Special Forum Sessions on Real Estate

Panel Session 2:
Putting sustainability in real estate into practice
Moderator: Tatiana Bosteels
Head of Responsible Property Investment, Hermes Real Estate,
UNEP FI Property Working Group Co-Chair

Organized by:

Promoted by:

With the participation of:

Putting sustainability in real estate into practice:

WHAT has been achieved in last 5 years?

Policy framework in place in EU and Members States

Tools and concepts addressing the organisation of information flows
and decision-making processes
Including supply chain challenges.
Growing evidence of links between sustainability related
performance aspects of buildings and investment performance.
Range of real estate practitioners getting involved: Valuers

Major steps foward in understanding sustainability and

involving real estate practitioners

Sector tools regarding methodological evidence

Link to download the publications

www.iigcc.com
www.worldgbc.org
http://ec.europa.eu/energy/efficiency/buildings/buildings

Building tools for investors

Link to download the publications

www.unepfi.org/publications/property

Building tools for constructors and developers

Link to download the publications

http://www.unep.org/sbci/

Building tools for valuers

Link to download the publications

http://www.rics.org

Putting sustainability in real estate into practice

HOW to scale it up?
Is there a need to improve and create more supportive policy
framework conditions?
How do we disseminate the existing tools and methodologies to
help integrate sustainability into information flow and investment
decision-making process?
How do we continue to build and communicate the evidence of
impact to investment performance and the full benefits of green
building?
How to increase the understanding and knowledge of key
practitioners: Valuers, lenders, letting agents, assessors, etc..
What are the skills gaps among real estate practitioners and how
do we address these?
How to scale up actions to achieve changes required by
policy ambition and corporate objectives?

WSB 2014 - Barcelona

Putting sustainability in Real
State into practice
Pau Garcia (EASME)
Pau.garcia-audi@ec.europa.eu

Putting Sustainability in Real Estate

into practice
European Commission's interest in Real Estate
EEFIG Group
RenoValue

9
Energy
Energy

EC's interest in Real ESTATE

EU Objectives:
EU 2020 objectives
EU 2030 objectives
EU 2050 objectives

EU Directives
RES Directive (RES in buildings)
EPBD (NZEBs and renovation)
EED (NEEAPS and renovation)
10
Energy
Energy

EC's interest in Real ESTATE

EU support instruments:
FP7 and IEE
H2020
Structural Funds
EiB
Work with financial institutions

11
Energy
Energy

EC's interest in Real ESTATE

Biggest problems in bringing EE into practice:
Finance
Finance
Finance

Then other ones:

Legislation, building codes, standards, technology
and innovation, perceived costs, amortisation, sector
fragmentation, training (all actors), different
solutions (but no single solution), etc. etc. etc.
Energy
Energy

12

EEFIG Group
Energy Efficiency Financial Institutions Group
EEFIG report
http://ec.europa.eu/energy/efficiency/studies/doc/2014_fig_how_drive_finance_for_economy.pdf

6 conclusions:
Implementation of
Directives

Improve and facilitate the

decision process

Legislation stability Benchmark

Data

Link funds to NEEAPS

13
Energy
Energy

RenoValue
Why did we select it?
Very focused Straight to the problem
Training

Mix of relevant actors

Long term solution
Bring EE valuation into standard practice

Good value for money

14
Energy
Energy

Putting Sustainability in Real Estate

into practice

THANK YOU!

15
Energy
Energy

Sustainability metrics in real estate

Frank HOVORKA
UNEP FI Property Working Group : Co-chair
Sustainable Building Alliance : Chairman

The mandate of the Property Working Group

UNEP FI is a global partnership between

UNEP and the financial sector
Over 200 institutions, including banks, insurers and fund
managers, work with UNEP to understand the impacts of
environmental and social considerations on financial
performance. The Property Working Group (PWG) analyses
the role of financial institutions in promoting sustainable
development in the real estate and property finance
sectors.
Members include:
Actis
Allianz Real Estate (Allianz SE)
Aviva Investors (Aviva plc)
Axa Real Estate Managers (Axa
Group Management Services)
Bentall Kennedy
BNP Paribas Real Estate
Investment Services (BNP Paribas
Fortis)
British Columbia Investment

CalPERS
Colonial First State Global Asset
Management (Commonwealth Bank
of Australia)
Deutsche Bank
F&C REIT Asset Management
Hermes Real Estate
Hesse Newman Capital AG
Infrastructure Leasing & Financial
Services

The Link REIT

M&G Real Estate
Mitsubishi UFJ Trust & Banking
Corporation
Portigon
RobecoSAM
The Sumitomo Trust & Banking
Co., Ltd.
Sustainable Development Capital
LLP

