Catch up with Tao Bourton

Following on from our previous Catchup featuring Kate Temby’s views on sustainable investment considerations within the property landscape we ask Tao Bourton, Founder & CEO of Yolk Property Group, for practical insights into applying sustainability principles at the coalface of property development.

In his spare time, Tao loves boating, surfing and spending time with his wife and two young sons.

What comes to mind when people talk about ESG (Environmental, Sustainability, Governance) principles?

It means different things to different people. Most people go straight to “sustainability” as an all-encompassing term in the property sphere. I don’t just look at it through a property lens such as targeting cross ventilation or solar. Although these are important, I try to apply the mindset of “is this sustainable” to what I do. To use a non-property example there is nothing sustainable about flying an apple from the US to Australia. It’s the sustainability ethos, sustainable production and living.

As a business, we went looking for guiding principles with criteria to strive for. We went for the UN Sustainable Development Goals, One Planet Living and UDIA criteria all of which we have adopted to some extent. Combined they are a set of guiding principles and an action plan for what we are striving for.

One Planet Living was quite aspirational whereas the UN Sustainable Development Goals really encapsulate everything in a good way. We danced around all the tools out there looking for guidance and settled on this as a practical and more easily understood way to target and implement ESG goals.

Are sustainability and impact matters important to you personally or to your business?

I would say both. At a personal level I want my grandkids to be able to go fishing but will they be able to eat the fish if there’s plastic in the food chain? Are my kids going to surf like me or will they avoid the ocean?

With a name like Tao, it might suggest that my Mum was a hippy! So, the grassroots may have rubbed off. She says that everyone needs a house to live in, but you at least will try to do it (deliver houses) better than most.

Adopting a mentality that says we’ve done things a certain way for the last 50 years doesn’t necessarily mean it’s right. So long as we’re moving forward that’s the key. That’s what I come back to with ESG – it’s not just focusing on one thing. It’s about focusing on everything. If you could hit all the benchmarks then that would be great but you can’t always do that so it might be a 5% improvement on one thing, 2% on another, some of it you can’t do but if we are constantly setting new benchmarks that’s when we’re moving forward.

I have genuine concerns about where we’re heading internationally and believe we need a fundamental shift with western governments taking a stance to act and move away from playing politics on climate. At a corporate level, we’re starting to see billionaires take on the AGL’s of the world agitating for change. We can’t all do that but if we do our part and if all businesses try to do better in whatever sector they’re in then we will all be better off. That’s my ethos.

What initiatives are Yolk involved in that can help achieve better sustainability outcomes, say from a climate perspective?

We’ve been involved in a number of pilot programmes. Initially, we went down the solar route which can have a big impact on climate. We were the first developer in Australia to do solar with batteries and peer-to-peer power trading using micro bid blockchain technology. We helped write the strata bylaws which are being used as a government template nationally on how to do it (Project: Evermore Whitegum Valley).

One Planet Living (global) certification. We were one of 5 projects in the world that had that certificate back then (7 or 8 years ago) on the Evermore WGV. It was highly innovative at the time with no rule book. As a business, we had to take quite a leap of faith that we had the skills in-house to manage the risks of innovation. We weren’t making any money on that project as it was very time and resource heavy. We learned and evolved along the way with our WA State Government partner, to create the first solar-powered purchasing agreement in the Amble Estate Girrawheen. We brought in a private power supplier – they retained ownership of the solar panels on peoples’ roofs. These people only bought the green energy when they needed it, at a rate at effectively a 40% discount to market and after 10 years they could buy the system for $1. So, zero cost to mum and dad and they own the system after 10 years. That was a system that was able to be replicated nationally and rolled out.

Likewise what initiatives are your group involved in that can help achieve better social outcomes?

After the solar pilots, we’ve gone down the social health and wellbeing path with a pilot project known as the “liveable street” at Allure Estate in collaboration with the WA State Government. This is arguably more intangible but nonetheless important. It sees a streetscape designed to draw residents out of their homes and promote social interaction within the community. The concept is seen as a key way to combat loneliness and mental health issues stemming from the isolation that can prevail in the suburbs.

