The role of planning in ESG

COMMENT With the Department for Business, Energy and Industrial Strategy considering a new energy rating system, and with new legislation on electric vehicles coming into force this summer, environment, social and governance is a concept that is on everyone’s mind. In the world of real estate, when we think of ESG, we often turn to topics such as green leases and Minimum Energy Efficiency Standards, but the role that planning can – and does – play shouldn’t be overlooked. Leading the charge The planning system has been grappling with the concept of ESG for some time. Take electric charging points as an example; the forthcoming legislation will require that all new non-residential buildings with more than 10 parking spaces must have at least one EV charging point. While this is a positive step, planning policy has, in many cases, required EV charging points in new developments for years. In fact, the London Plan states all new developments with car parking are to cater for electric or other ultra-low emission vehicles. Will the new legislation really have the scale of impact anticipated? Or is this simply an evolution from planning policy to law?  Planning for a green future We can go back further – environmental impact assessments have been set in the planning regime for decades. The planning industry is well versed in explaining the impact of a development – not just the environmental impact, but also the socio-economic. EIA requirements have become more far-reaching in recognition of growing ESG concerns and now cover air quality and climate change. The planning process has arguably been at the forefront in demanding a detailed analysis of the environmental impact of development.  As a result, the concept of environmental mitigation has also been embedded in the system for some time. The London Plan encourages various forms of “urban greening”, including recommending that major development proposals include some form of green infrastructure, such as green roofs or street trees. Although the importance of planting more trees to combat climate change was stressed at COP26, this idea is already included in many local plans, with examples including recommendations that at least three new trees should be planted for every one removed.  Carbon offsetting contributions, which have been a requirement in many planning obligations for years, are another example of planning supporting the ESG agenda. National policy is also keen to be green. The National Planning Policy Framework, first published by government in 2012, sets out that one clear purpose of the planning system is to “contribute to the achievement of sustainable development”, defined as “meeting the needs of the present without compromising the ability of future generations to meet their own needs”. This aim is achieved in a number of ways within the NPPF, including recommending that new developments help reduce greenhouse gas emissions and introduce green infrastructure.  Promoting better places The planning system also grapples with the “S” element of ESG – social. The NPPF promotes “healthy and safe communities” through planning policies which are focused on providing social interaction and shared spaces. The importance of this concept has more recently been echoed in the Levelling Up white paper, published earlier this year, which aims to restore a sense of community, and the introduction of Use Class E which is set to invigorate the high street. Clearly, a building’s impact on society is an important planning consideration. Aside from obvious examples, like the need to provide affordable housing or fund school provision, the planning system is used to consider social issues. Take the redevelopment of 114–150 Hackney Road in Tower Hamlets, E2, which is to provide an LGBTQ+ venue as part of its section 106 obligations. This follows the closure of a prominent LGBTQ+ venue on the development site.  Room for improvement  Obviously, this does not mean the planning system always gets it right. One area which many consider in need of attention is permitted development rights. The opportunity to carry out development without the usual planning controls provides scope for unmitigated environmental harm. For example, these rights currently allow for offices and restaurants to be changed to residential without the need for planning permission. Although on one hand this is likely to increase housing supply, it will also lead to homes being delivered which have not been considered with the same level of scrutiny as those built pursuant to a planning permission. This in turn could lead to unmitigated pressure on local schools and hospitals, and the associated social damage. Why is the role of planning important? First, among all the talk of planning reform, it is easy to overlook what the system does well. By effectively utilising its resources, planning holds the key to addressing issues much wider than the often-cited housing crisis. One of the primary functions of the planning system is to balance competing demands. For those embracing ESG considerations for the first time, acknowledging the impact of decisions on the wider world can seem radical. While the planning regime may need to adjust where the balance is struck in some cases, it can inform others of valuable lessons learned about achieving that balance. And second, having recognised the need for action to address ESG priorities, we can also acknowledge the progress already made which has helped pave the way to a greener future.  Rosie Shields is an associate at Hogan Lovells