSATION TO LONGTERM BENEFITS RATHER THAN QUICK HOUSING SOLUTIONS” Bridging & Commercial
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Explained
ustainable, eco-friendly homes have been in the spotlight for a while now, as the country continues its efforts to reach net zero by 2050. Often, these types of properties can get buyers to fork out more than the average home; according to Savills, there is a 12% premium for larger green homes compared to traditionally built dwellings of the same size. However, buyers’ desire to acquire a green home may be quelled by inflation tightening their purse strings. With sustainability and affordability seemingly at odds, can developers achieve the best of both worlds? Chris Gardner, joint CEO at Atelier, notes that while the demand for affordable sustainable housing is growing, only high-end ones are being delivered—and homes that meet the stringent sustainability standards based on voluntary guidelines, such as the Future Homes Standard or the RIBA 2030 challenge, rather than standard EPC requirements, are beyond the budgets of most people. “Those homes meeting voluntary standards are targeted at more affluent but sustainability-minded clients, and the average property costs around £1.5m,” he claims. Nitesh Magdani, founder of Net Positive THE COST PROBLEM Solutions, highlights that many of the green homes marketed to wealthy clients follow the same “cookie-cutter” approach to sustainable Firms that set out to deliver affordable design. “There are many high-end developsustainable homes face a range of challenges, ments with underfloor heating and air-source including higher build costs; Savills estimates heat pumps as standard, supporting the an additional 4–8% is needed to meet the energy transition away from gas, and some Future Homes Standard or an additional benefit from the odd solar panel and piece 10–14% to build to net zero in operation of timber cladding,” he imparts. “This to (assuming the national grid is decarbonised). me isn’t very inspiring and certainly not It also calls for a more skilled workforce, much better than what I would expect from as all parties need to be up to date with the a well-built affordable housing scheme.” latest technologies. Plus, affordable homes present a specific dilemma, as developers may not be able to produce properties that reach the same standards as high-end green ones. The high inflation rate has intensified the differential between traditional and sustainable materials. Nitesh feels this has pushed most developers to save money by choosing conventional equivalents over green principles. “The additional costs of many sustainable materials can usually be factored in by accounting for benefits using a triple bottom line assessment, looking at areas such as the environmental payback over a period of time, social value, less material usage or more infrequent replacement in future, and reduced energy bills,” he points out. “Unfortunately, with the recent increase in prices of materials and labour, we are seeing a greater hesitance from clients to invest in the longer-term benefits over shorter-term capital costs.” However, Jess Hrivnak, practice technical adviser (sustainability) at the Royal Institute of British Architects (RIBA), believes that green homes do not have to cost developers more, depending on which materials they use. “Sustainable homes can be built with judicious choice of materials, aiming for a reduced palette, where policy permits. Developers can spend more on some elements by avoiding or minimising materials elsewhere,” she claims. 33
CHANGE IS POSSIBLE—AND NEEDED Despite these factors, Chris thinks that sustainable homes can indeed be built economically—but this is more suited for the public sector, as he thinks it currently offers better opportunities to deliver sustainable and affordable social housing. This is because local authorities have better access to land and, when building for social housing, do not face the same constraints as private property developers, who must pay higher land and financing costs and consider mortgageability, warranties, and householder insurance, along with buyer preferences and market appeal. A change in the mindset of developers, housing associations, and registered providers around sustainability is also crucial, according to Nitesh. He feels that most of the industry views it as “a token gesture”, with developers reluctantly moving with the market and the demands of the legislative process. “The market needs to be jolted for sustainability not to be the exception,” he urges. Similarly, Jess argues that sustainable homes should not be seen as something separate from standard ones, and that the industry should look to embed green practices into business as usual, starting in the design phase. She contends that sustainable homes should provide, by their nature, a better-quality product. The cost uplift comes from spending on good design and incorporating physical analysis in the programme, she adds, suggesting this needs to be introduced earlier in the process than is currently the case. She also references the new building control regime published in August, in response to the Grenfell Tower tragedy, to establish clearer accountability for the safety of higher-risk buildings. The rules will support compliant design work and require regular inspections and consistent workmanship by teams overseen on site, but Jess argues that they need to go further on sustainability as well as quality. “In terms of building energy-efficient, well-insulated homes, attention to detail on site is very important,” she says. “Inspections and consistency of workmanship will deliver a better product.”
Sept/Oct 2023
Explained
PROFITS FROM PRINCIPLES
THE MISSING PIECES
While making new builds affordable and sustainable presents a variety of challenges, upgrading or refurbishing existing properties is a potentially profitable market. Chris, Jess and Nitesh all agree that retrofitting will be crucial to increasing the availability of affordable sustainable homes. “The lowest carbon building is the one that is already standing,” Chris asserts. “It’s the lowest cost, lowest carbon, and most sustainable option for developers.” Jess views this route as “urgent” and says a shift to retrofitting is the most sustainable way we can improve the environmental impact of homes across the UK. “Retrofit solutions and repurposing existing buildings present a unique opportunity to address health outcomes, the housing shortage, carbon emissions, and fuel poverty at the same time.” Jess also calls on the government to implement embodied carbon considerations into building regulations, and to introduce a national retrofit strategy—a long-term plan and investment programme for upgrading the energy efficiency of housing stock, while addressing incentives and skills gaps. Nitesh would like to see more incentives and grants to steer developers towards retrofitting the UK’s existing housing: “Around 80% of existing building stock will still be around in 2050,” he notes. He also shares that large projects with a mixture of private and affordable housing are ideal for developers looking to deliver affordable green homes without their profit margin decreasing. “These developments not only have the economies of scale required to apply similar standards to both ends of the market, but also benefit from enhanced social cohesion and sometimes from districtwide energy systems,” he explains. In line with this, he notes the more enlightened developers or registered providers will be able to help their customers to reduce energy poverty through in-house support services.
Looking ahead, experts claim new government regulations and policies will be required to draw in and incentivise developers to invest in the provision of affordable sustainable homes. Nitesh says that developers are keeping apace with prospective guidelines, such as the Future Homes Standard, as well as tightening legislative targets—such as Part L, which sets the standards for the energy performance of both new and existing buildings—“but until these come into force and grants and loans are available to incentivise sustainable building materials and technologies to be put into place, it sometimes feels like the housing market will be left behind”. However, he is still optimistic. “Having worked alongside some of our clients in this space, there is potential to lock in energy security for their customers, while providing homes that meet future environmental targets ahead of time, thereby ensuring their portfolio is ahead of the curve,” he adds. Chris specifies the availability and economics of land as a major obstacle. “The big costs of any development, if you’re looking at affordability, are the land and going through planning,” he conveys. “Developers don’t set out to deliver unaffordable homes, but the price of the property is set by how much they must pay for the land, as well as materials, labour, and everything required for the build, with the land being a significant part of that cost. If that can change, there is no reason affordable sustainable homes couldn’t be built.” Jess focuses on the attitude of developers: “We need to shift the conversation to longterm benefits rather than quick housing solutions,” she asserts. “There are huge benefits to selling quality homes that are efficient and highly cost effective to run and maintain.” She also highlights an imbalance, from a local perspective, in terms of how sustainable homes can be delivered. “We have local authorities that are leading the way, promoting sustainable strategies with policies such local resource use, but their own departments have not been set up and well resourced to support delivery, resulting in delays, uncertainty, and conflicting objectives.” Nevertheless, taking into account all market forces and relevant factors, Jess remains hopeful: “You don’t have to go high-end to have an efficient home.”
The market needs to be jolted for sustainability not to be the exception”
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Developers don’t set out to deliver unaffordable homes, but the price of the property is set by how much they must pay for the land, as well as materials, labour, and everything required for the build, with the land being a significant part of that cost. If that can change, there is no reason affordable sustainable homes couldn’t be built”
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Christian Faes
Interview
America’s answer to Montello 2.0 From small-town beginnings to fintech frontier: the extraordinary journey of Christian Faes Words by
BETH FISHER
In a bold move in July, LendInvest co-founder Christian Faes launched US bridging lender F2 Finance to take a bite out of the lucrative American ‘fix and flip’ short-term property market, estimated to be worth as much as $68bn a year, according to the finance provider
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Interview
“I stumbled across a couple of clients that were bridging lenders and I started acting for them, doing the legal documentation and some of the enforcement work. I found it quite a fascinating sector, but I could see that I wanted to be on the other side of the table— doing the deals rather than being the lawyer” Bridging & Commercial
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t marks his fintech investment firm Faes & Co’s first venture—but Christian is not new to the start-up game. While he currently resides in LA—a place he has frequently holidayed over the past seven years—Christian grew up near the beach in a small country town on the Gold Coast in Queensland, Australia. Raised by entrepreneurial parents, Christian studied to become a real estate lawyer and, not long after becoming qualified and learning the trade at Australian-based law firm Allens, he packed up his bags and moved to London at the ripe age of 21 to pursue his dreams as a corporate finance lawyer at Clifford Chance. “I went from doing real estate stuff in Australia to big corporate work in London; I was just a small cog in a big
wheel,” he shares. He then started working in-house at Deutsche Bank as legal counsel, but he was determined to run his own thing. “I always wanted to start my own business,” divulges Christian—who admits that his biggest fear is the thought of ‘getting a job’. “So, I moved back to Australia in my mid-20s and started a small property finance law firm.” It was at Faes & Co—a name that has recently gone full circle—that Christian had his first introduction to bridging finance. “I stumbled across a couple of clients that were bridging lenders and I started acting for them, doing the legal documentation and some of the enforcement work. I found it quite a fascinating sector, but I could see that I wanted to be on the other side of the table—doing the deals rather than being the lawyer.”
“I was not as entrepreneurial as I wanted to be; it was quite constraining being a lawyer. You’re boxed in doing your hourly stuff, whereas lending is a far more entrepreneurial enterprise” While he enjoyed his profession, he admits it was a “tough career” where you often put yourself last. “I was not as entrepreneurial as I wanted to be; it was quite constraining being a lawyer. You're boxed in doing your hourly stuff, whereas lending is a far more entrepreneurial enterprise where you're dealing with entrepreneurial clients every day. Also, if you're not passionate about being a lawyer, you're probably not going to be a very good lawyer.” This was when he decided to launch small bridging lender Drexel in Australia, with the help of some friends.
