Business Overdrafts
Be financially flexible with a business overdraft.
Spotlight on Higher Education
Watch time: 11 mins Added: 13/09/22
In the first of our ‘Spotlight on…’ series we talk to Susan Lea, from the University of Hull about their ambitious targets for net zero and how they are building relationships within the Humber to support the levelling up agenda.
-
Speaker 1: Welcome to the University of Hull, where we'll be discussing how the higher education sector is balancing the drive to net zero with the current economic climate. What do you see as the biggest challenges for the higher education sector currently?
Speaker 2: So I think for me it's got to be financial sustainability, as you say, with flat fees and rising cost of living. That causes enormous challenges for universities. But I think on top of that, there are a set of other challenges, and that would be competitiveness for students, uncertainty about research funding, questions around quality and value of universities, and indeed mental health arising from the COVID pandemic.
Speaker 1: And what do you see as the biggest opportunities for the sector in the coming years?
Speaker 2: So for me, I think there are an enormous number of opportunities around the levelling up and place based agenda. This is something that’s really important. We know we live in a country with considerable inequalities and drawing that thread from what we do locally in our own place to the global stage, whether that’s in terms of research or education or wider engagement, there’s lots of opportunities there, particularly through developing good partnerships.
Speaker 3: And I agree with that, Susan. But alongside that, as we face the global climate emergency, I think the higher education sector in the UK has got great opportunity to be a world leader, a world leader in terms of the way they educate their students, world leader in terms of the way they transition to net zero and world leader in terms of the way they work with their communities and with their suppliers.
Speaker 1: How important do you think it is for universities to be anchor institutions in their regions?
Speaker 3: It's critical. When you think of the contribution the higher education sector makes to UK economy, that gives you the sense. It contributes over £50 billion gross domestic product and employs indirectly or directly over 800,000 people. And in Yorkshire and the Humber region, I think we're talking about over £5 billion of gross domestic product, employing 75,000 people.
Speaker 1: Actually, Susan, I was going to ask you, what is the University of Hull doing to support the ambitions of the wider Humber community?
Speaker 2: So the University of Hull takes very seriously its role as an anchor institution and it's a role we've always played. If you look at this region, we're the only university in the Humber. The Humber is the highest emitter of carbon in the country, but it's also an area of significant inequality and deprivation. So right at the heart of our strategy, 2030, in the university are those twin themes of environmental sustainability and social justice.
Speaker 1: And do you see the inequality getting less or have you seen much improvement?
Speaker 2: So this is an area of considerable inequality, and I think that equality is written through a whole range of things. So health inequalities, wealth inequalities, etc., in honesty, it's difficult to improve that in the current circumstances.
So COVID has widened divides in the population, not lessened them, and I think we have to be really mindful of that. And certainly as a university, as we play that anchor institution role in the region, understanding those divides and trying to help in a variety of ways is critical through our research. So for example, in health, cancer outcomes are very different depending on where you sit in the population.
So our research here is making that difference of trying to ensure that everybody accesses cancer treatment at an early stage and comes in if they've got concerns about their health. So if we could use this area as a test bed for levelling up and achieve success, it would really be lessons learned and a blueprint for other areas.
Speaker 1: And what do you think the time frame is to move up a notch on that levelling up?
Speaker 2: I think that's the million dollar question. You know, if we had the answer to that question, we'd probably be an easier place because the devil is in the detail and resources are required to level up. It's actually really difficult to level up without attracting more resource.
So in this area, the way to achieve that is to work in partnership with others to bring money and investment into the region and thereby to level up and for us here as well, it's about linking together carbon neutrality and social justice, because if you can pull those things together and you can innovate in the carbon space and at the same time level up, that is a win-win.
Speaker 1: How do the sustainability credentials of a university impact their wider business models?
Speaker 3: Well, first of all, I think I think the university's ESG plan should be front and centre of its strategy. And so having a credible transition plan, exactly as the University of Hull have done is really critical. And the risks are if you don't, there's this real major institutional risk, risk of students who might not have appetite to go to university, staff who might not want to come to your university, and suppliers that might not want to work with you.
Speaker 2: Yeah, I would completely agree. It's got to be front and centre right at the heart of your strategy. It's got to be led from the top. I think the governance needs to be there and you need to be clear about your purpose and how you're going to get there. And as you say, I think you need to be transparent and open because your stakeholders are looking to you to see how you're actually taking that forward.