The issue: Suburbs have evolved towards car dominance. Most people have safety concerns about their kids playing in the street, therefore tend to park in the garage and go straight into the home or backyard. Single, often older, people tend to stay inside their homes rather than actively seek interaction in the streets either for similar reasons or because of it. The solution: To take the traditional open space infrastructure (parks etc) and put half in one location and spread the rest out throughout the local streets making them more active and appealing. This has the combined effect of greening the streetscape, and providing communal amenities throughout such as skateboard and bike tracks, banquet tables, climbing walls etc. We added speed attenuation measures to slow traffic and made the pedestrian the priority on the street. This was all fitted into a standard road reserve and the result is what we call a “liveable street”. It encourages activity outside the home – parents are more inclined to allow kids to play locally while they might be out the front working on their laptop with the kids in view, or to converse with their elderly neighbour who is drawn to the activity and open space. The intent is to build a community which all people crave.

Who cares? Who cares when Yolk pursues and achieves these?

Buyers seem to care. While the market has not evolved such that buyers will necessarily pay more for ESG measures, from our pilots it seems that if presented with two options and one has an ESG benefit and the other doesn’t, they will choose the one with some ESG benefit. By way of example, not all blocks in Allure benefited from the liveable street infrastructure directly. The uptake of sales was initially skewed towards the ones that did because people wanted those blocks and then others followed because they could see the wider benefit. The result was the project sold out in 4 hours. In the case of the solar initiatives at the Evermore, we launched that project into a tough pre-sales market but we got the sales away. Other councils have subsequently expressed an interest in the liveable street concept.

Councils seem to care and this is the big one for us. They are starting to take note of our sustainability credentials. By way of example, we’re working on a rezone at the moment, where those credentials have been thoroughly investigated and well received by the council in question. As a result, they are more supportive of our proposal (they were reluctant to rezone the previous owner because they didn’t want what they would have delivered).

These may be “feel good” aspirations and outcomes but are there practical or commercial benefits for you, as a developer?

Our observations are that it may help with sales rates, not a sales price premium at present.

We are seeing greater interest in what we do and getting a better hearing from Councils and that is currently the most tangible benefit. The proviso is, so long as you’re not “greenwashing” and are genuinely trying to push the boundaries and set new benchmarks. We will see significant timeframe benefits and the realisation of our vision for a rezone project sooner and ultimately our investors will see the benefit of that.

One thing we realised with ESG principles, it is about targeting the best bang for your buck. If you try to do too much you can get overwhelmed, so you need to focus your resources on one thing and do it really well – that has the greatest impact.

Just as there has been a wave of capital searching for assets in certain sub-sectors of the Australian property market, it seems there’s a “wave” of impact investors heading our way. Are you seeing any real benefit from the initiatives you’ve undertaken?

Family offices are different to larger organisations and insto investors. Family offices want a return of course but if they are looking at a number of opportunities and here’s ours trying to push the boundaries and do something a little better, then they’re happy to embark on a project with you and try and do things better, so long as the risks are not overtly greater on a like-for-like basis. No matter what sector you’re in we should all be trying to do a bit better.

Innovation does come with risk and it’s a matter of managing that risk. I do believe that the bigger institutions are still trying to get their heads around ESG and quantifying it. In bigger corporations by the time a great idea has gone through everyone’s hands and everyone trying to reduce the risk, the idea can become watered down so much that it is not a great idea anymore. This is slowly changing, with the creation of pilot funds within bigger groups to invest in newer techniques but it will take time to get to scale.

Are we at the point where property developers, owners and managers that cannot demonstrate genuine ESG credentials spanning sustainability and social issues, will become ‘un-investable’?

We’re not there yet but it will happen.

What do you like to do outside of work?

I’m a mad keen ocean goer so I like surfing and boating. That is when I’m not coaching soccer and footy on the weekends!