When Data Plays a Significant Role in Unlocking Potential of ESG Loans

Published on: 30 May 2022
by KnowESG
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Irina Leigh, production innovation architect at L&Q and workstream lead at COLAB, believes that construction must embrace BIM and innovation to exhibit credible sustainability policies and solid environmental practices.

Many large construction companies have pledged to achieve net-zero emissions during the next few decades owing to COP26.

ESG loans, which are linked to this, are becoming more widespread as banks respond to shareholders' desire for financial institutions to demonstrate their commitment to positive change. Is our industry, however, prepared to track progress against the goals and criteria established as part of these loan agreements?

The construction business, whether we like it or not, has a bad reputation when it comes to data collection, processing, and management.

The Hackitt Report identified a lack of data management as one of the industry's faults and a cause of system failure. It's no surprise that many lenders are sceptical about construction firms' ability to meet ESG loan targets. Especially when dealing with increasingly complex datasets that must be gathered, monitored, and evaluated.

Credit risk is lower for companies that have credible sustainability strategies and solid environmental policies. As a result, businesses that can obtain 'green' loans can benefit from better conditions, with interest rate savings often ranging from 5 to 10 basis points.

Many lenders are pursuing organisations that can make these ESG promises. Therefore, enterprises that are unable to define their targets may find it more difficult to obtain funding.

The industry must embrace BIM and technical innovation to address this difficulty. Part of their approach to this challenge is the COLAB DfMA Toolkit, which was developed by L&Q in collaboration with partners Virtual Viewing, HTA Design, and HawkinsBrown.

The DfMA toolbox includes a business intelligence platform that enables clients to interactively monitor, analyse, and evaluate datasets. It allows stakeholders to compare their data to industry benchmarks and track records, facilitating data openness and tracking. It is the starting point for creating a "Golden Thread" of data that can be traced throughout a building's lifespan.

The growing popularity of ESG loans and the scrutiny that comes with it has emphasised the significance of using third-party verification services to determine whether agreed-upon targets are being reached. Currently, it is up to the borrowers to ensure that they not only set the proper goals but also track their progress against them.

Companies can find their way to gathering the required KPIs using a platform like the Business Intelligence tool and the correct initial set-up. They'll have a better awareness of data gaps, allowing them to make the best strategic decisions possible in terms of sustainability, data management, investment, and innovation.

Construction companies need to be bold and confront the most pressing challenge of our time, climate change, in a climate-conscious, ESG-led society.

Reduced carbon emissions will necessitate a massive effort of innovation and collaboration throughout value chains. To do so successfully, you'll need not only good sustainability plans and ambitious net-zero targets but also the right data management platform to help you make strategic decisions with maximum impact. The DfMA Toolkit and Business Intelligence platform demonstrate how this may be done, paving the path for more sustainable houses that are in line with the global net-zero objective.

The DfMA Toolkit is a project supported by Innovate UK (UKRI). This money comes from the Construction Sector Deal's Transforming Construction Industrial Strategy Challenge Fund.

Source: BIMToday

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