Speaker 1: Who would you both say is getting it right when it comes to ESG and higher education? Is there one institution that is leading?
Speaker 2: I'm not sure anybody's getting it right. This is a very big and complex agenda. I'm really proud of what the University of Hull is doing in this space. It's absolutely at the core of our strategy as I've said and our ambition is to be carbon neutral by 2027, which is our centenary year. And that's what we're well on track to deliver.
Speaker 1: That is extremely ambitious. Many UK universities have a target of 2050. I think LSC has got an ambitious target which is also hit, but 2027 is not that far away now, is it?
Speaker 2: It's not that far away. But you know, there is a climate emergency right on our doorstep. The IPCC is really clear about that. And our belief at the University of Hull is we all have to step up, we all have to play our role, and we're really proud to be at the forefront of that and have set an objective that is ambitious, but nonetheless realisable and realistic with concerted effort and hard work.
Speaker 1: So how can sustainability and higher education support local communities and beyond?
Speaker 3: Well, there's actually a recognition that where there are positive green outcomes, there are positive social outcomes. And so that's I think the opportunity that universities can engage from a research perspective. For example, in areas such as retrofit of homes where, you know, outcomes through research can lead to lower flow fuel costs and more comfortable living environments for people.
Speaker 2: And I think the other element of that for me is around business support. Businesses are trying to reduce their own carbon. And so universities play a key role at the University of Hull, in particular in supporting businesses, in achieving those ambitions through things like Project Aura, where we have a consortium here. Businesses can come in for support.
They can work with us on innovative solutions for carbon reduction, and then that enhances their business and the opportunities for people within it. There are risks and given the current financial situation to people's ability to deliver against their carbon strategies. But we can't not deliver against our carbon strategies.
The planet is in crisis and there are threats to its people. So we have to find ways. And surely universities are the seats of innovation to find those ways and in partnership with others, we've already shown that you can deliver all sorts of incredible solutions to these sorts of challenges and we've just got to continue doing so.
Speaker 3: Yeah, we are actually seeing that happen across the sector. Hull is a good example, having just raised £86 million to support their transition, the funding is available through banks and through the capital markets to do this.
Speaker 2: So for us, the private placement facilitated through Lloyds is critical to realising those carbon neutral ambitions because it will enable us to move forward with some specifically carbon neutral deliverables, but also to develop our academic infrastructure in a way which means we can deliver excellent research and education in buildings that are green and will be attractive to students and to staff.
Speaker 1: Andrew, I'd love to begin with you and get your thoughts on how higher education businesses can finance themselves for the future.
Speaker 3: Well, I think the most important thing is that universities are financially sustainable. And by that I mean they generate free cash flow and regular surpluses.
So that's the most important thing. But from a solid base, I think there's a real significant opportunity to secure funding to help universities meet their ambitions. And that might be net zero ambitions or it might be international campuses or own campus development. And the way you might do that: working with the bank, obviously, or with the capital markets, those are the two ways we typically see in this sector. In the shorter term, funding via the bank and the longer term funding via the capital markets.
Speaker 1: And do the capital markets, are they very interested in this kind of funding?
Speaker 3: Well, it's really interesting, actually. The capital markets really see the UK universities as somewhere they want to invest in. We see that really typically in that they see long term investment in the UK as a very sound proposition. They have money to invest in the UK and they want to invest in the UK’s universities.
Speaker 1: Does that surprise you, Susan?
Speaker 2: I suppose it doesn't surprise me necessarily because I think the UK has a fantastic reputation for higher education and it's well recognised for its quality and its excellence. And I think Andrew's right, financial sustainability is key in generating those operating surpluses, but you can only do so much with those operating surpluses given the financial challenges that we've spoken about and that we face. So therefore, securing additional finance to enable that investment is absolutely pivotal to success, really.
Speaker 1: Why was it important for you that those funds were raised using a green finance framework?
Speaker 2: So a green finance framework was absolutely essential for us because our clear strategic ambition is around environmental sustainability and carbon reduction, and it's at the heart of our strategy 2030. So for us, everything we do is within that theme, and we're a university that is absolutely well known for our research and education in climate change and environmental sustainability and carbon reduction. And we try to practice what we preach. And therefore a green financing framework was essential.