Commercial Real Estate Sustainability in 2017: Seven Likely Highlights

I think most will agree that 2016 has been year of surprises and uncertainties in many arenas. In spite of this, we’ve seen some positive moves in many aspects of the world of commercial real estate sustainability and 2017 could shape up to be an equally encouraging one. I wanted to share EVORA’s thoughts on what we think the highlights of the next 12 months could be.


1. EU and US Political Surprises

The question is will the progress of recent years to a greener and more energy efficient real estate sector be halted or even reversed following Britain’s vote to leave the EU and the US electing Trump? However, the reality is that for the next 5-10 years there could be very little regulatory change, certainly in Europe. Let’s not forget the global context; the UK and other members of the EU are all also members of the International Energy Agency (IEA). As such all are committed to implementing IEA guidelines which is a good example of why the UK as a whole, and more specifically the real estate sector, would still be required to act on climate change whether part of the EU or not.

Aside from Brexit we’ve already been anticipating some ‘rationalisation’ of the UK energy legislative landscape i.e. the review of how its main elements work together; Carbon Reduction Commitment (CRC), Climate Change Levy (CCL), the Energy Savings Opportunity Scheme (ESOS) and mandatory GHG reporting etc.

For the time being, companies will still need to comply with existing legislation and instruments such as ESOS (and MEES – see No. 3, below) should surely, at the very least, only promote the business case for investment in energy efficiency rather than hinder it. Although broader economic performance has not been as bad as predicted since the Brexit vote, the continued uncertainty will be stifling company decision making and the sooner the UK government can provide clarity the better.


2. The Health & Wellbeing Agenda

Recent months have been awash with this topic and I would like to think that, despite staff engagement within many organisations still having some way to go, there need be no more debate that addressing health and wellbeing has a demonstrable business case. There are some great case studies coming out of the retail and commercial office sectors but can we expect 2017 to be the year in which there will be more action? EVORA expects the profile to continue to be increased but perhaps firm action (and to a certain extent, interest) could be limited to major developers and larger investment companies. That said, rapid acceleration of relatively inexpensive monitoring technologies should enable ease of access to valuable data (such as indoor air quality) to organisations of all sizes. This could lead to occupiers taking the initiative on health and wellbeing conversations with their landlords. It will also be interesting to follow the uptake of and insights provided by GRESB’s Health & Wellbeing Assessment; 2016 already saw nearly 25% of the entities that reported to the GRESB Real Estate Assessment voluntarily report to the Health & wellbeing module.


3. EPCs

With the 2018 Minimum Energy Efficiency Standards (MEES) deadline looming, we could see potential high profile litigation relating to historically incorrect EPC assessments. With not much more than a year to go, 2017 should see a lot of activity in this space with a push to understand and address EPC risks. This is something EVORA have recognised the need for expertise in having recently launched EVORA EDGE, our technical engineering division.


4. Science Based Targets

Following the first theme regarding the global context to action on climate change, 2016 saw an increase in the commercial real estate sector’s interest in science based targets (SBTs). One of our Junior Consultants, Kim Diep, wrote two blogs on this providing considerations for the real estate sector. EVORA anticipates that SBTs will continue to gain interest amongst the REITs and Institutional Investors that consider themselves at the forefront of carbon reduction target setting. This will no doubt be a topic on the minds of those following the ongoing response to the COP21 outcomes as a means of aligning the carbon reduction strategies for real estate to the requirements of broader climate policy.


5. Increasing Momentum in Voluntary Reporting

2016 saw a 30% increase in the number of participants in GRESB (Global Real Estate Sustainability Benchmark) in two years, with Europe participants alone comprising $750 bn in total asset value. EVORA was certainly kept busy managing the process of more than 40 submissions for our participating clients. Indeed, the uptake of GRESB in the real estate sector is a fairly good barometer of interest. Investors are asking more and more about ESG and GRESB appears to be an increasingly popular means of engaging in the topic with their fund and asset managers. GRESB has recently released the guidance for the 2017 survey; whilst it’s important that participants engage with GRESB to shape the methodologies to ensure scoring is reflective of market conditions, it will be good news to the ears of those involved with administering submissions that the Real Estate Assessment is being kept stable. EVORA expects increased uptake but also even more focus on score improvement.

Stay tuned to our newsletters for information on the release of our upcoming GRESB eBook and our GRESB Masterclass in March.


6. Focus on Data Accuracy

With more and more data being collected and analysed to inform real estate decision making, accuracy is going to be ever more important. We’ve already highlighted this in respect of EPCs but also GRESB as an example where accuracy of information will be key to implementing improvements and where there is a trend increasingly toward the need for investment grade data. These are merely two examples against a background of emerging ‘big data’ trends which are increasingly pertinent in the real estate sector. Our Technical Architect, Alex Graham, blogged about this very topic in 2016; he highlighted how big data will continue to shape our approach to our software SIERA, for example, to enable our clients to get the insights and information they need to improve their sustainability efforts.


7. Continued Fall in Cost of Low Carbon Tech

Despite the recent backtracking from the Government on the fiscal incentives for low carbon technologies, EVORA would argue that the shortfall in policy could be replaced by market forces which seek similar objectives to ensure a low carbon, energy efficient, economically viable and productive real estate sector. Therefore, despite the seemingly persistent barriers, we expect to see a continued uptake and fall in cost of low carbon technologies. Getting the strategic balance between decarbonisation of energy supplies/generation and energy efficiency will continue to be important.


If you have any questions or if you would like more information on any of the topics covered in this blog post, please don’t hesitate to get in touch with our experts today.

The 2017 GRESB Reporting Cycle and Five Tips for GRESB Survey Submission Success!