Keen to get back to the UK after this experience, he ventured back to London in 2008—at the young age of 31—to launch Montello, which would eventually become LendInvest. “In some respects, it was the worst timing ever, because I landed back in the UK and didn't really have any investors—or a lot of money—and didn't know many people,” says Christian. “I had a small, serviced office and was just trying to figure it out.” Back then, the UK bridging market was in its infancy and wasn’t the largely institutionalised asset class it is today. “It was a very slow start for us in terms of getting the
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business going,” Christian admits. Montello’s co-founder and chief investment officer, Ian Thomas, had a property background, and therefore was a “great complement” to Christian’s legal brain. “It was then that it started to work. Over time, we found a couple of investors and some credible borrowers to lend to.” Initially, the business matched high-networth investors to borrowers and then, in 2010, it decided to launch a fund to attract investors. When the regulator banned commissions for retail investment advice at the end of 2012 following the Financial Services Authority’s Retail Distribution Review (RDR), Montello went offshore to sell the fund through financial planners in places such as Hong Kong, Singapore, Dubai, and other expat jurisdictions. While Montello found it challenging to raise capital in the early days—often faced with rejections from endless meetings with institutions that simply didn’t understand bridging—after gaining momentum, the company managed to secure its first institutional funding lines—one from an Eastern European bank—followed by some warehouse lines from OneSavings Bank and Macquarie Bank. In August 2014, the leadership team behind Montello noticed the UK government’s support of fintech and decided to create an online marketplace to invest in loans the business was originating—the genesis of LendInvest. After building a technology team and raising venture capital for it, they focused their efforts on the tech side of the business. “That’s been a key differentiator for [us]. Today, I think we have the best mortgage tech in the UK, and it took many years to build that.” In the summer of 2021—more than one year after Christian handed over the day-to-day management of the business to CEO Rod Lockhart—LendInvest debuted on the London Stock Exchange, setting a market value of the company at approximately £255.6m, with £2.8bn of funds under management. “We always had ambitions for it to be a public business,” Christian—who remains fully committed to the business in the role of executive chairman—tells me, “but it's a double-edged sword. You've got to be very transparent and there's a lot of institutional rigour, so it's very hard to remain
Bridging & Commercial
an entrepreneurial, fast-moving business when you are within the constraints of that environment. But I think it’s part of growing up as a business.” With more time on his hands to focus on what he loves doing—being an entrepreneur—Christian co-founded and helped set up bridging lender Onate in Ireland, before deciding to launch another one across the pond. The Santa Monica-based company F2 Finance has been lending since April, working with a select group of introducers. Currently focused on markets in California, Texas and Florida, the business has a goal of becoming a nationwide bridging lender in an estimated market size of over 8,000 other providers. While a handful of institutions sit behind and buy the vast majority of bridging loans in the US, many lenders have their criteria “ dictated ” to them, notes Christian. Consequently, he spotted a gap to come into the market without these constraints. “We want to have alternative capital sources so we can create products that don't sit within the box of the normal institutional players in the market. By doing that, we'll be able to create products that are different.” When he first landed in the States, Christian highlights his experience of attending one of the conferences by the American Association of Private Lenders, which had circa 100 bridging lenders selling their wares. “They've all got their booths out and you go around and collect all the product sheets from them—and it's literally the same product sheet! It was just mind bending. I don't know how these guys differentiate. I think that presents an opportunity if you can come in with slightly different capital.” To put it simply, F2 Finance will be America’s answer to Montello 2.0. With a fund set up in the Cayman Islands as its primary source of capital, offshore investors will be able to inject money into loans originated by the US bridging lender. “I don't want to say this too boldly because I might [end up with] egg on my face, but no one has been able to tell me of another fund that is set up for offshore investors for bridging finance [in the US] in this way,” claims Christian. “That will be our competitive edge to have a wider credit box, and it will allow us to be more entrepreneurial as a business to determine the products we want to build.”
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“Hiring a team now and talking to people about what they’ve done number-wise at previous businesses, and I think, ‘Wow, what I want to do in a year, people are doing in a week.’ So, I think there’s a huge opportunity here” 43
Sept/Oct 2023
Interview
“I don’t want to say this too boldly because I might [end up with] egg on my face, but no one has been able to tell me of another fund that is set up for offshore investors for bridging finance [in the US] in this way”
This funding structure should also benefit them in a sector where large institutions dominate the space and rely on securitisations. With a hardened securitisation market, funding for bridging lenders is currently constrained. “Less bridging lenders have been able to sell their loans on. They've got big infrastructures and high head counts, and then they've got no funding. That’s where it comes unstuck.” Looking forward, entering other states in the US poses a much bigger challenge than expanding in the UK where it has one legal system, as each state comes with a unique set of regulations. “You've got different regulatory environments and requirements in each,” confirms Christian. California, for example, requires a licence, which can be very time consuming but, on a positive note, creates a barrier to entry. “We're learning that Georgia and South Carolina are interesting markets for us, and probably less competitive. There are also some quirky foreclosure laws in these two states that make them interesting for bridging finance. Texas is obviously a good market as it's very pro-business with less regulation.” The business is also doing its first deal in Tennessee and is already active in Virginia. To help map out its expansion, F2 Finance has invested in a lawyer to scale up. “It's a bit of a maze to work through.” Having now been involved in the bridging markets in Australia, London, Ireland,
Bridging & Commercial
and now the US, Christian believes the product and borrower are quite similar in the land of opportunity. “It's just the size of the market that shocked me,” comments Christian. “Hiring a team now and talking to people about what they've done numberwise at previous businesses, and I think, ‘Wow, what I want to do in a year, people are doing in a week.’ So, I think there's a huge opportunity here.” Christian was also surprised by the sophistication of some of the systems available in the US. “Because of the size of the market, some people have built really interesting technologies that you can use,” he states. “While it's expensive and time consuming to set up, I can't imagine being able to do that in any other market I've seen.” While he doesn’t necessarily think the US embraces tech more than the UK, he thinks its easier to attract capital to build such systems. Now, Christian is spending six days a week working on his new venture—and the other day surfing, spending time with his young family, or taking up tennis and golf lessons so he doesn’t “embarrass himself ” during corporate events—and it pushes me to ask what keeps him motivated and sharp as an entrepreneur. “I'm addicted to it,” he replies. “It's a sad addiction, but it's very rewarding when it comes together. I've seen that with the LendInvest journey, and I’m excited for it again.”
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Cover Story
IT’S TIME TO PUT ESG BACK ON THE AGENDA Words by
ANDREEA DULGHERU
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Considering it was going full steam ahead years ago, ESG seems to have taken a back seat in the specialist finance sector, mainly due to a severe lack of information, guidance and regulation, as well as an increased focus on remaining profitable in a tumultuous market. Firms that choose to neglect it, however, might soon be taught a very harsh lesson
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Cover Story
F
or years, ESG has been the buzzword that somehow makes its way into any
conversation. Since the official birth of the ESG movement— which some believe was marked by the publication of the UN’s
‘Who Cares Wins’ report in 2004— firms throughout the world have taken steps to incorporate it into their business plans. In the specialist finance sector, we have seen many players implement various initiatives over the past few years. Some have focused on the environmental side by offering green finance products based on a property’s EPC rating or, like specialist lender Atelier has done, assess loans on the reduction of embodied and operational carbon, among other measurements. Others have chosen to build their social strategies by boosting their charity work, introducing enhanced policies for miscarriage and paternity leave, or improving resources to support their employees’ mental health and wellbeing. In October 2021, the Mortgage Industry Mental Health Charter was formed, which currently has over 90 signatories, highlighting the importance placed on employee mental health. While the sector has been developing strategies with ESG in mind, some experts claim that overall, progress has been slow. “We should be at a point where people have got their targets sorted and they’re doing their measurements and calculations . . . but I don’t think that this industry is there yet,” states Smithi Sharma, ESG manager at Atelier.
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GRABBING THE LOW-HANGING FRUIT According to Smithi, while people do understand what ESG stands for and the basic principles behind it, many don’t fully grasp the complexity of the matter. “I think what’s happening now is that people hear ESG and they think that’s just sustainability or social wellbeing. They don’t actually know what it entails and how expansive it is, and the fact that it needs to be ingrained in your whole business strategy.” This failure to appreciate the scope of ESG is a likely reason why some firms have chosen to focus on areas that are easier to understand, implement, and quantify in terms of their impact on society, such as charity work. Kate Langton, chief people officer at Phoebus Software, says: “Social activities and outcomes, such as fundraising goals or the number of employees involved in charity, are a lot more tangible and visible from the outside, so they’re maybe seen as quick wins that can be achieved, whereas for other initiatives around diversity and governance, it might be harder to show short-term results.” She thinks these areas are probably pursued to demonstrate quick results, even if this is not a conscious decision. Sabinder Robinson-Sandhu, director of operations at Avamore Capital, agrees, stating that for businesses that are just starting their ESG journey, it is easier to focus on common corporate social responsibility (CSR) practices and other obvious ESG initiatives. However, she warns that once these avenues are explored and firms have introduced these simpler tasks, they risk losing steam, as they may not necessarily know how to proceed from there. “Last year, we partnered with Change Please as part of our commitment to increase CSR. We’ve engaged in environmental initiatives, including raising plastic-free awareness, worked on team focus groups to find out what’s important on a personal level, and engaged with our borrowers to understand what might motivate them into greener action. We’ve picked off all the ‘low-hanging fruit’ but now, to be brutally honest, we are left scratching our heads,” discloses Sabinder. “We’ve had some good outcomes, and continuing a dialogue helps us maintain our corporate consciousness, but the major question is: where do we go next?”
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A LACK OF GUIDANCE A big factor hindering the progress of ESG in our sector is the lack of direction on how to implement a meaningful strategy. “It’s very difficult to keep moving forward if there’s no pathway for you. And that’s where the complexity comes in, because there’s no specific agenda, no clear guidance, and therefore you have nothing to benchmark success against,” Sabinder highlights. Tanya Elmaz, director of intermediary sales for commercial finance at Together, believes this is one of the main reasons why some businesses have not made enough, or any, headway. It seems that some are waiting for information or examples of successful ESG strategies shown by other companies to steer them on the best route. “It’s clear that some firms have the right approach, and some are a little bit stuck,” she says. Kate concurs, adding that there is a need for standard guidelines to help specialist finance firms navigate the intricacies of executing ESG. “There’s no formula or requirements in place for companies to know that they’re achieving what they need to in order to meet ESG targets and goals. Also, things are changing rapidly, so it’s quite hard to keep up.” While Tanya agrees with these views, she feels there are many basic ESG steps firms can take that don’t need official direction. “Some of these practices are common-sense, straightforward things that, as an industry, we should be taking on board anyway. Yes, guidelines are necessary, but that doesn’t get you off the hook,” she contends. In Tanya’s opinion, any specific ESG framework that sets out initiatives and targets should be used by our sector as guidance, not gospel. She encourages companies to look at these resources and adapt them to their own needs and structure, rather than adopting them as a set blueprint. “If you look at ESG as another initiative you have to implement, then you are not heart and mind in it, and this is not the right place for it to come from.” She emphasises that ESG is not about following advice that the government or someone else set out—it’s about understanding what ESG means to you, and making a framework that you can actually fulfil.
