ESG Real Estate Insights 2021 | Article #7 ESG as real estate value driver - Deloitte
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
ESG Real Estate Insights 2021 | Article #7 ESG as real estate value driver
ESG as real estate value driver | ESG Real Estate Insights 2021 Recently, environmental and social issues have become a public and political priority, and as such, of material value for investors. An informed and regular approach to identification and management of ESG impacts shall protect investment portfolios and not only enhance resilience and guard against the risk of accelerated obsolescence and value erosion – and will also provide better financing conditions within a larger pool of new, more responsible capital, attracted to the industry to make a positive ESG impact. 2
ESG as real estate value driver | ESG Real Estate Insights 2021
For the real estate sector, the EU by investors, managers, tenants and
In our previous ESG Real Estate Taxonomy drafted by the European ultimately even the users, each one
Insights series, we have noted Commission within its Sustainable at its level of involvement. Proper
that the real estate sector, which Finance Action Plan (SFAP) is becoming understanding of the value chain of the
generates approx. 36 percent of the main guide for practitioners and properties by all stakeholders will enable
GHG emissions and consumes investors to implement at sector and the development of effective strategies
around 40 percent of the project level, when looking to ease their and drive sustainable change. Defining
total power balance1, greatly access to capital. The EU Taxonomy the ESG strategy with this knowledge
contributes to climate change. aims at three objectives when it comes will provide the management team with
The high level of emissions is, to real estate projects: optimizing the relevant insights to take action – and will
among others, a result of using use of resources, reducing emissions also allow them to assess which initiatives
such energy-consuming materials and waste, and extending the lifespan will bring the greatest benefit to the
as brick, concrete, steel, etc. of assets by adopting a more circular entity’s operations, i.e., to its shareholders
However, in 2019 compared to economy approach that, in turn, will and stakeholders together. Such benefits
the previous year, CO2 emissions allow the subsequent elongation in may include the following initiatives:
from the operation of buildings projects’ cashflows. To this end it is highly
have increased to their highest desirable to use innovative methods and Increased effectiveness of risk
level yet at around 10 Gt CO2, technologies that effectively extend the management over climate change-
or 28 percent of total global life of buildings and/or their components. related risks
energy-related CO2 emissions. 2 Finding solutions to extend the usability Risk management efficiency is an
Emission reducing activities are of objects, be it with new uses or by important matter affecting the value of
incorporated in the European upgrading them to extend the current real estate. At present, preventing climate
Green Deal, which goal is for the use, allows for greater economy for the change that may jeopardize financial
EU to achieve climate neutrality investor – who should not always require stability is a key challenge and adapting to
by 2050. The emergency of global major renovation or adaptation processes the already present changes is considered
mega-trends, understood as but rather implement an innovative as important. The Task Force on Climate-
large-scale social, economic and approach. Circularity, considered from the related Financial Disclosures (TCFD),
environmental changes, should phase of design, significantly improves created by The Financial Stability Board,
make the real estate sector the economics of a project by allowing has prepared a set of guidelines to help
change its approach towards a the reutilisation of objects or their enterprises in the identification of climate
more sustainable development. parts, recycling the resources used in its change-related risks.
construction. It even reduces the impact
All of these brings us to the key that at the end of the life of an object To this end, the early identification of
question: What is the value of a needs to be considered – as these will climate change-related risks and the
sound real estate ESG strategy? incur taxes and costs associated to the effective adoption of risk management
demolition of objects, destruction of policies and procedures do certainly
resources and remediation of the land have substantial benefits. Incorporating
as the urban and spatial development these aspects in the ESG vision enables
plans of cities encourage a more human a more favourable long-term strategy in
approach to the use of land. Meeting the line with the long-term approach in the
predicaments of the Triple Bottom Line EU Regulations on sustainable finance.
approach, these solutions do generate To be able to achieve the objectives of
economic benefits while reducing the EU Green Deal, many regulations
environmental and societal impacts.12 and directives are continuously being
introduced by the authorities and the
The adoption of adequate property entities are obliged to know and align to
management practices is crucial in each these in order to develop longer-term
aspect of its operation as ESG impacts strategies.
directly depend on measures undertaken
1
European Commission: New rules for greener and smarter buildings will increase quality of life for all Europeans, April 2019.
2
UNEP Buildings Global Status Report. https://wedocs.unep.org/20.500.11822/34572.
3ESG as real estate value driver | ESG Real Estate Insights 2021
A way to build investment resilience more than 10,000 verified environmental Entry to new markets and
Tenants, users, investors and buyers product declarations, which denoted a opportunities
represent a considerable power, as they 30 percent increase compared to the Entities that follow sustainability
expect not only high-standard buildings, prior year. As far as building certification guidelines may benefit from more
compliant with contemporary market is concerned, the entire project and strategic freedom, easier access to
requirements, but also respecting local construction process is verified by an administrative permits and additional
environmental issues, such as appropriate assessor, and then evaluated by the growth opportunities by creating new
development of land, space for certifying body.6 products and services or expanding
pedestrians, close proximity of greeneries their business activities in other regions
or public transport. Modern and efficient Therefore, introducing these ecological or countries. This can create growth
buildings are attractive for clients and solutions such as reduced water or power opportunities as well as ease the access to
more probable to retain their value if consumption, high acoustic comfort or the new markets – leading to new revenue
managed in compliance with international ensuring access to daylight, shall decrease streams.
