The new Taxonomy Regulation has been in force in the EU since the beginning of the year. Property managers who cannot prove the ESG compliance of their own portfolio in the future risk high losses. Not everyone has yet set out on the road and developed an implementation strategy. But time is pressing.
With the Taxonomy Regulation published in April 2021 as part of the Action Plan for Financing Sustainable Growth, a binding catalog for assessing the sustainability of real estate is now available. This will make it easy for capital investors to identify green investments and, in particular, sustainable buildings. Until that point is reached, there is a lot for those responsible to do, from the building to the portfolio. And: Unlike voluntary measures, extensive rules and regulations must now be implemented.
To develop a sustainable real estate portfolio, it is essential that facility, property and portfolio management act in concert. This is neither self-evident nor easy. In most cases, responsibility and the necessary activities are distributed among several organizations that have their own interests and also goals. But unlike voluntary and individual sustainability goals, there is now a threat of sanctions. Business partners therefore urgently need to jointly develop an overarching ESG strategy and derive measures from it, which are then implemented by the individual parties.
The basis for action planning is the greenhouse gas emissions of each building in the portfolio. In order to make this data accessible or to collect it at all, preliminary projects often have to be initiated. This is because recording consumption in the building is unfortunately not a matter of course. And even if data is already collected at the building level, it is time-consuming to make it accessible, because many of the systems used to collect consumption data at the building level are proprietary and do not offer convenient interfaces. This poses major challenges for automated collection and processing at the portfolio level.
But time is pressing. Neither legislators nor investors will tolerate delays. There is a threat of sanctions from the legislature, and investors will simply avoid properties in the future whose carbon footprint is not transparent.
In the Netherlands, it has long been clear that office buildings must at least meet the requirements of efficiency class C from 2023. If this level is not achieved, the building may no longer be used as an office. Brussels has long been discussing making such regulations binding for the entire EU. It is therefore understandable if investors steer clear of properties that do not meet these requirements.
Portfolio management must therefore systematically search the portfolio for CO2 risks in order to assess them and derive measures. In many cases, the data available is not sufficiently detailed to make investment decisions and implement measures. In this case, starting with monitoring points the way to future measures and enables targeted, performance-oriented investments.
A systematic and coordinated approach is essential here, because the measures identified at portfolio level must be implemented at property level. Many efficiency measures take place in the plant technology and have little or no impact on the tenants and users of the building. However, conversions usually do not remain without disruptions and must be coordinated and planned on site with the users.
The taxonomy forces the protagonists in the entire utilization chain to work together closely and in a coordinated manner. The plan-do-check-act cycle familiar from management systems must be established across portfolios. Systems must be implemented and networked as quickly as possible so that data from all objects can be recorded dynamically. Only on the basis of complete data can conclusive decisions be made, measures implemented and their effects monitored. At the object level, the promises made by technology providers can be compared with the actual savings achieved. Since precisely this comparison is usually not possible due to a lack of data, neither the planners nor the providers of efficiency solutions can currently be measured against their own savings forecasts.
So if portfolio management knows which measures can be used to optimize the building and makes these transparent to property management, which then involves facility management, it is possible to align a portfolio sustainably.