Cover Story
MISCONCEPTIONS AROUND COSTS Whether hiring a company to offset carbon emissions on one’s behalf or organising charity or employee wellness events, ESG can come at a cost, one that companies might not be able—or willing—to bear, particularly in the current volatile market. As macroeconomic conditions put a strain on our sector, potentially impacting the bottom line, some companies may choose to avoid ESG, or scrap their existing strategy in favour of saving money. “ESG initiatives might be seen as an area that can be disposed of or paused, so that’s a danger,” warns Kate. “If there’s a lack of knowledge and understanding of what ESG means for your organisation, and there’s a misconception that it is costly, that might be a barrier to actually getting started with things.” Experts affirm that ESG doesn’t have to be expensive to be effective—in fact, Sabinder tells me that Avamore Capital hasn’t spent anything other than employees’ time in implementing its strategy. “We may come to a point where we do want to put some monetary resources behind it,” she elaborates. “One thing we’re looking at is engaging in a scheme under which we’d pay to offset the emissions for every development we fund—that’s the only way we can do it, as we cannot force our developers to do it.” Jeremy Stevens, head of marketing at Castle Trust Bank, says that the biggest expense allocated to ESG is its sponsorship of Destination Basingstoke, a not-for-profit organisation that supports businesses, community groups and charities in Basingstoke and Deane. However, he clarifies that the costs incurred are relatively minimal. “We’ve got a budget to support some of the activities—it’s not huge, as we can’t do this at the expense of running the business. That being said, our colleagues are really pleased that we do this, so I think this exceeds the cost of doing it in the first place.” He goes on to stress that if companies aren’t adopting ESG internally because they think it’s going to cost a lot, there’s a very good chance they haven’t considered the goodwill of their coworkers and the fact that a lot of them will want to put their own time and energy into making these things a success. Tanya agrees that introducing an ESG strategy doesn’t have to break the bank, and believes that the misconceptions around the expense are a poor excuse for firms to not
do their part. “There are so many things you can do that don’t involve any costs, and others—like improving the energy efficiency in your office—that are actually saving money.” In fact, carefully thought out ESG could save firms more money than they might think. Smithi highlights that planning and
“We should be at a point where people have got their targets sorted and they’re doing their measurements and calculations . . . but
I don’t think that this industry is there yet” putting an ESG strategy in place ahead of official regulation—which she thinks is inevitable—will spare companies the headache and hefty costs of doing so at the last minute. “It is very tempting for businesses to look at the cost of ESG and put it off for another day, as times are tough and margins are being squeezed. And yes, you might be saving money upfront, but you then damage the long-term value and get behind the curve on green legislation. However, if you’re ready, you won’t be fighting fires when regulation does come in.” Atelier also carries out a biannual horizon scan to make sure it is prepared not just for ESG, but legal construction and financial crime laws. “If we didn’t do that and later got hit by something, that would cost us,” she asserts.
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HOW DO YOU MEASURE ESG? Aside from the struggle to find guidance that’s relevant to our sector, there is one challenge that makes implementing a meaningful ESG strategy particularly tough: the lack of an industry-wide standard framework for gauging its success. “It’s very difficult to quantify what you’re doing from an ESG perspective, because there isn’t really a single unit of measurement to say if your approach is successful or not,” explains Jeremy. “There are indicators that show what difference you may have made—for example, you can look at the number of trees you’ve planted—but to measure ESG as a whole is very hard because of the broad range of things you can do.” Looking at sustainability in the building sector alone, there are multiple standards leveraged in the UK, including BREEAM, NABERS, AirRated and Passivhaus, alongside the traditional EPC rating scheme, which some experts consider outdated. While the BBP, BRE, Carbon Trust, CIBSE, IStructE, LETI, RIBA, RICS and UKGBC have joined forces to create a UK Net Zero Carbon Buildings Standard—which aims to be the single agreed methodology for defining and measuring sustainability for buildings—this is still under development. Consequently, there is currently no sole UK-wide accepted way of assessing how eco-friendly a property may be. On a broader scale, there are several industry standards or frameworks that businesses can use as reference to assess ESG compliance, including the Sustainability Accounting Standards Board (SASB), Global Reporting Initiative (GRI), Task Force on Climate-Related Financial Disclosures (TCFD), the Sustainable Finance Disclosure Regulation (SFDR) and United Nations’ Sustainable Development Goals. Yet again,
Smithi points out, there is no single accepted framework in the UK and, unless mandatory, companies are under no obligation to report against these. This is currently just reserved for larger companies. However, from January 2024, the International Sustainability Standards Board (ISSB) standard—which aims to develop a global baseline of sustainability disclosure focused on the needs of investors and the financial markets—will apply to large UK companies, but SMEs could benefit from following its guidelines as well. With multiple ways to measure sustainability, for those who don’t have the expertise to understand the differences between them, and which one is the most comprehensive, this can prove quite the challenge. “There’s so much context behind the E that doing anything independently without the guidance of a professional organisation feels like you’re shooting in the dark,” states Sabinder. “Even in my conversations with different consultancy firms about how to measure a carbon footprint, every one of them said they came up with their own calculations. No two experts appear to have the same measuring criteria, and that’s what makes it really difficult.” And it’s even trickier for SMEs; Smithi explains that, while bigger companies can use the aforementioned standards to measure and report on their ESG strategy results, these are harder to tailor to smaller firms. “Where you’ve got these very detailed, 700-point metric systems that don’t apply to a small business, I can see why that would be daunting.” Despite the lack of consistency, Tanya, Smithi and Jeremy insist firms should report on their ESG efforts regardless of which framework they use. “If you want to make ESG changes but you’re not measuring the impact, then it’s just a tick-box exercise,” Tanya states.
“We’ve picked off all the ‘low-hanging fruit’ but now, to be brutally honest, we are left scratching our heads. We’ve had some good outcomes and continuing a dialogue helps us maintain our corporate consciousness, but the major question is:
where do we go next?” Bridging & Commercial
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LACK OF REGULATION AND ACCOUNTABILITY There’s no denying that implementing an ESG initiative and measuring its impact is a step in the right direction. However, not all firms will be inclined to be so altruistic, particularly as there is nobody responsible for keeping them accountable or forcing them to create a strategy. Currently, only regulated companies— in particular, those with more than 500 employees and £500m turnover—are legally required to report on their ESG initiatives, under several regulations, including The Companies (Strategic Report) (Climaterelated Financial Disclosure) Regulations 2022; and the TCFD and FCA’s rules on climate-related disclosures, which came into force on 1st January 2021. Moreover, these are limited to environmental disclosures specifically, while other aspects of ESG are fairly neglected. However, there does seem to be small progress; at the end of September, the FCA and PRA launched a consultation on proposed measures to boost diversity and inclusion in financial services. “Larger and international companies have very different responsibilities, whereas for companies like ours, it’s all voluntary. For the unregulated side of our sector, no, there’s nothing that’s tying us down,” Smithi imparts. “The sub-sector has no mandatory codes, and with ESG being perceived as new, people are having a go at certain things with no-one marking their homework.” There is a fear that this dearth of regulation could leave room not only for firms to bypass ESG responsibilities, but also for greenwashing. According to Sabinder, we’re still at the stage where ESG is more for show, rather than for tangible results and change.
“There’s so much context behind the E that doing anything independently without the guidance of a professional organisation feels like you’re
shooting in the dark” “Even if someone comes out and says they’ll offset the emissions for every property they build, there is nobody to check this because everything is self-driven. So, if you launch a strategy that doesn’t work, it doesn’t really matter because there is no recourse for it.” If regulation was brought in, it could push companies to take ESG more seriously and make a conscious effort towards it—something Smithi thinks is imminent. “That’s exactly why you have to be creating your tangible ESG strategies, to make sure you’re not caught out by the regulation that is coming,” she states. Tanya suggests there should be an official regulatory body to oversee this and keep firms accountable, although the exact structure of this is hard to pinpoint. Sabinder and Jeremy see this as a rather extreme measure, and are more in favour of solid guidelines to steer firms on the right course. “I’m not sure how a regulatory body could work. If we’re talking specifically about green products, there are so many variations on what you can do—it’s too broad,” shares Jeremy.
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HOLDING PEOPLE ACCOUNTABLE WITHOUT REGULATION With the Future Homes Standard scheduled to come into force in 2025, Rishi Sunak scrapping the proposed new minimum EPC requirements for landlords, the Energy Efficiency Taskforce being disbanded six months after it was established, and plans for the UK Green Taxonomy up in the air—among other rules stuck in limbo or at a proposal stage—it’s fair to say that the UK has a long way to go before reaching the regulatory panacea desired. Yet the need for progress around ESG is right now—so how can firms be held accountable without any substantial regulation in place? This is the conundrum that has many experts scratching their heads. While there might not be official repercussions for greenwashing, ditching an ESG strategy, or not having one at all, that’s not to say organisations that shun ESG will not suffer any consequences. The first area where specialist finance firms might be punished for a lack of effort is their workforce. Kate believes companies that don’t have a solid ESG strategy or decide to relinquish it might seem less appealing to potential employees. “During the recruitment process, younger generations are especially keen to understand the organisation’s approach to ESG and sustainability, and the ethics and morals behind it and from the leadership team. So, if a firm scraps its ESG strategy, it will be off-putting to both existing and potential staff,” she elaborates. Although Sabinder does not expect a mass exodus should a firm give up on its ESG strategy, she does feel this would send a negative message to its employees and make the business appear weaker than those that prioritise it. “There’s a lot of competition for good-quality staff and experienced people, and elements of ESG are more important to individuals than ever—in many instances, that could be the difference between somebody choosing to work for you or going somewhere else,” says Jeremy. Further to this, Tanya claims a lack of ESG initiatives could impact firms on a business level, as customers are “much more astute” and more likely now—and moving forward—to make decisions about who they work with based on sustainability, energy, environmental and ethical policies. “If you don’t have some sort of ESG strategy, you may find that customers don’t want to buy from you,” she cautions, “and you may find that your profits don’t match where you want them to be because of this.” Bridging & Commercial
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The absence of a solid ESG policy might also lead funders to think twice about investing in a specialist finance business. While no UK-wide research particularly targeted to our sector has been carried out, Tanya and Smithi report, from personal experience, that funders are increasingly paying attention to a lender’s ESG credentials, and are more inclined to provide finance to firms that have a robust strategy in place. “Five years ago, an ESG strategy was a nice thing to have, whereas now it forms part of a funder’s assessment of a firm, which is a huge change,” Tanya says. Avamore Capital has noticed a rising interest in ESG from the whole funding market, too—in fact, it is asked about this topic more often than not. “Now I think it’s more unusual for ESG to not be mentioned,” Sabinder shares. “Our head of investor relations has actually asked me to clarify what we’re doing because so many investors are interested in ESG.” She believes there will come a point when not having a sustainability strategy in place will impact a company’s ability to grow. Smithi notes that this is already underway; as bigger financial institutions—many of which fund specialist lenders—are governed by different regulation (such as the UN’s Principles of Responsible Banking and the SFDR), they are already looking at how ESG-friendly their clients are. “It’s a natural part of their portfolio management to seek out this information and assess the credentials of the businesses they fund,” Smithi states. She also predicts that funding will eventually stop for companies that don’t have the right credentials: “We’re already seeing this happen, and I think it will continue.” Aside from the potential damaging effects of neglecting ESG, Tanya claims the onus to ensure firms act responsibly also rests on the shoulders of the sector and media. “We, as an industry, have to keep each other accountable, and publications need to raise awareness of these matters by talking about it and highlighting issues.”
