Workload on ESG projects is increasing rapidly
ESG is exerting an increasing influence on the world of real estate and this means that the amount of work involved in proving that building and portfolio are truly sustainable and healthy is rapidly increasing. In addition, parties realise that there is still a great deal of regulation hanging over the market.
The fact that Environmental Social Governance is a subject that you can no longer ignore as a property owner or user has rapidly become clearer in recent months. The alarming noises about global warming plus the continuing attention to matters concerning people's health, welfare and safety are to blame for this. The entire economy is affected, but real estate in particular. Just think: around 40% of the world's annual greenhouse gas emissions are related to real estate. In addition, we are increasingly aware of the impact of our built environment on our health, well-being and safety.
ESG-proof real estate is worth more
We see that the ESG trend is increasingly reflected in the value of real estate. The major property consultants CBRE, JLL and Cushman report that tenants are prepared to pay higher rents for ESG-proof buildings. We also see increasingly clearly that investors are prepared to pay higher prices for sustainable and healthy buildings.
In fact, the world's leading investors are now shying away from buying buildings with tenants who clearly contribute negatively to environmental pollution, such as oil or airline companies.
So we see the demand for ESG-proof buildings rising sharply. This in turn leads stakeholders, from shareholders to tenants, financiers to government, to want to see hard evidence that what you claim about the building or portfolio is actually true. That proof has to come in the form of hard information about your building. And that proof should not be provided just once, but continuously: keeping the ESG performance of a building up to standard in terms of energy, health and safety requires a considerable effort from the owner and his partners, such as the property manager.
Strong emergence of industry standards and regulation
Fortunately, owners and users do not have to figure out how to provide that proof themselves. We see a strong emergence of industry standards and benchmarks for ESG such as BREEAM, LEED, WELL, Fitwel and GRESB. These standards should be seen as detailed manuals to determine how sustainable, healthy or safe your building is based on hundreds of information points. More and more building owners are initiating massive certification programmes for their portfolio or reporting to ESG benchmarks.
At the same time, we see that the government is increasingly regulating the real estate market when it comes to ESG. Given the enormous social task in terms of sustainability, health and welfare, this is not surprising. Europe is leading the way internationally in this respect with the Energy Performance Buildings Directive (EPBD) or the EU Taxonomy for Sustainable Activities. Government regulation is also expected to move increasingly in the direction of detailed blueprints for determining whether a building and portfolio are ESG-proof.
The realisation that you have a social responsibility and that a serious ESG approach is also a prerequisite for value-adding real estate means that more and more owners are getting to work on their buildings. We see this reflected, for example, in the enormous increase in the number of building certifications. All of this means that there is a huge amount of work for the market to do when it comes to providing the evidence for ESG-proof buildings.
1,000 data points, 500 evidence documents
For example, if you want to provide the evidence for the latest version of BREEAM in use, V6, you have to colour 1,000 data points and provide 500 evidence documents to go for the highest certification. It's not crazy to do that, because in addition to a demonstrably ESG-proof building, high certification also delivers the highest value.
Such ambitions do mean that there is a lot of work to be done in the short term. It is a complex project in which information from all kinds of sources, from building management systems and energy to all kinds of documents, must be brought together.
Software that can be characterised as so-called data fabric can help you with this. According to a renowned research agency such as Gartner, this can save up to 70 % of the efforts needed for data management. We have developed the Blue Module precisely to help with this. If you want to know more about it, please contact us!
To sum up:
- The ESG trend is increasingly impacting the value of real estate
- The demand for hard evidence is growing rapidly
- Standards and benchmarks to collect evidence (BREEAM, LEED, WELL, Fitwel, GRESB) are rapidly emerging
- Government regulation is also increasing and becoming more detailed
- The amount of work for the investor is increasing and ESG software helps you to do that in the most efficient way.