Investa Property
Group
UNEP FI Investor Briefing COMMERCIAL REAL ESTATE
UNLOCKING
THE ENERGY EFFICIENCY RETROFIT INVESTMENT OPPORTUNITY

Management Corporation (bcIMC)

Caisse des Dpts et
Consignations

Lend Lease

Thomas Lloyd

UBS Global Real Estate (UBS AG)

17

Life cycle but no

communication or
information
translation !

www.worldgbc.org/activities/business-case/

You cant manage what you cant measure

A survey of property investors and managers revealed that

A relatively sound understanding of sustainability exists in relation
to single buildings and investment vehicles. The information/data on many
performance aspects are already being gathered by leading organizations
but the respective data are not yet systematically captured and
processed:

81%

16%

58%

have some form

of sustainability
check in place

is able to use the

information for
sustainability
reporting functions

do not have any

form of internal
management
system
in place

Industry drivers for Responsible Property

Investment (RPI)

Better understand the impact of environmental and social

issues to protect long-term performance and value of
property assets.

Get ahead of regulatory environmental and social

requirements.

Respond to tenant demands for more environmentally

efficient buildings.

Foster better collaboration and align interests between

the different actors in the investment and use of real
estate.

Meet investors fiduciary duty.

Needs and options to take action

Sustainability considerations can be embedded within
business and decision-making processes at different
corporate levels

Buildings sustainability performance will impact on asset

and portfolio value, corporate reputation and financial
performance
UNEP FI Property Working Group report SUSTAINABILITY METRICS TRANSLATION AND IMPACT ON PROPERTY INVESTMENT AND
MANAGEMENT

21

Translating information for decision-making

From the boiler room to the board room.

UNEP FI Property Working Group report SUSTAINABILITY METRICS TRANSLATION AND IMPACT ON PROPERTY INVESTMENT AND
MANAGEMENT

22

Structuring information flows

To address the problem, it is necessary to consider that
information flows need to be structured and managed in
relation to 3 domains :
-

Organizational

External

Cross-over

UNEP FI Property Working Group report SUSTAINABILITY METRICS TRANSLATION AND IMPACT ON PROPERTY INVESTMENT AND
MANAGEMENT

23

Collecting performance / quality

information at the building level

UNEP FI Property Working Group report SUSTAINABILITY METRICS TRANSLATION AND IMPACT ON PROPERTY INVESTMENT AND
MANAGEMENT

24

Building Information Modelling

Building Passport
Designed indoor
climate class:
A/B/C

kWh/m2
150

Recycling, reuse,
demolish

Renewable, building, users

Energy:

Maintenance, repairs

Renewable, building, users

Energy:

Renewable, building, users

Energy:

Renewable, building, users

Energy:

Maintenance, refurbishment

Materials

Maintenance, repairs

500

Maintenance

Waste

Maintenance, repairs, retrofit

Work

Renewable, building, users

1000

Energy:

Transport

Energy:

1500

Measured user
satisfaction:
%

Indoor Environment Quality

Maintenance, repairs

kgCO2/m2

Renewable, building, users

Name:
Address:
Year of completion:
Heated floor area:
Number of occupants:

Primary
kWh/m2
Energy
Performance
Certificate

Year: 0
Embodied:
kgCO2/m2

50

Design Real

-500

100

1
Operational:
kgCO2/m2,a

29

10

Embodied:
kgCO2/m2,a

Recycling
:
kgCO2/m2

Designed carbon footprint

of building

1124
Measured
kWh/m2
Display
Energy
Certificate

25

2649

Energy
kgCO2/pers,
a
Annual
Footprint

50

Travel
kgCO2/pers,
a
Recycling of
waste
%

-50

Water
m3/pers,a
Landfill
waste
kg/pers,a

Translation to financial tools

Translation
Market Response
drivers

sources: Bozorgi (2012),

SBA project sustainable building performance thresholds
value (2013)

Value information

generating

The way to success

Corporate Real Estate Sustainability Management (CRESM)
The implementation of CRESM requires a holistic approach across
the whole organization. The successful management and integration
of sustainability risks and opportunities into business routines and
decision-making processes depends upon an approach to
information/data at all corporate levels.