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“It is very tempting for businesses to look at the cost of ESG and put it off for another day, as times are tough and margins are being squeezed. And yes, you might be saving money upfront, but you then damage the long-term value and get behind the curve on
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“ESG is the future;
there will come a time when we aren’t in a position to make decisions on where to take things because this will be set out for us”
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SLOW BUT STEADY WINS THE RACE Overall, the journey towards ESG is filled with speed bumps, many of which are impeding the specialist finance industry’s progress on this path. In the near future, Sabinder expects things to continue at the pace they have to date, as companies will be more focused on recouping their losses on the back of the tumultuous past 12-18 months. “I can’t see us making big strides next year unless something dramatic happens [if] a new requirement comes in,” she says. While there is an undeniable need for companies to move forward in this area—for the sake of their own sustainability, as well as for the country and the world—Tanya emphasises that rushing to implement ESG initiatives is not the answer. “It’s not about making panicked changes to tick boxes— that doesn’t work. First you have to look at where your firm is at and make an effort to understand what ESG means to you and what you think you can change.” Ultimately, it’s about finding a balance between speed and quality. And while it may take this industry longer than we’d like to get to the goal, we are heading in the right direction. “ESG is the future; there will come a time when we aren’t in a position to make decisions on where to take things because this will be set out for us,” notes Sabinder. She views what we have now as a completely unique opportunity to drive a new agenda. “There probably isn’t one answer to nail it all, but persistence will prevail—and we feel confident that if we keep at it, we’ll get at least close to what good looks like.”
“There’s a lot of competition for good-quality staff and experienced people, and
elements of ESG are more important to individuals
than ever—in many instances, that could be the difference between somebody choosing to work for you or going somewhere else”
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EIGHT REASONS WHY ESG IS AN OPPORTUNITY, NOT JUST A COST By Smithi Sharma, ESG manager at Atelier
With businesses currently facing multiple challenges at once— from the rising cost of finance, wages, and materials, to falling customer demand—many could be forgiven for focusing more on the immediate difficulties. But short-termism can be dangerous. Firefighting today’s problems may require costs to be cut, but cutting the wrong things risks creating more problems in the future. Investment in an ESG strategy sits squarely in this category. Too often, lenders and developers can be tempted to see ESG, and the framework used to deliver it, as a soft target. But this is to fundamentally misunderstand what ESG should be about. It’s not a halo to be polished when times are good. It’s the key to achieving sustainability in its true sense—not a mere green credential, but long-term business success. The G in ESG stands for governance. It’s often the most overlooked of the three elements, yet at times like these it may be the most important. Just as reducing a business’s energy consumption delivers both an instant boost to its bottom line and greater long-term profitability, setting up robust and transparent governance is a proven way to manage business risks now and in the future.
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Here are eight reasons why you should see ESG as an opportunity, not just a cost: 1. LONG-TERM RESILIENCE
2. RISK MANAGEMENT
3. INVESTOR CONFIDENCE
4. COST SAVINGS AND EFFICIENCY
Well-executed, meaningful ESG articulates a business’s commitment to both sustainability and responsible conduct. Companies that consider not only short-term profits, but also their impact on the environment and society, are best placed to achieve long-term viability.
Economic instability can amplify several risks, including regulatory, reputational, and operational threats. An ESG strategy helps identify and mitigate these risks, providing certainty and protecting businesses from potential shocks and losses.
Investors tend to be more risk averse during tough times, seek ing out investments with strong fundamentals. Companies with robust ESG practices are often perceived as more stable and sustainable, attracting greater investor confidence and potentially more investment.
Investing in energy efficiency and waste reduction may incur a capital cost now, but will deliver savings and improved value in the medium and long run. Similarly, companies with strong social initiatives that prioritise employee wellbeing and diversity often experience higher productivity and lower turnover rates.
5. REGULATORY COMPLIANCE
6. REPUTATION AND CUSTOMER LOYALTY
7. TALENT ATTRACTION AND RETENTION
8. ACCESS TO CAPITAL
Consumers are increasingly concerned about the social and environmental impact of the services they buy and the companies they support. Businesses that demonstrate commitment to ESG principles are likely to build stronger customer loyalty than those that don’t.
The ongoing tightness of the labour market means retaining top talent is crucial if a company is to remain compet it ive. Busi nesses with strong ESG practices are more likely to attract and keep skilled employees who support the company’s values and purpose.
Governments and regulatory bodies are continuously pushing for more stringent ESG standards. Companies that prioritise ESG will place themselves ahead of the curve, able to adapt to—and capitalise on—any new regulations faster than their rivals.
Financial institutions and lenders frequently include ESG considerations in their lending and investment decisions, so ESG-focused businesses tend to find it easier to access capital during periods of economic instability.
Short-term cost-cutting at the expense of long-term value is never good business. And there can be no falser economy than ditching ESG now if it undermines the sustainability—or, in fact, survival—of the business in the future. Sustainability is not a diversion from success; it’s a prerequisite for it. Businesses that see ESG for what it really is—an investment in their long-term sustainability and success rather than a burden to be borne—will continue to use it to improve their ‘triple bottom line’ of good outcomes for profit, people, and planet.
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Bridging & Commercial
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THE B&C AWARDS 2023 WINNERS: BEST BRIDGING NEWCOMER — BROKER Winner: Portway Finance Highly commended: Fluent Bridging
BEST BRIDGING BROKER Winner: FinSpace Group Highly commended: Fluent Bridging
BEST BRIDGING NEWCOMER — LENDER Winner: Castle Trust Bank Highly commended: Spring Finance
BEST SURVEYOR Winner: Anderson Wilde & Harris Highly commended: Metropolis Surveying Services
BEST COMMERCIAL BROKER Winner: Watts Commercial Finance Highly commended: Arc & Co SPECIALIST PRODUCT OF THE YEAR Winner: Albatross Capital (48-hour rescue bridge) Highly commended: Avamore Capital (part-complete development)
Bridging & Commercial
LARGE LOAN LENDE R OF THE YEAR Winner: West One Highly commended: United Trust Bank BEST DEVELOPMENT BROKER Winner: FinSpace Group Highly commended: Arc & Co
BEST DEVELOPMENT LENDER Winner: West One Loans Highly Commended: LendInvest
BEST SPECIALIST FINANCE PARTNER Winner: VAS Valuation Group Highly commended: Pure Panel Management
MEZZANINE LENDER OF THE YEAR Winner: Iron Bridge Finance Highly commended: Davon Ltd
COMMERCIAL LENDER OF THE YEAR Winner: Allica Bank Highly commended: Together
UNDERWRITER OF THE YEAR Winner: Michael Schofield, Together Highly commended: Ruby Haque, Glenhawk MARKETING PARTNER OF THE YEAR Winner: Somo
REGULATED BRIDGING LENDER OF THE YEAR Winner: MT Finance Highly commended: United Trust Bank
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SERVICE EXCELLENCE — LENDERS Winner: MT Finance Highly commended: LendInvest
B&C Awards 2023
On 21st September, Medianett Publishing welcomed 780 guests for the 16th annual B&C Awards, proudly presented in partnership with Market Financial Solutions. Our esteemed guests embarked on a journey into the heart of the greatest party on Earth—the Rio de Janeiro Carnival, where they were transported to a realm of dazzling colours and entertainment, featuring live music, samba dancing, delectable cuisine, and the exceptional camaraderie of industry leaders. In a year marked by challenges, we decided to host our own carnival as a testament to the triumphs achieved within our industry, and to celebrate the best that this sector has to offer. After a fierce competition and a rigorous judging session—thanks to our carefully selected expert judges—this year’s shining stars emerged victorious, and everyone was delighted to raise a glass in honour of their achievements. We extend our heartfelt thanks to Market Financial Solutions for their unwavering support of this year’s B&C Awards, including the generous drinks reception, bar, and the thrilling afterparty festivities with live entertainment. Our gratitude also extends to our esteemed support and category sponsors, whose contributions made this evening truly exceptional.
SERVICE EXCELLENCE — BROKERS Winner: Propp Highly commended: Master Private Finance
SPECIALIST BTL BROKER OF THE YEAR Winner: LDN Finance Highly commended: The Loans Engine
BEST SPECIALIST DISTRIBUTOR Winner: Positive Lending Highly commended: Crystal Specialist Finance
GREEN PRODUCT OF THE YEAR Winner: Glenhawk Highly commended: Octopus Real Estate (Green Alliance)
BEST SOLICITOR Winner: Seddons Highly commended: Lawrence Stephens
BEST D&I CAMPAIGN OF THE YEAR Winner: West One Loans Highly commended: Allica Bank
BEST SPECIALIST FINANCE NETWORK Winner: Synergy Commercial Finance Highly commended: Connect For Intermediaries
LENDER RELATIONSHIP MANAGER OF THE YEAR Winner: Christian Gugolz, MT Finance Highly commended: Craig Taylor, United Trust Bank
REGULATED BRIDGING BROKER OF THE YEAR Winner: Clifton Private Finance Highly commended: SPF Private Clients EDITOR'S CHOICE AWARD Winner: OSB Group, led by Jon Hall BEST SPECIALIST BANK Winner: OSB Group Highly commended: Allica Bank
BRIDGING LENDER OF THE YEAR Winner: Glenhawk Highly commended: Market Financial Solutions OUTSTANDING CONTRIBUTION Winner: Paresh Raja, CEO at Market Financial Solutions
SPECIALIST BTL LENDER OF THE YEAR Winner: Together Highly commended: Kent Reliance 67
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Aerial view of Q New Homes’ sustainable net-zero carbon scheme in Kent (Credit: Damien Wynne, Q New Homes)
One Day
Witnessing the turning point in sustainable construction Donning a pair of sturdy boots, a hardhat, and a high-vis jacket, I find myself on an abandoned dairy farm in Kent, the site of one of Atelier’s Carbonlite Challenge-funded schemes developed by Q New Homes. Little did I know that this site has the potential to redefine the meaning of sustainable, net-zero carbon construction for residential development Words by Andreea Dulgheru
One Day
Aerial CGI of Q New Homes’ finished scheme (Credit: HAZE viz)
On a sunny Monday morning, after a tumultuous journey filled with tube delays and train cancellations, I finally arrive in Cowden, Kent, surrounded by rubble, construction materials, excavators, and a host of half-completed structures. However, this is no ordinary construction site—this place will mark a new era for sustainable housebuilding.
