The focus on CO2 will safeguarde the value of the Real Estate Portfolio.
Under the headings of ESG and sustainable finance, we have witnessed a veritable regulatory firestorm this year. While this is primarily aimed at financial market participants (banks, insurance companies, asset managers) and financial advisors, it is ultimately aimed at companies in the real economy. Financial regulation serves as a hinge to drive the transformation of the entire economy.
The term ESG has also become established in the German-speaking world and stands for the three central sustainability goals of environmental, social and governance. In the future, economic activity in the EU is to be aligned with these three pillars. In view of the Paris Agreement on climate protection and the goal of limiting global warming, the focus is currently on the “E”.
Regulators expect banks, insurance companies and fund managers to take sustainability risks into account in their risk management. In future, large capital market-oriented companies, banks and insurance companies will have to provide detailed information on the degree of environmental sustainability of their business activities as part of their non-financial reporting. But investor interest has also ensured for some time that many real estate companies are improving their ESG reporting. In this way, they are ensuring greater transparency with regard to their sustainable business activities.
The path to greater transparency is costly for real estate companies. The data needed for reporting is collected on a building-by-building basis, if at all. The granularity of the data, the accuracy of the collection, the designation of the data is as individual and different as the systems in which it is prepared. Thus, in order to arrive at cross-portfolio ESG performance indicators (KPI= Key Performing Indicators), preliminary work is necessary. It is best to start with a concept that can be applied step by step to the entire portfolio.
Companies also need to decide where the data will converge. If data is collected and prepared for each building, even for a smaller real estate portfolio, preparing and consolidating it is a huge task. Significant savings can be realized here with cross-portfolio data management. Onboarding of newly acquired properties is also faster. Since portfolios are subject to constant change, companies should define processes for this.
But mere documentation is not enough. On the basis of the data collected in the buildings, efficiency measures in the individual buildings but also across the portfolio are to be identified, initiated and their effectiveness checked. Ultimately, the aim is to reduce CO2 emissions in the portfolio and to draw up a roadmap showing how the legal requirements and climate targets can be achieved.
This will safeguard the value of the portfolio. As performance indicators are increasingly used to compare real estate companies, investors have the opportunity to identify sustainable investments and invest in the best positioned companies for a future low-carbon world. Real estate companies thus secure long-term access to low-cost capital and strengthen their competitive position.
In my next article, I will explain the measures the EU is taking to provide the necessary momentum. Follow me on Twitter hear first about it.
Optimizing buildings is my passion, reducing CO2 emissions is necessary!