UNEP FI Property Working Group report SUSTAINABILITY METRICS TRANSLATION AND IMPACT ON PROPERTY INVESTMENT AND
MANAGEMENT

28

Unlocking energy efficient investment

opportunities
A seven-step approach can effectively increase the the supply
of financeable energy retrofit projects.
Ensure executive awareness of the business case
Measure and benchmark building energy performance
Set portfolio energy efficiency targets
Link asset manager compensation to energy performance
Align lease clauses to enable retrofits (green leases)
Include impact on asset value in investment analysis
Take a portfolio approach to determine next steps

THANK YOU

Link to download the publications

www.unepfi.org/publications/property

UNEP FI Property Working Group

Elodie.feller@unep.org

UNEP FI Investor Briefing COMMERCIAL REAL ESTATE UNLOCKING THE ENERGY EFFICIENCY RETROFIT INVESTMENT OPPORTUNITY

30

Greening the Building Sector

Supply Chain

World Sustainable Buildings Conference 2014

Barcelona, Spain
28-30 October 2014

Curt Garrigan
UNEP-SBCI

The Global Impact of Buildings

Environment
1/3 of global GHG emissions is from the building sector- the
single largest contributor of emissions
40% of global energy use
60% of worlds electricity consumed in residential and
commercial buildings
Energy used for heating, cooling, ventilation lighting, plug
loads, water production, etc.
40% of waste generated by volume
25% of global water usage
40% of global material resources
Growth regions: Asia, Africa, Middle East, and Latin America

The Global Impact of Buildings

The social challenges ahead.....

By 2030, 80% of the worlds population will be living in cities in Africa, Asia, and
Latin America

By 2030, 40% of the population (3 billion people) will need access to housing

How to meet this demand in a resource efficient way?

Need for housing, commerce, schools, hospital..

UNEP-SBCI Partnership
Mission Statement:
UNEP-SBCI is a public-private partnership that works to promote
sustainable building policies and practices worldwide, with a
special focus on buildings and climate change. The initiative
develops tools and strategies to support policy-makers at local,
regional and national levels. Partners, including key public and
private stakeholders in the building sector contribute to the
initiatives work and guide development of its tools and strategies.
Stated Goals of the Initiative:

1. Provide a common language to allow international cooperation on

sustainable buildings.
2. Develop tools, methodologies and data that help to identify barriers and
enabling measures to wider adoption of sustainable buildings
worldwide.
3. Support policy makers and relevant international processes to recognize
and realize the role of buildings.
4. Demonstrate through pilot projects.

UNEP-SBCI Partnership
Parallel Work Streams
Energy Efficiency and Climate Mitigation
Focused on Performance of Buildings (in use)--Developed the
Common Carbon Metric (CCM)
Assessment of Policy Instruments
State of Play and Baseline Reporting
Workshops with UNFCCC
SUSHI and SPoD projects
Development of Nationally Appropriate Mitigation Actions project in
Asia
Resource Efficiency
Focused on Construction system
Reduce water, material, and energy consumption, and waste and
carbon generation
Supply Chain initiative
Supports sustainable consumption and production patterns and
SBC programme under 10 Year Framework of Programmes

Resource Efficiency in the Building Sector

The building sector can be called the industry of thirds:
over a third of all CO2 emissions come from building
construction and operations, over a third of all energy and
material resources is used to build and operate buildings, and over
a third of total waste results from construction and demolition
activities.
UNEP- Green Economy Report, 2011

From 1900 to 2005:

Total material extraction increased over that period by a factor of 8.
The strongest increase can be observed for construction minerals,
which grew by a factor 34
UNEP- Decoupling Natural Resource Use and Environmental
Impacts from Economic Growth, 2011

Pathways for the Building Sector

Climate and Energy
Projections and established
pathways to zero
energy/zero carbon
Promote policy actions
(Graph from Architecture
2030)

Resource Efficiency
Resource use and Materials
extraction increases with
population growth
(materials, water, waste)
Construction mineral extraction
from 1992 to 2005 increased
by 80%
How to alter resource
consumption trends from
construction?

How to reduce Global Resource Consumption

Increase sustainability and resource efficiency in the

Building Sector through a focus on its supply chains,
which have impacts on multiple sectors

Greater Resource Efficiency in the Building Sector will

require significant stakeholder engagement at all
levels, and in public and private sectors

Greater Resource Efficiency in the Building Sector will

also require targeted Green Interventions at various
stages of the building delivery process

Stakeholders have different roles and

responsibilities in an overall building
delivery process.
Green interventions must be designed at
the appropriate stage and engage the
relevant stakeholders.
Interventions can be regulatory, voluntary
initiatives, incentives, etc.
Need metrics/indicators to measure
resource efficiency impact

Sustainable Buildings and Construction under

the 10-Year Framework of Programmes on
Sustainable Consumption and Production
(10YFP)
Inter-governmental Mandate for SCP adopted
at Rio+20
o