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“When you compare that to a small, standard dwelling, it’s quite exceptional that you can have such excellent, luxurious and generous homes that are virtually free to run”
“This is a big milestone moment for us. Schemes like this raise the bar so, for us to see it come to life in that way is very satisfying indeed”
T
he site was originally home to a dairy farm set in 40 acres of land within an area of outstanding national beauty (AONB), overlooking rolling countryside. Q New Homes’ founders, brothers Damien and Michael Wynne, bought the site—which had planning consent for converting barns on the land into housing—and decided to go beyond the original scope in order to transform it into nine ultra-sustainable, net-zero-carbon homes. While this is not the first development Damien and Michael have undertaken—they have completed numerous other residential schemes in south-east London in the past—they describe this as the most complex and interesting project they have embarked on to date. Damien explains the reason for taking on a scheme of such magnitude was twofold: the desire
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to challenge themselves, and to deliver truly sustainable and super energy-efficient houses. “It was quite hard for people to see the potential of the site because, at the early stage, there was just a collection of dilapidated buildings; it was just a mess of ad-hoc construction,” says Damien. “However, our RIBA award-winning architect firm Nissen Richards Studio, which we’ve been working with for 10–12 years now and have a solid long-standing relationship with, could also see this site had a lot of potential, and that it could provide some exceptional quality homes. The scope of the job has grown somewhat since our initial thoughts on it but, ultimately, we want to push beyond current building regulations by at least a decade to make sustainability the cornerstone of our construction and design choices, to provide homes of the utmost quality and environmental integrity.”
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CGI of Q New Homes’ finished scheme (Credit: HAZE viz)
“Ultimately, we want to push beyond current building regulations by at least a decade to make sustainability the cornerstone of our construction and design choices, to provide homes of the upmost quality and environmental integrity”
Bridging & Commercial
TAKING THE BULL BY THE HORNS With an ambitious plan in mind and a hefty site in their pocket (metaphorically speaking), all that was left to do was find the right funding partner to enable Q New Homes to bring their dream to life. Hearing the brothers’ development idea, the firm’s broker, Development Capital Solutions, introduced Damien and Michael to Atelier and the Carbonlite Challenge, which looked to be the perfect fit for their needs. Once the project had been assessed, the lender provided almost £10m to fund it. “At that time, we were launching the pilot for the Carbonlite Challenge and we wanted to raise the bar for sustainable and green building. A lot of the market was centred around financial incentives for EPCs and we wanted to move beyond that—we could see that it wasn't a true reflection of genuine green and sustainable building or holistic carbon reduction,” elaborates Reece Lake, head of business operations at Atelier. “After we were introduced to the deal,
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it became clear quite quickly that it was a great match for us. We could see there were solid plans and aspirations to build something very special that could satisfy the RIBA’s Climate Challenge requirements. It felt like a good opportunity for us to do that with Damien, Michael and their team.” In addition to the regular due diligence Atelier does for each of its loans, as part of the Carbonlite Challenge a carbon assessment monitor was appointed at the start of the deal to ascertain the different elements of carbon reduction and sustainability measures for the development and their costs. “The whole-life carbon assessment looks at the life expectancy of every material used in every component of the build and of the building over 60 years,” explains Damien. “For example, if it’s a window, generally speaking there’s a lifetime expectancy of 30 years—although it may last way longer than that—so the carbon cost of the entire window package gets put in twice in these calculations. Other materials, such as floor
One Day
screeding, last beyond 60 years, so they get put in once. Meanwhile, for carpets, even if you go for the best and most environmentally friendly carpet you can get, the whole-life carbon assessment assumes there's a lifetime expectancy of just 10 years, so you have to enter it into the carbon calculations six times. Overall, there is a requirement to considerably reduce embodied carbon, operational energy and water consumption, to what are genuinely challenging targets, but result in tangible benefits. It's all about making the right choices. It’s complex, but we've used that to steer a lot of our decisions.”
BOOSTING ECO FEATURES
home, including moisture and smells from the kitchens and bathrooms, and brings in filtered air from outside, while retaining up to 95% of heat. For the construction, Q New Homes will use structurally insulated panels by SIPS ECO—which consist of a foam core sandwiched between two rigid facings—which, according to Damien, reduce embodied carbon by 40% compared to traditional masonry construction. SIPs also create an unbroken, thermally efficient envelope around each dwelling, enhancing the performance of green technologies and minimising cold bridging. Each home is also cocooned in insulation, fortified by an internal wrap vapour control layer and air seal that ensures
My adventure starts off with a visit to the Hartdene Barns’ largest house, which amasses to a whopping 6,500 sq ft. The two brothers walk me and Reece—who has joined for the site visit—through each of the rooms, excitedly showing us the bare bones of the bedrooms, dining room, TV cinema room, kitchen and many other areas. Despite seeing only the structure of the property, Damien and Michael’s vivid and thorough description of each feature, together with the CGIs they have on hand, paint a detailed picture of what the final look will be—one that doesn’t cease to amaze me. Behind the beautiful architecture and design are a slew of high-tech, ultra-energy efficiency features, such as air source heat pumps, solar photovoltaic panels, extensive insulation and mechanical ventilation with heat recovery systems (MVHR)—which, in simple terms, extract stale air from the
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airtightness. “At the roofs, we’re approaching nearly half a metre of continuous insulation,” confirms Damien. “If we didn’t have such high levels of insulation, the air source heat pumps would have to work harder, and thus they’d draw more electricity. But the pumps here are sized correctly for the scope of the building.” Damien tells me the homes will also feature fireplaces that burn bioethanol—a renewable energy source derived from food industry waste—meaning there are almost no carbon emissions, as well as no soot or ash to clean up, thus removing the need for a chimney. Sustainability is also embedded in the fabric through the use of eco-friendly materials. The house structures are lightweight timber, as opposed to heavy carbon-intensive masonry. Weight-bearing glued laminated timber columns and beams (glulam) are also helping the developer to save money and reduce their carbon footprint, as, according to Damien, they are cheaper and less energy intensive compared to steel at the point of manufacturing. The ceiling beams feature some interesting metal elements, which Damien explains are metal web joists. Manufactured off site, these use less timber to achieve the joist strength and loading capability required, and are more labour- and cost-effective. In addition, these joists provide easy access for mechanical and electrical services to pass through. Looking around, I notice some beams that look somewhat different, standing out from the rest of the structure. The brothers explain that these are the barns’ former structural pillars, which will be incorporated into, but hidden within the new build. Damien explains parts of the original agricultural structures are being retained, but not relied upon, or loadings placed upon them in any instance. They are being included because of the planning permission, as the team is essentially converting the barns into new-build homes. “We’re not using them apart from the fact that we’re following the form of the original agricultural buildings, which has given us our interesting barn-style aesthetic.” The entire scheme also uses low-carbon cement, as well as charred timber cladding for the final finish, as opposed to traditional masonry construction, which is more carbon intensive. “The process of charring timber makes it an extremely stable material that won’t shrink or move. It also has a very long lifetime and doesn’t need upkeep. It’s an expensive process to go through, but it’s very effective in the long run, and makes it a really high-performance external cladding material,” Damien elaborates.
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CREAM OF THE CROP Q New Homes’ vision for these properties is not just sustainability, but also luxury—the scheme’s original expected GDV exceeds £15m. “It is indeed rare to be able to purchase homes of such integrity in a gated community in the rural idyll, and there is no direct comparison on the market, so the end value of these homes is yet to be determined,” says Damien. While the brothers have not put a price on the properties yet, one can easily tell these are luxury homes that only the affluent could purchase. This is reflected in the overall design of the homes, as well as the area surrounding them. In order to maximise the value of the site’s location within an AONB, the brothers decided to also purchase a significant chunk of the surrounding agricultural land, to ensure they had full control of the views that could be seen from the homes. Michael explains that by doing this, they can prevent external factors—such as farmers bringing in noisy animals that could disturb the future residents—from potentially impeding sales, as well as to leave room for homebuyers to extend their gardens or keep horses, should they desire this. However, he clarifies that, since the surrounding land is all agricultural, the cost of acquiring it was much lower than the actual building site.
NOT A WALK IN THE PARK While both Michael and Damien are incredibly passionate about this project and dedicated to bring these ultra-sustainable, net-zero-carbon homes to life, they admit this has not been an easy process. One of the biggest challenges the brothers faced was around planning permission. While the site had full consent when it was purchased, Damien tells me that some of the internal layouts did not work and were more akin to an outline consent, meaning they had to reconfigure the entire plans by way of a non-material amendment and come up with a strategy so the homes could be built out practically while embracing the brothers’ sustainability aspirations. Retaining old existing ad hoc agricultural buildings and enveloping them in new SIP construction proved to be the solution, although Damien tells me it was both technically and practically challenging, as keeping existing large structures standing while excavating foundations around them is not straightforward. “There were a lot of additional
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“We’re very hands on in what we do. It goes without saying that we sub work out, but we aren’t using too many people in the supply chain making a mark-up, so we’ve got slightly lower overheads. Plus, I like to think we have more attention to detail and control over the works, so that can help with costs also” hurdles, with 25 planning conditions—12 of which were pre-commencement. These related to ground investigations, archaeology, environment and ecology, as well as all the usual conditions you might expect,” he adds. Another problem they faced along the way— which many other developers can relate to—was the increased costs brought on by market volatility, particularly for concrete and glazing. “The cost of concrete had exploded because of the cost of cement due to the increase in energy, and cement being so energy intensive
to produce. The expense we had allocated for our concrete foundations in the development significantly increased compared to what was in our cost plan. Following consultation with our whole-life carbon assessor, we made the decision to use low-carbon concrete, which uses a waste product from the metal industry as an alternative for 70% of the cement content. This makes it a much lower carbon product, but it’s much more expensive normally. However, because the cost of regular cement went up, this decision was actually cost-saving relative to the
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“Overall, there is a requirement to considerably reduce embodied carbon, operational energy and water consumption, to what are genuinely challenging targets, but result in tangible benefits. It’s all about making the right choices. It’s complex, but we’ve used that to steer a lot of our decisions”
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price increase,” highlights Damien. “We did also have a significant cost hike in our glazing package so, across the scheme, we had to make some subtle technical changes to offset some of the price increases, while not diluting the quality of the scheme, just value engineering.” Added to the cost difficulties was a surprise payment requirement from Natural England, due to an existing pond on the site, which was deemed by ecologists as a potential habitat for great crested newts. “The pond on the site had positive environmental DNA results for great crested newts, meaning we had to enter into an agreement where we would pay money into a fund to produce other new habitats for newts elsewhere. When it was fully calculated, they drew a 500m radius around the perimeter of the very large site and, within that boundary, there were a multitude of other ponds, which Natural England used to multiply the fee. In the end, we had to pay over £100,000 to Natural England as a one-off contribution,” recalls Damien. “That was something we didn't envision or didn’t appreciate how much it would end up costing. But Atelier was very helpful with that and allowed us to pay that out of our contingency—and obviously, they ensured from the outset that we had a very healthy contingency of about £700,000 so, overall, this hasn’t impacted us.” Things are more positive on the labour front—as Q New Homes is acting as both the developer and main contractor for this scheme, the labour expenses are significantly lower than for developers hiring third party main contractors. “We're very hands on in what we do. It goes without saying that we sub work out, but we aren't using too many people in the supply chain making a mark-up, so we've got slightly lower overheads. Plus, I like to think we have more attention to detail and control over the works, so that can help with costs also,” says Damien.
