Risks & Opportunities

At Grainger, our approach to sustainability is based on a rigorous assessment of potential political, economic, social, technological and environmental (PESTE) risks and opportunities to our business.

ETHOS Corporate Responsibility strategy is Grainger’s response to the material issues likely to impact our business over the next five to ten years. These issues were identified in 2009 through a rigorous assessment of potential political, economic, social, technological and environmental (PESTE) risks and opportunities.

Alongside this long-term CR strategy, we monitor immediate risks and opportunities and proactively manage these by setting annual targets in each of our ETHOS areas. The monitoring process includes discussions of key climate change issues within our Green Projects Group as well as consultation with our external sustainability advisors, Jones Lang LaSalle, Upstream Sustainability Services. Grainger carefully considers the long-term costs and benefits of all CR initiatives to ensure that our approach makes commercial sense.

2011/12 Risks:

Grainger regularly considers the changing landscape of sustainability risks and opportunities and has identified the following as key areas to manage.

• Legislation: Climate change and environmental issues are set to continue to rise up the political agenda in the coming years. There is potential for there to be significant impact on our business through having to meet increasingly stringent legislative requirements. It is our intention to engage with Government to ensure that policy is appropriate for the private rented sector and that Government understands the complexities that varying tenure types and tenant demographics will have upon the likelihood of successfully improving the energy efficiency of existing housing stock.
• Reputation: Stakeholders’ expectations of how effectively and transparently Grainger manages its environmental and socio-economic impacts continue to grow. For investors in particular, it is important to demonstrate maturity by reporting meaningful metrics that link CR to business performance.
• Physical: Rising temperatures are seen as inevitable. The impacts of climate change have not yet affected our portfolio value or maintenance costs, but in the long-term there is potential across the UK for flooding, water stress, overheating, subsidence, increased weathering and other physical impacts such as damage to infrastructure. We already take some of these factors into account in our acquisition activities, though the time horizon for analysis varies. This year we intend to publish details of our processes and policies in this area.
• Energy costs: Rising fossil fuel based energy costs have direct financial implications for companies and are also likely to impact customer demand for less energy-efficient housing in some markets. Energy efficiency information, such as Energy Performance Certificates, is expected to increasingly influence buying and renting decisions. We are committed to ensuring that we fully understand these impacts on our various portfolios and to transparency in our reporting.

2011/12 Opportunities

Grainger proactively seeks opportunities to distinguish itself from its peers and to future-proof our assets in order to protect asset value and secure a long-term income stream for the business.

• Legislation: As the UK’s largest listed residential landlord, we are in a unique position to actively engage with the Government, directly and through industry bodies. Grainger can influence and shape future sustainability policy to ensure it is both practical and cost-effective.
• Physical: If developed in partnership with industry, current Government proposals relating to minimum energy efficiency standards and the Green Deal, for example, offer Grainger a significant opportunity to upgrade our properties using third party funding.
• Reputation: Community engagement and investment are central to the planning process and are likely to become even more so with the Localism Bill. A proactive approach can win the trust and respect of stakeholders, increasing success with planning applications and attracting potential employees. With operations across the UK, Grainger’s procurement policies can stimulate local economies. This year we are seeking to understand the make-up of our contractor base from a local vs. national supplier perspective.
• Energy costs: Externally, CR factors such as energy performance are increasingly valued into residential properties and investment is available to those companies that demonstrate strong leadership. Demand for high quality rented housing from tenants able to exercise choice is likely to rise as an increasing percentage of the UK population rent rather than buy.

These risks and opportunities should be viewed in the context of our risk disclosure on pages 39 to 41 of our Annual Report 2011.