Sustainable Public Procurement

Sustainable Tourism

Sustainable Buildings and Construction

Consumer Information and Education

Sustainable Lifestyles

Opportunity to Mainstream SCP and Resource

Efficiency in the Building Sector

10YFP SBC Programme

Potential work areas
Establish and promote
enabling frameworks
to implement
sustainable building
policies

Support and Promote

Sustainable Social
Housing Initiatives

Promote Resource
Efficiency in Building
Sector Supply Chain

Building sector
sustainable policies
and codes
Sustainable social
housing
development and
finance strategies
Development of
tools and metrics to
measure and report
resource efficiency
Develop building
sector mitigation
actions
Establish and
support building
sector networks,
complete State of
Play reports to
assist policy-makers

Reduce climate
impact of building
sector- realize

national climate
mitigation targets
through building
sector actions
Knowledge sharing,
outreach and
awareness raising-

expert networks to
support national
actions

SBC 10YFP Programme Development

Potential key actors

SB

CI

Regional
centers of
excellence
(ex: BCA
Singapore)

Green
Building
Councils

Joining
forces
onal s
i
t
a
N
ent
m
n
r
gove

Technical
Networks
, etc.
Resea
instit rch
ution
s

SBCI

Green
Building
Councils

Research
institutions

Regional
centers of
excellence
(ex: BCA
Singapore)

National
governments

Technical
Networks
, etc.

10YFP Programme
Development

Drivers for change:

Strengthening the role of valuation professionals
in market transition
Ursula Hartenberger,
Global Head of Sustainability, RICS

RenoValue Project:
Geographical outreach

Partner countries
(UK/DE/NL/PL/IT/BE/SE)
Countries directly involved
(NO/FI/DK)
Countries indirectly involved:
material available in their local
languages (IE/FR/AT/MT/CY)

RenoValue project rationale

Property valuation is important with regard to sustainability

of the built environment

Valuations are carried out at almost every stage of the property life cycle

Valuers are the the independent axis around which property information flows

Valuers are information managers in often highly intransparent property markets

Arguments used by both parties in the negotiation process in a commercial

transaction process are usually based on advice provided by valuation
professionals on both sides.

While valuers do not make the market, their advice and the scope
and the nature of their services influence property market outcomes.

Reality check

Studies

Guidance

Consideration
in daily valuation
practice?

RenoValue
Starting Point

Owners & Tenants

We would like to own and/or
live and work in energy
efficient buildings but we are not
sure wether this makes economic sense
and there is a lack of adequate

Current market barriers

to large-scale uptake of energy efficiency
and renewable energy in buildings in the EU

professional expertise.

Lenders, Investors,
Insurers
We would provide preferential
conditions for energy efficient buildings
but as yet there is little
demand and too much uncertainty regarding
the real economic impact.

Source: Hartenberger, U. & Lorenz, D., 2013

Built Environment
Professionals*
We would advise our clients on
the economic benefits of energy efficiency and
renewable energy installations
and carry out subsequent measures
but our clients do not usually
ask for it and lenders and investors do
not give preferential rates.

Valuers
We have not got the skills to assess energy
efficiency measures and only reflect the market and
cannot reflect the benefits of
energy efficiency and renewabe energy installations
without evidence of the market
being willing to pay for it.

*Designers, constructors, developers, valuers, etc

Project objective

To design and pilot bespoke training material to provide

practising valuation professionals with the necessary knowledge
and skills on the basis of market insights gained through national
round tables and surveys.

Owners & Tenants

(Valuation Users)

RenoValue
Project Outcome

We purchase and rent energy efficient

buildings and invest in energy efficiency
and renewable energy because
this reduces operational
costs and increases occupant
well-being and comfort and
ultimately asset value.

Professional Bodies
We spread the knowledge about
the economic benefits of energy
efficiency and renewable energy installations because
this is critical for capacity building
and market transformation.

Built Environment
Professionals*

Lenders, Investors,
Insurers

Increase of Nearly Zero

Energy Buildings in EU

We design, build and retrofit energy

efficient buildings
because of market demand
and because lenders, investors
and insurers provide preferential
conditions.

(Valuation Users)
We invest in, finance and insure
energy efficiency and renewable energy
projects because that is
what occupiers want and
therefore there are fewer

Valuers
We recognise the economic
benefits of energy efficiency and renewable energy
in buildings and reflect this in
advice given to clients and other built
environment professionals.

associated financial risks.