A FIELD DAY
Currently, the entire scheme is at its halfway point, with all homes expected to reach practical completion at the end of 2024. Nonetheless, the residential project has already been praised for its sustainability credentials. According to the development’s whole-life carbon assessor, the scheme already exceeds the target goals set by the Carbonlite Challenge and the RIBA’s Climate Challenge—meaning that should this be the case at completion, Q New Homes is eligible for a £230,000 loan rebate. The assessor also confirms that Hartdene Barns is 10–15 years ahead of the majority of new-build properties
expected in the UK, and the houses will be among the most environmentally friendly in the whole of the UK. Thanks to all the sustainability features implemented, the future homeowners will only pay for water and electricity, and will not require gas. During the coldest months of the year, the average bill is estimated to be around £40 per month, when the demand for electricity and heating will be the highest. “When you compare that to a small, standard dwelling, it's quite exceptional that you can have such excellent, luxurious and generous homes that are virtually free to run,” states Damien. While this is the full potential that these homes offer in terms of energy efficiency, Atelier’s Carbonlite Challenge includes a post-occupancy evaluation, which requests energy and water data from the occupiers after the initial 12 months’ usage, to help assess the benefits of meeting these rigorous standards. The brothers highlight that the true utility bill cost for each property will depend on how the future residents will use the homes. “What could completely skew the results is if, for example, a homeowner came here and installed an in-ground swimming pool and hot tub. It would be an exceptional thing to have in their home, and they’ve got the space for it and an incredible view, but that is going to completely skew our expected water and energy consumption calculations because this is not designed into the property,” explains Damien. “We could end up with some of the houses left vacant, or there could be an awful lot of people living in them, or even some business operating in the properties with a high energy usage. Ultimately, we can’t control how a house is used and how many people will be living in it.” From the way both of them are speaking about the properties—all the way to the description of the tiniest details—the pride, joy and passion for this project seeps through every word. “If I'm perfectly honest with you, on every job we've ever done, it's always quite sad when we sell them; you get really attached because we put so much into it,” shares Michael. The same pride is shown on Reece’s face, who, like me, has been amazed by the progress made by the brothers and by the potential of the scheme. “This is a big milestone moment for us,” notes Reece. “It's fulfilling a big ambition of our business and what our company is striving for, which is to make a positive lasting impact. Schemes like this raise the bar so, for us to see it come to life in that way is very satisfying indeed.”
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NIAMH SMITH
ar
ture o u f e h
Words by
is circu l on
struc n o t c i f
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As the construction industry continues to extract and dispose of resources at an unsustainable rate, we explore how it can transition to a circular model
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“If buildings are repurposed and reused, instead of being demolished, and fewer factories are built, the natural environment can be preserved” unneeded panel furniture, can be used to build stud walls and lintels, eliminating the requirement to cut fresh full-length sheets. If such materials cannot be used on another project, they can be advertised to online scrap groups or donated to charities.
he model of circular construction could present the ideal solution to reduce t he sec tor’s i mpac t on climate change and tackle the shortage of raw materials while supporting the future housing supply. The construction industry has long operated on the linear model. This ‘t a ke, m a ke, d i s p o s e’ approach involves extracting raw materials, using them to manufacture a product, then discarding it as waste at the end of its useful life. The construction industry uses more raw materials and produces more w a s t e t h a n a ny other industry in the UK, according to Green Alliance, and is responsible for 25% of the country’s carbon emissions. The shift to a model based on the principles of circular economy favours the preservation of natural resources, as it focuses on the use of recycled, reused and renewable materials during the construction process. It also aims to maximise the lifespan and reusability of buildings and materials by ensuring resources are kept in use for as long as possible then, at the end of their service life, recovered and regenerated. For example, scrap timber, such as offcuts of wood from staircases or
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THE PROCESS To create circularity within the construction industry, new projects must consider from the outset of the design phase how to eliminate pollution and waste. The key, says Jenny Davis-Peccoud, global head of sust a i nabil it y a nd responsibility practice at Bain & Company, is to maintain a circular mindset throughout the whole process, including how the approach can be implemented in the overall design of spaces, buildings, materials and services. “For example, if it’s a residential building, are you designing to minimise waste and improve circularity? Are you using recycled steel in key components where it is structurally sound? How are you planning to manage the waste from the site before you start to build?” This highlights the need for detailed assessments. Construction companies must estimate how long materials will last, for example, and investigate how the materials in the existing structure could be reused or recycled. According to Dr Luan Ho and Nathan Wood, carbon reduction scientists at Tunley Environmental, this planning should also determine how reusing materials on site will reduce carbon emissions. “During the design stage of a project in which recovered materials are incorporated, carbon assessment will be carried out to underscore the environmental advantages of utilising recovered materials,” they explain. “Such assessments can be done in parallel with a cost analysis to ensure the project meets both environmental and financial reporting requirements.” Developer GS8 incorporated the circular construction model into its plans to build
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The Arbour, a mix of eight houses and two flats in Walthamstow Village, London. The company was able to reuse 100% of all non-contaminated materials from the deconstructed existing buildings in the final development because it had evaluated how resources could be reused from the start. “We allowed materials to drive design,” states Ben Spencer, founder of GS8. “We set the buildings out based on dimensions that meant very few offcuts were created. As a result of upfront planning, those offcuts that had to be created were redesigned back into the homes.” Innovation was still required on site to repurpose materials, to avoid what would have otherwise been a waste stream from the area. Throughout the 15-month construction process, GS8 was supported by its chosen development lender and a monitoring su r veyor i n helpi ng it to real ise its commitment to zero waste. “The process w it h West O ne a nd it s mon itor i ng surveyor, Calfordseaden, required a lot of understanding on all sides, given that what we were delivering was quite different from the typical developments any of us were used to building. They took the time to go through all the construction and design with us in detail, and this made the process very enjoyable,” Ben adds. The Arbour not only achieved zero waste, but it will be carbon negative and net energy positive as well.
ENVIRONMENTAL BENEFITS The construction industry uses more raw materials and produces more waste than any other industry in the UK, imparts Libby Peake, head of resources at Green Alliance, a think-tank focused on environmental leadership. It is facing growing pressure to decrease its use of virgin materials, in the aim to reduce its materials footprint and reach its net-zero emissions goals. The first benefit of circular construction, according to Luan and Nathan, is the reduction in greenhouse gas emissions stemming from materials manufacturing as the reliance on virgin materials declines. Likewise, Libby stresses that reducing the volume of extracted resources and the manufacturing of materials would substantially decrease the carbon footprint of the industry. “Green Alliance research shows that, using techniques and technologies that are already available, the sector could reduce its upfront use of materials by 35% by 2035, which would reduce associated carbon emissions by 39%.”
This is supported by Ellen MacArthur Foundation; the company’s research reveals the circular economy could reduce global CO2 equivalent emissions (CO2e)—the number of metric tons of CO2 emissions with the same global warming potential as one metric ton of another greenhouse gas—from the production of the most common construction materials (cement, steel, plastic and aluminium) by 40% or 3.7bn tonnes by 2050.
BIODIVERSITY BONUS T he shift to a circular construction model would also slow the decline in biodiversity, which is heavily attributed to linear production. According to the Ellen MacArthur Foundation, more than 90% of biodiversity loss is due to the extractive, polluting and wasteful way we use resources in the economy. Conversely, as Luan and Nathan point out, maintaining the value of buildings and materials for as long as possible limits the need to construct more developments on undeveloped land, which damages biodiversity. “If buildings are repurposed and reused, instead of being demolished, and fewer factories are built, the natural environment can be preserved.” Reducing the need to extract materials for construction also prevents overexploitation of natural resources in biodiversity-rich areas, which often exceeds natural replenishment rates. “For instance, around a quarter of global iron ore extraction, used to manufacture steel, occurs in species-rich, critical biomes, so reducing the need to extract more will help protect invaluable landscapes,” Libby states. Lea Esteban, assistant project manager and circular economy skills manager at Arup, says the benefits of circular construction are consistent with the aims of every environmental agenda—as reducing demand for natural resources allows nature to thrive and restores ecological systems, which also helps to remove carbon from the atmosphere.
“Reuse has the potential to increase overall resource efficiency, easing the struggle of material availability through recovery processes and reducing costs related to purchasing new resources” 83
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“Green Alliance research shows that, using techniques and technologies that are already available, the sector could reduce its upfront use of materials by 35% by 2035, which would reduce associated carbon emissions by 39%” Bridging & Commercial
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MORE HOUSING FOR ALL As the global population continues to urbanise, the Ellen MacArthur Foundation estimates the construction industry’s consumption of materials will increase, from 40 billion tonnes in 2010 to 90 billion in 2050. However, t he Covid-19 pandemic demonstrated how raw materials shortages can affect the delivery and pricing of building projects, providing further motivation for the industry to move beyond relying on ‘take, make, dispose’. As Lea explains, reusing products and components takes fewer resources, as well as less energy and labour, than making new products from raw materials and discarding old ones. “Reuse therefore has the potential to increase overall resource efficiency, easing the struggle of material availability through recovery processes and reducing costs related to purchasing new resources.” The product lifecycle and value chain can then retain the highest quality and value for as long as possible, while also optimising energy efficiency, she claims. The high costs associated with extracting and manufacturing raw materials also emphasises the need for improved circularity in the construction industry. “As the cost of virgin raw materials goes up, it becomes more attractive to experiment with new models. Switching costs are lower when the price of raw materials is higher,” Jenny points out. OVERCOMING BARRIERS While great strides have been made in creating the foundations of the circular economy, the construction sector still faces barriers to progressing and implementing it and therefore making it mainstream. One of these, notes Libby, is the UK tax system, which encourages wasteful practices and disadvantages circular construction activities that preserve and enhance existing buildings. “As a matter of priority, the government should redress the imbalance between new build, currently zero-rated for VAT, and retrofitting, which is normally charged VAT at 20%,” she implores. Aligned with this, Jenny urges the government to alter the tax system to provide an incentive for construction companies to improve circular practices. “We need to work out lifecycle economics under different scenarios. You can imagine some ‘bold green’ scenarios where carbon or waste taxes make non-circular models less economically attractive,” she suggests.