standards. The approach affects the operating expenses and improve tenant
housing segment, too, contributing to satisfaction. Further, having considered Meeting investors’ needs
the growing popularity of sustainable future risks related to climate change The growing interest of investors in ESG-
construction. Based on the PLGBC report 3, and increased service prices, such related data has been observed. Recent
in 2019 the share of certified housing measures will affect long-term sustainable environmental and social issues have
space increased by 14 percent compared performance of these investments. become a public and political priority, and
to 2018. When considering all certified as such, a material value for investors.
facilities in Central and Eastern Europe, Access to more affordable financing According to a 2020 research by GRESB10,
Poland remains the certification leader To support and assist EU Member States the share of investors who pay attention
with 51 percent of certified facilities in their transition to a green economy and to this aspect has grown by 22 percent,
located in the country. to ease the adoption of new sustainable which demonstrates that ESG standards
practices, the European Union is will increasingly affect the valuation of real
The decision-making practice regarding developing many instruments within the estate, resulting in greater differentiation
supply chain and the selection and European Green Deal Investment Plan7 – in performance prospects between
sourcing of materials remain a crucial the Sustainable Europe Investment Plan – assets with well-aligned ESG credentials
aspect of ESG strategy development. such as the European Energy Efficiency and assets which fall short in the eyes
The European Commission Construction Fund8 and the Just Transition Fund9. The of investors and are therefore subject to
Product Regulation4 lays down potential support from the EU will have weaker resilience and value erosion risks.
harmonized conditions for the marketing to be accompanied by significant private
of construction products and introduces investment. An opportunity to obtain
the need to issue a Declaration of more favourable terms of borrowing is
Performance for products (DoP), as well another factor contributing to growing
as a Voluntary Environmental Product popularity of eco-investments. The
Declaration (EPD). For example, in Poland, number of banks and investors involved
the Instytut Techniki Budowlanej (Building in “green finance” that are already offering
Research Institute) is responsible for the better terms, larger credit facilities and
national EPD program for construction further assistance to real estate players is
products. It has registered eleven growing steadily.
manufacturers with active environmental
declarations.5 At the beginning of January
2021, around the world there were slightly
3
“Polish Certified Green Buildings in Numbers”, PLGBC, report 2020.
4
https://ec.europa.eu/growth/sectors/construction/product-regulation_en.
5
EPD | ITB.
6
EPD Facts & Figures – Eco Platform en (eco-platform.org).
7
European Commission, COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL
COMMITTEE AND THE COMMITTEE OF THE REGIONS, 14.01.2020, retrieved from website.
8
Home – European Energy Efficiency Fund eeef.
9
Financing the green transition: The European Green Deal Investment Plan and Just Transition Mechanism – Regional Policy – European Commission (europa.eu).
10
Participation in the 2020 GRESB Real Estate Benchmark leaps 22% amid accelerating investor demand for ESG data.
4ESG as real estate value driver | ESG Real Estate Insights 2021
Conclusion Your Contact
There are valuable outcomes generated
by a robust ESG strategy: more resilient Irena Pichola
balance sheets, stronger cashflows Sustainability Consulting Leader
with longer repayment terms, risk Central Europe | Risk Advisory
management systems adapted to the Deloitte Poland
new environmental conditions are ipichola@deloittece.com
already developed for the industry,
etc. Increasingly additional gains are Katarzyna Średzińska
evident for conscious investors as they Manager | Risk Advisory
manage better the new risks, access Deloitte Poland
new capital with better conditions and ksredzinska@deloittece.com
profit from better reputation among their
stakeholders which, in turn, increases Wioleta Krupa
their goodwill and the chances to attract Analyst | Sustainability and
and retain clients and talent. Time will tell Economics | Risk Advisory
on how successful these efforts towards Deloitte Poland
the “greater good” were to provide viable, wkrupa@deloittece.com
measurable and long-lasting value for the
real estate industry as a whole. Raul Garcia-Rodriguez
Director | Risk Advisory,
Sustainability Consulting
Deloitte Czech Republic & Slovakia
rgarciarodriguez@deloittece.com
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member
firms, and their related entities (collectively, the “Deloitte organization”). DTTL (also referred to as “Deloitte
Global”) and each of its member firms and related entities are legally separate and independent entities, which
cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related
entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services
to clients. Please see www.deloitte.com/de/UeberUns to learn more.
Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax and
related services; legal advisory services in Germany are provided by Deloitte Legal Rechtsanwaltsgesellschaft
mbH. Our global network of member firms and related entities in more than 150 countries and territories
(collectively, the “Deloitte organization”) serves four out of five Fortune Global 500® companies. Learn how
Deloitte’s approximately 330,000 people make an impact that matters at www.deloitte.com/de.
This communication contains general information only, and none of Deloitte GmbH Wirtschaftsprüfungs
gesellschaft or Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms or their related
entities (collectively, the “Deloitte organization”) is, by means of this communication, rendering professional
advice or services. Before making any decision or taking any action that may affect your finances or your
business, you should consult a qualified professional adviser.
No representations, warranties or undertakings (express or implied) are given as to the accuracy or
completeness of the information in this communication, and none of DTTL, its member firms, related entities,
employees or agents shall be liable or responsible for any loss or damage whatsoever arising directly or
indirectly in connection with any person relying on this communication. DTTL and each of its member firms,
and their related entities, are legally separate and independent entities.
Published 07/2021You can also read