Supply
Source: Hartenberger, U. & Lorenz, D., 2013

Demand

*Designers, constructors, developers, valuers, etc

Project progress to date

May July 2014: national valuation roundtables

8th of May - London

22nd of May - Stockholm

11th of June - Warsaw

7 roundtables

3rd of June - Amsterdam

25th of June - Frankfurt

7 EU countries

6th of June - Brussels

2nd of July - Milan

150 participants

16 video interviews

88 valuers surveyed to

published online

prepare the roundtables

Key questions raised in surveys and round tables

1.

What are the current levels of awareness and knowledge with regard
to energy efficiency and renewable energy installations within amongst
valuation professionals across a sample of countries within Europe?

2.

What kind of market barriers currently hinder the consideration of

energy performance data by the valuation community?

3.

What is the local market sentiment with regard to energy efficient

buildings potentially commanding higher sales or rental premiums?

What are the current levels of awareness and

knowledge with regard to energy efficiency and
renewable energy installations within amongst
valuation professionals across a sample of countries
within Europe?

the level of awareness among the majority of market participants

is rather low;

more guidance is needed on how to interpret energy efficiency

related information, how to consider this type of information in
valuation reports and how to advise their clients accordingly.

What kind of market barriers currently hinder the

consideration of energy performance data by the valuation
community?

a lack of general lack of market transparency

a lack of systematic and centralised collection and management

of building information, linking transaction and energy performance
data

a lack of quality assurance procedures both in relation to basic

transaction data as well as energy performance data recorded
through energy performance certificates

What is the local market sentiment with regard to energy efficient

buildings potentially commanding higher sales or rental
premiums?

the availability of reliable and robust local data still the exception
rather than the rule

as yet there is not enough sufficient local data that would allow a
general conclusion that better performing buildings really do
command higher sale or rental prices although in some locations
this does seem to be the case

going forward, the market may no longer talk about a green premium
but rather about the risk of a brown discount for buildings that do
longer meet legislative requirement thresholds and client expectation

Next steps: Development of training material

Drafting
of
Training
Material

Piloting
of
Training
Material

Finetuning
of
Training
Material

General
Roll-out
of
Training
Material after
February 2016

Thank you!
Contact:
Ursula Hartenberger
uhartenberger@rics.org

Sustainability from a valuation practitioners

perspective

Mark Creamer MRICS

Head of EMEA Valuation & Advisory Services CBRE

Organized by:

Promoted by:

With the participation of:

AGENDA

The Influence of the Occupier

The Influence of the Investor

The Role of the Valuer

THE ROLE OF THE OCCUPIER

Why is sustainability important in your sector?

THE ROLE OF THE INVESTOR

Where lies the gain?

Greater marketability of the property.

Some tenants have strict policies concerning the environmental
performance of the space they occupy.

Tenants much more aware of ongoing maintenance or
refurbishment costs

Tenants looking for reduced energy consumption.

Result is shorter void periods in more sustainable buildings.

Other factors such as bicycle racks, corporate reputation are of
interest but not material in the valuation context.

RICS GUIDANCE
RICS Valuation Professional
Standards (2014)

Valuers are advised to collect
appropriate and sufficient sustainability
dataeven if it does not currently
impact on value.

Valuers are recommended to arrive at
an informed view on the likelihood of
sustainability criteria impacting on
value.

Comment on the current benefits/risks
that are associated with any
sustainability characteristics, or the
lack of risks

Provide a statement on the potential
impact of the benefits and/or risks to
relative property values over time.

VALUERS and
EcoPAS service
EcoPAS measuring environmental
risk of real estate portfolio

Designed for portfolio management

Benchmark measuring environmental
risk of every asset in portfolio

Designed in collaboration with fund
managers, valuation surveyors and
sustainability managers

RICS supports and checklist
recommended to be used in standard
valuation practice

Data collection process shared between
INVESTORS, VALUATION SURVEYORS
and IPD

CONCLUSIONS

No specific adjustment for building ratings

Rental levels

Length of void period

Operating costs

A multitude of factors influence a valuation:

Type of asset
Age, use and location
Macro economic picture
Tenants
Insurance costs

Valuer training

Thank you

CONCLUSIONS
Scaling up sustainability integration in real estate into
practice How..
There is a lot of knowledge tools instruments - material
available to be used
Need to provide right information - in the right format to the
right level of decision making
The full benefits of green buildings must be captured and wellarticulated to key financial decision makers
Clear need for up-skill of a wider range of real estate practitioners
and educate them on sustainability performance and its impacts
Work with policy makers to ensure policy framework is supportive
of investments in sustainable real estate and construction
Need to disseminate existing knowledge, tools and data
Right level of information at right level of decision making