Jenny also observes that construction companies seeking to implement circularity have struggled to value reused and refurbished materials due to, for instance, the lack of an ecosystem to collect, process and return circular materials. Libby cites the limited availability of information as a challenge to companies that are trying to establish how existing materials can be reused in new developments. “The experts we spoke to suggested action was being held back by the lack of data. They say it can be difficult to track material flows and that better and more consistently used metrics are needed.” As well as helping people to understand resource use, increased data could eventually be used to set targets to reduce primary resource use and its impacts, she adds. T he w idespread use of mater ia ls passports—digital documents that certify a material’s identity and properties to enable them to be reused—could combat this issue, Lea puts forth. “A central solution for the construction industry in particular will be the increased adoption of materials passports, ensuring the future lifecycles for materials away from their original location.” During the EU’s Circular Economy Stakeholder Conference in February, it was proposed that these passports be rolled out as quickly as possible across its member states, using standardised indicators. Reused and refurbished materials are often more expensive, which has presented a barrier to their use. In research by RICS, 70% of American respondents, as well as most respondents in 11 countries, identified higher perceived costs as a top three obstacle to circular construction. Luan and Nathan explain that costs are currently higher because recycling existing materials into useful ones takes more work than extracting and manufacturing raw 85
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materials. “One must consider that recovered materials might be more expensive, given that recovery processes are labour intensive,” they say. Ben reports GS8’s biggest challenge when constructing the zero-waste The Arbour development was cost inflation and supply chain shortages. Although the circular construction model could be used to create more homes from the same amount of materials, the greater cost of these materials means they may not be suitable for building affordable housing. The government’s National Planning Policy Framework states that at least 10% of all housing units in projects constructed in the UK should be for affordable homeownership.
THE FUTURE OF CIRCULAR CONSTRUCTION Despite the costs and data barriers, Luan and Nathan find that the construction industry and local authorities are making positive, proactive changes aligned with the UK government’s ambitions to achieve net-zero carbon by 2050. For example, many local councils now require contractors to perform carbon assessments and ensure that their forecasted estimates of emissions do not exceed the threshold of each premises. “By adopting circular construction and minimising the use of virgin materials, these thresholds can be adhered to with increasing ease,” they affirm. Libby believes that improved regulation would accelerate the market-wide adoption of the circular construction model, noting that many companies already use the necessary technology. “A lot of the business leaders we’ve spoken to indicate that things could change quite quickly with the right regulation and incentives, agreeing that the technologies to become more circular and reduce material use already exist.” Many suggested the industry would respond best to regulation, she adds. In Europe, policies and regulation have been introduced to encourage the construction industry to adopt circularity. However, they have had a limited impact so far. For example, the 2008 version of the EU’s Waste Framework Directive established a target for recycling 70% of construction and demolition waste by 2020. But its buildings sector (including light industrial, commercial and residential) is only around 30% circular, with the potential to reach just 50% by 2040. In 2020, the European Commission adopted the Circular Economy Action Plan, which aims to double the EU’s circular materials use rate (this measures the share
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of recycled materials in the total input of materials) by 2030. Although this rate increased from 8.3% in 2004 to 11.7% in 2021, the pace of improvement is not sufficient for the target to be achieved. Shifting away from the linear model would enable the construction industry to cut carbon emissions, deliver supply to meet the increased demand for housing and reduce reliance on raw materials. But the EU has demonstrated that authorities cannot rely purely on regulation to get the desired results. The UK government will still play a significant role in encouraging the widespread adoption of circular construction with amendments to tax structures to incentivise companies to improve circularity. The industry must also demonstrate its willingness to embrace change and increase collaboration, share materials and knowledge, and encourage the use of materials passports to ensure companies understand how to reuse materials, in order for the circular construction model to prevail.
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“A lot of the business leaders we’ve spoken to indicate that things could change quite quickly with the right regulation and incentives, agreeing that the technologies to become more circular and reduce material use already exist” 87
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In Conversation
Breaking the glass ceiling by
empowering entrepreneurship Companies run by female entrepreneurs are often limited by poor access to capital. To help, two specialist finance experts have set up a brokerage, attracting over £100m worth of deals in its first four months
Words by
ELLIOT TOPHAM
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A
ccording to ‘The Alison Rose Review of Female Entrepreneurship’, women’s average starting capital is 53% below that of men. The report cites different risk appetites between the sexes, as well as disproportionate childcare responsibilities, among a range of other elements that could account for this. In the wake of the report and on the back of a wealth of experience in the finance world, two female veterans of the industry decided it was time to address this disparity so that women can take their micro businesses into the major category. I sit down with Roxanne Goodman, managing director at Goodman Corporate Finance; and Martine Catton, CCO at The Broker Hub, the two experts who joined forces to create Female Founder Finance, a company designed to help women navigate their way to entrepreneurial success.
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In Conversation
ET: What made you want to pursue a career in finance? Roxanne Goodman: I fell into it by accident, to be brutally honest. I am a nursery teacher by trade, and I left my role to do a bit of travelling and do what young, single women do during a long, hot summer: I went to Glastonbury. [Before we were married], I knew Paul [Goodman, chair of Goodman Corporate Finance] anyway, aside from the industry. He said: “I’ve got a vacancy as a receptionist at one of our businesses—do you want to come in and fill in a bit of holiday work?” And I thought, yes, that’s fine, I can top up the beer money. And it just stuck—I ended up staying, and we moved the business along. He then set up Goodman Corporate Finance on his own and I joined him, and it just went from there. It’s taken me a long time to build up the expertise I now have; I did maths and business studies A levels at college, but it was a complete fluke that brought into commercial “The sector is still male-dominated. me finance.
It’s a million times better than it was when I was 23, but we aren’t there yet—we still have a long way to go”
Martine Catton: When I finished my A levels, I wanted to do law; I did a law O level at night school, while studying for my other O levels. My father passed away very suddenly, and I thought, “I don’t want to go and do this”. So, I applied for a job at First National Bank in London. I toddled off down there from the north of England to meet them—they paid for my train fare and lunch. When they said they wanted to offer me the job at the end of the day, I thought: “Oh no, I’d better say yes because I owe them.” A month later, I moved to London and my career in finance began. Over time, I was promoted into more senior positions, [including CEO of a cashflow lender, CEO at Catalyst Property Finance and channel director at Aldermore Bank]. However, there are still too few very senior female leaders in the finance industry, hence the need for the Investing in Women Code and the Women in Finance Charter. The sector is still male-dominated. It’s a million times better than it was when I was 23, but we aren’t there yet—we still have a long way to go.
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ET: How did you decide to establish Female Founder Finance? RG: As part of my work at Goodman Corporate, we signed up to the Investing in Women Code and the Women in Finance Charter. I interviewed Martine for an International Women’s Day article that I wrote on LinkedIn, along with a couple of other women in our industry. All the discussions that we’d had and the feedback that everyone had given me made me realise women aren’t supported in this industry, there aren’t enough of us, and access to finance available for women isn’t promoted enough, and I thought that someone should do something about it. I kind of parked it, then one Friday night, the whole idea just came into my head: we need to set up a female specialist brokerage—someone’s got to point these women to where they can go to get the funding they need to scale their businesses at the same rate as men. That weekend, I texted Martine to chat about the idea. We talked about it on a Teams call and agreed this is what we’d do. It went from a thought I had while drinking a cocktail on a Friday night to saying, ‘this is a brilliant idea’. MC: When Roxanne mentioned the idea to me, I realised I hardly ever saw applications from women, in all those years of lending. It was mind-blowing, and we had to do something about it. It’s likely to be [caused by] unconscious bias —we’re not suggesting it’s anything other than that—but women just don’t have the same access as their male counterparts as research shows. So, when Rox said we had to do something about it, I said: “I am one million percent behind you. It’s the best idea I’ve ever heard—let’s do it.”
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ET: What’s been the most surprising thing you’ve discovered so far? RG: From my perspective, it’s the complete lack of awareness. Until ‘The Alison Rose Review of Female Entrepreneurship’ highlighted that there was such a disparity in women’s and men’s access to funding, I didn’t even know it was a problem. Up to £250bn could be added to the UK economy if women had the same access to finance “We can’t boil the ocean—as as men—that’s a staggering amount of much as we would love to— money, and it was but we can move the dial” that one document that highlighted it to me. You then start to dig a little bit deeper and look for more data and other avenues to see why it’s such a problem, and it’s unconscious bias. But until someone points it out to you, you don’t know that it’s there. I think it could be, perhaps, because the average age of a female director is slightly older than a male director for a start-up business. You could assume this is because they’d been stay-at-home parents and, now that their children have got to school age, they can go off and complete their aspirational products. MC: I think the perception is that women start not-for-profit or community-led businesses. There is an element of that for sure, but a lot of women start enterprises we describe as ‘purpose-led businesses’, and people confuse that with community or not-for-profit. That’s not what we’re talking about. Generally, what happens is a woman will start a business because something happened to her, or she found a gap she thinks she can fill to help other people, or so others won’t have the same problem. I know it’s a generalisation but, in our experience, it has been the same for everybody we have spoken to: they’ve all gone to the bank, asked for some funding and the bank said no. We found that often women then don’t ask again and decide to do it themselves, so often they can’t expand beyond the micro business status because they’re having to use their own funds. Women tend to not be exposed in the same way to finance.
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ET: Does the work that needs to be done to break the traditional gender norms sometimes feel quite overwhelming? MC: We can’t boil the ocean—as much as we would love to—but we can move the dial. We’re not going to be able to educate everyone who starts their own business. What we’ve decided to do is focus immediately on the women who need funding. There are lots of businesses that are still sat in the micro space, but could grow and scale, so it’s about identifying those and helping them, and giving them a place to come with the ecosystem that allows them to find what they need. We can’t help everybody—there’ll be people with a community-led business that we can only assist by signposting because unfortunately, commercial finance only lends itself to commercial enterprises, that’s the world of banking and lending; investors are looking for a return. First and foremost, it’s about getting access to finance for the businesses that could and want to move out of the micro space and into something that could then scale and require venture capital. That will add to the £250bn pot that will come back to UK treasury. RG: I think the difference with the work we’re doing is that we can prove it works. I know there are lots of discussion happening in the background with all the various parties, political banks, and funders, and quite a lot of people think, “Oh yes, Female Founder Finance, it looks really good on paper, let’s tick a box for ESG”, but it’s not about just doing something to look good, it’s about following through—it’s deeds, not words. Our words and actions are aligned, and we are doing what we said we would. The funding that we’ve put together for female business owners is making a difference.
In Conversation
ET: What has been Female Founder Finance’s biggest impact so far? RG: We’ve created a complete female ecosystem. Within the funders that we’ve got on the panel, we have a completely female chain of command with women on the ground, BDMs to speak to the female founders, and women in credit etc. They’ve got the ability to speak to another woman, financiers, other businesswomen [and women from across the finance chain], to sell the journey and understand what they’re trying to achieve, because we can prove this makes a massive difference to their chance of success. And it’s not just support for the business side, we’re building out a complete ecosystem to support them on anything they would need to talk about. MC: We’ll effectively have different hubs for finance, accounting, legal and wellbeing. To be fair, I think right now that’s as much as we can have on the road map. If we focus on too many things, we won’t be able to achieve what we’re setting out to do, so we have focussed on the areas that matter most. The legal hub is important; as a female founder, if you’re new and starting up, it’s hard if you don’t have £5,000 to give a corporate lawyer the initial downpayment. So, some of the lawyers that we’ve engaged have agreed to also do some pro bono work for our female founders. For accounting, it’s about having somebody who you can talk to, understand how to forecast, how to cost, and help you understand if you can build a profitable business. If you’re looking for investment, there are lots of clever female accountants who are genuinely interested in assisting. The wellbeing hub is designed to assist us share how important it is to take care of your own health and looking after yourself. I think it’s probably a human trait, as opposed to just a female one—or at least I hope it is—but we tend to put everybody else before ourselves. We are creating a space supported by professionals where you can go for guidance and advice—if you’re in a good mental state, then you can achieve more of your goals.
ET: Can you give an example of a business you have helped and how you did this? What impact has it had on the company? RG: A woman reached out to me after reading a post on the Female Founder Finance Facebook page. She started her business in lockdown and had recently had a baby, and was trading from her spare bedroom. She knew where she wanted to go, but didn’t know how to get there. She approached her bank for an overdraft and was told, ‘No’. It was a start-up business and she had no experience in the industry—so she reached out to me. She is buying fabric from China to manufacture her [fitness related] products for her fitness business and, up until the point when I went out to see her, she’d done this on her personal credit card and from her savings. She now has a trade finance facility. In the space of six months, she’s going to go from a turnover of £300,000 up to nearly £1m, purely off the back of having the proper working capital facilities that have allowed her to scale up. This absolutely changed that business.
“Our words and actions are aligned, and we are doing what we said we would. The funding that we’ve put together for female business owners is making a difference”
MC: Her scalability has changed significantly, she can fulfil orders sooner, supply larger orders and improve profitability. RG: It has created jobs as well—she’s taken on five new staff to cope with the demand. So, we’ve got five new jobs in the community; this is the ecosystem.
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ET: What has the feedback been like since launching the new business? MC: We have been overwhelmed by the “We have been support from the lenders that we have overwhelmed by engaged with. They the support from have understood our purpose and have the lenders that we been so encouraging. Every lender already have engaged with” had this on their own roadmap. We’ve not had a single organisation that has asked us why we want to do this, they understood the need immediately. One of our challenges is conveying that Female Founder Finance isn’t about not focusing on men—we’ve got some outstanding male ambassadors. The only reason we set up Female Founder Finance is because the disparity [in finance] is so huge. We are keen to engage with as many male advocates and ambassadors to work alongside us. By working together, we really do have the best chance of moving the dial and levelling the playing field.
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ET: Have you had any negative feedback? RG: A little bit, yes. Somebody tried to have a go, a man—I’m not going to name him because I don’t want to call him out—but he basically accused us of fabricating all the data and making everything up. But we just pointed him back to the evidence, and then he backed down. That’s the only one I’ve experienced. ET: What types of finance can you help women with to start and scale their businesses? RG: All aspects of commercial finance— exactly the same that a male-led business would have access to. We’ve got working capital, invoice finance, factoring, spot factoring, merchant facilities, unsecured and secured business loans, asset finance, and refinance. We can also do property finance if clients need the option to buy a building, perhaps the one they’re renting. We can also do long- and short-term bridging—basically everything, but with a female slant to it.
In Conversation
ET: Since launching, you’ve already secured some well-known funding partnerships in a very short period of time. How did you manage to do that? RG: Between myself and Martine, we’ve got a lot of contacts in the industry. For NatWest, I had an initial chat with Dave Furnival [head of broker at NatWest] and he couldn’t have moved any faster to support us. It was the same with Allica Bank. GB Bank literally had a female sat in my office within a week, and same for Together. Reward Finance Group has given us a whole team of women. Everybody who we have spoken to about the idea sees the value and the purpose of what we’re trying to do, and they’re literally throwing resources at us. We’ve got conferences, women on the ground, networking, and social media support—everything that we could ever have hoped for and more, because it’s right thing to do and the right time to do it. ET: Is this evidence that the industry is changing? MC: I certainly would say that everybody we have spoken to has already got it on their roadmap, and they were looking at ways to bring something to market that would address the disparity. When we launched Female Founder Finance, we were pushing at an open door, dare I say, because it was something they already had on their agenda. We provide a route that they potentially couldn’t have taken themselves because they have their own set of guidelines and regulatory controls, and they have a finite set of products and services.
“The fact that on 1st May we launched this idea and our current pipeline has more than £100m of funding requirements speaks for itself” ET: What goals do you have for Female Founder Finance over the next 12 months? MC: We have many aspirations for the business; the first is reach, we can only assist if female founders are aware that we are here to support them. From there it’s about monitoring the volume in terms of the numbers of businesses for whom we can provide much needed funding while creating a hub of useful resources for them to access when required. By recognising the challenges and making them more visible, awareness increases. By keeping the disparity experienced by female founders on the agenda, unconscious bias becomes conscious and that will drive change. RG: Yes, absolutely. The fact that on 1st May we launched this idea and our current pipeline has more than £100m of funding requirements speaks for itself. For me, I am very happy if we can make even the slightest difference to those women who need support. As Martine said, we’re not going to be able to boil the ocean, but using our ability, knowledge, skills and resources to help women who are struggling with access to finance—that’s the end goal for me.
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“We have identified a gap, and our mission is to ensure that we fill that gap and we do it professionally, with the right lenders, offering the right products at the right time to help those female founders fulfil their ambitions and their potential”
MC: Add to t hat t he fact that the lenders we have spoken to have been so overwhelmingly supportive of us. They want to be able to do that too, so if we have the resources to do it, and they have customers who have a requirement, then surely it can’t be beyond the wit of man for us to work together to deliver something that does what it says on the tin. Just the mere fact of being able to signpost them to somebody like us would significantly change what those female founders can achieve. We have identified a gap, and our mission is to ensure that we fill that gap and we do it professionally, with the right lenders, offering the right products at the right time to help those female founders fulfil their ambitions and their potential. They aren’t less ambitious or capable, and they don’t have less of a desire to succeed than their male counterparts. The feeling you get by knowing you have changed the course of somebody’s business and what they can achieve is like nothing else. RG: Yes, absolutely. It makes the job worthwhile. Knowing that I’ve helped a woman change her whole family’s life for the better is absolutely why I wanted to do this.
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Limelight
Limelight A glimpse into the industry’s charity events of the year
TAB 1 Who: What: 95% of TAB took part in a ‘Running Out of Time’ relay to raise awareness of climate change and raise money for Restless
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Development, a charity that works with young people across Africa and Asia to make lasting changes in their communities and countries How: The 37 staff members walked or ran 5 km around TAB’s local office in Borehamwood and then into Parliament Hill in Hampstead Heath. The event raised £800 for Restless Development
Castle Trust Bank 2 Who: What: 53 players across 14 teams got involved in a charity golf day at Guilford Golf Club to raise funds for Just4Children, a
charity that focuses on sickness relief and health preservation for UK children How: The Castle Trust Bank Golf Day—which included a Beat the Pro challenge—raised more than £9,500 for Just4Children thanks to the event’s key sponsors, such as Sirius Property Finance, Brightstar Financial, Paris Smith, Charleston Financial and FinSpace Group
Hope Capital 3 Who: What: Hope Capital teamed up with North West Cancer Research — a charity dedicated to funding pioneering research
and education for cancer — to raise as much money through the ‘£50 Challenge’ fundraising scheme How: The team at Hope Capital were split into five groups to see who could raise the most money via their fundraising campaigns with £50. From raffles to a comedy night, bake sale, tuck shop, beat the goalkeeper and more, the team raised over £6,000 for the charity
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Who: Glenhawk What: The firm’s CEO Guy Harrington and underwriter George Adams took part in a sponsored abseil for Tommy’s charity to help fund vital research into miscarriage, stillbirth and premature birth How: Guy and George ran 46 stories up the Cheesegrater building and then abseiled down from the 51st floor and raised £750,000
Metro Bank 6 Who: What: Seven members of the Metro Bank Asset Finance team walked a six-hour hike across Surrey Hills to raise money for Shooting Star Children’s Hospices How: The team followed a circular route from Shere to Newlands Corner to Shamley Green and back to Shere, and raised £1,094 while doing so
OSB Group 7 Who: What: Jon Hall, managing director of mortgages and savings at OSB Group and Christina Fasoli, Canterbury branch manager
at Kent Reliance, raised over £6,000 for Demelza through a charity bike ride initiative How: The duo cycled 183 miles over three days from Paris, France to Sittingbourne, England, reaching the finish line on Sunday 17th September. The fundraising efforts have generated over 100 donations so far
Shawbrook Bank Who: Reward Finance Group 5 Who: What: The bank raised over £20,000 as part of The Saracens 8 What: The firm organised a music and entertainment charity quiz Foundation’s ‘Empower Her Project’ campaign, an initiative which seeks to inspire young women to take on leadership roles in both sports and beyond How: The bank hosted a formal dinner and auction in the Tulip Suite at Stone X Stadium in London, attended by over 200 people—including Shawbrook’s leadership team, colleagues and partners. During a panel, some of the ‘Empower Her Project’ alumni also shared how the project has positively impacted them and guided their career journeys since their participation in the program
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in the Black and White lounge within Leeds Arena to raise money for Papyrus, a UK charity dedicated to the prevention of suicide and the promotion of positive mental health and emotional wellbeing How: Over 140 members of staff and attendees participated, including Rewards’ Leeds team members and the firm’s network of introducers. The event featured food and drinks, a speech and Q&A session with the Papyrus team, music by Lucas Watts, entertainment from Darren Mac, and a quiz led by Reward’s senior relationship manager and part-time quizmaster, Alan Sanderson. Over £12,000 was raised in total
Sept/Oct 2023
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