On your marks, get set… GRESB!

According to the time stamp on Tuesday’s Newsletter from GRESB, 01:51pm marked the starting gun for the GRESB 2017 reporting cycle. The race is on…!

Within the Newsletter, GRESB provided a link to the ‘pre-release’ of their Real Estate and Developer Assessment surveys. Review of the pre-release offers early insight into changes to the 2017 survey. Understanding the changes may unveil potential impacts on your organisation’s ability to maintain/improve its GRESB score and illuminate possible logistical challenges regarding gathering the necessary evidence and data in order to complete the survey.

I have written this blog to help you unpick these changes and explore the potential impacts on your business. Loosely, the contents of this blog boil-down as follows:

  • very brief reminder of the purpose and importance of GRESB and key dates for your 2017 diary
  • outline of the key changes for the 2017 survey and reflections on the impact of these changes
  • some humble tips on how to achieve GRESB and, more generally, ESG success.

[clickToTweet tweet=”The @GRESB 2017 reporting cycle. The race is on…!” quote=”The GRESB 2017 reporting cycle. The race is on…!”]


What is GRESB?

In their own words, GRESB (or Global Real Estate Sustainability Benchmark) is “…an investor-driven organization that is transforming the way we assess the environmental, social and governance (ESG) performance of real assets globally, including real estate portfolios and infrastructure assets.”

With over 250 investor members and having assessed more than 1,100 property entities, GRESB continues to dominate the ESG rating industry for commercial real estate, globally.

Key dates for your calendar:

  • March 1, 2017 – Release of
    • Assessment Reference Guide
    • Health & Well-being Module and Reference Guide
  • April 1, 2017 – GRESB Portal opens
  • June 1, 2017 – Response Check request deadline
  • July 1, 2017 – Assessment deadline
  • September 6, 2017 – Results day

[clickToTweet tweet=”Here are 5 key @GRESB dates for your calendar…” quote=”Here are 5 key GRESB dates for your calendar…”]


Key changes identified in the ‘pre-release’

Overall, the changes this year are relatively minor and thus if you are familiar with the GRESB format I think it would be justified for you to breathe a sigh of relief at this point. That said, it is important to bear in mind that larger changes are pipped for 2018, which GRESB Managing Director Sander Paul van Tongeren confirmed at our GRESB event in November 2016.

Scoring and weighting changes

Perhaps the most significant change is the increased emphasis on completing technical building assessments covering a broader range of sustainability impacts (Q16). ‘Piloted’ in the 2016 survey, from 2017 technical building assessments of impacts other than energy will be scored for the first time. This includes:

  • water (up to 1.5 points)
  • waste (up to 0.5 points)
  • health and wellbeing (up to 0.5 points)

Critically, the increased emphasis on assessment of improvement opportunities has been balanced by slightly reducing points available for actual implementation of efficiency measures for energy (Q17) and water (Q18).

We at EVORA have mixed feelings about this particular change. On the one hand, we worry when attention is taken away from making real and tangible interventions to improve asset sustainability performance. As such, we speculate as to whether the points should have been ‘balanced’ through reductions in points associated with a different section of the survey.

On the other hand, we do welcome the increased emphasis on other sustainability issues beyond energy. Energy has rightly been the emphasis of action for many organisations to date as it typically contributes the greatest environmental impact and is attributed with the highest operational cost of buildings, after security and M&E. However, water, waste and health and wellbeing matter as well and also present real opportunities for operational improvements that can benefit tenants, asset owners and investors. This is something EVORA strongly supports and on which we have a strong track record of advising clients. For example, we have competed more than 300 sustainability audits over the last six years.

Increases in reporting requirements

A small number of questions have been bolstered in order to increase the robustness of their assessment.

  • Increase in data granularity: Portfolio coverage for energy (Q17), water (Q18) and waste (Q19) technical building assessments must now be reported as a precise percentage of the whole portfolio. Previously, drop-downs were provided at 25% increments (e.g. >0 – <25%, ≥25 – <50%).
  • More supporting evidence: Monitoring property/asset managers’ compliance the sustainability-specific requirements (Q41.1) must now include upload of supporting evidence.

Reduction in the reporting burden

Several questions have been streamlined, generally on the basis that they will make the survey more straightforward and / or less resource intensive to complete, without compromising data and therefore rating quality. For example, a number of open text boxes and evidence upload requirements have been reduced or removed.

As long as the robustness of the assessment is preserved, we welcome improvements in the efficiency of GRESB’s reporting requirements.


Five Tips for GRESB Survey Submission Success!

As I write this blog, there are about 163 days left until the 2017 deadline.

In some respects this feels like a long time, however – and you will know this if you have completed an investor survey of this nature before – it is easy to underestimate the importance of planning when it comes to GRESB delivery.

[clickToTweet tweet=”Do NOT underestimate the importance of planning when it comes to @GRESB delivery!” quote=”Don’t underestimate the importance of planning when it comes to GRESB delivery!”]

As you look to start plotting out your programme, we recommend that you consider the following:

  1. Start early.
  2. Remind yourself what went well and less well last year – consider both the process and individual question responses.
  3. Engagement and education of people that will support you in delivering GRESB. Keep in regular touch with these people, particularly if they will be providing you with information.
  4. Data automation – our propriety software, SIERA, delivered 41 GRESB submissions in 2016, helping clients to seamlessly acquire and report data. Why not take a look at the following blog post: GRESB Data Automation: Ensuring Seamless Does Not Result in Senseless.
  5. Seek external support / advice. EVORA will be holding a masterclass on responding to GRESB, in March 2017. Keep a look out for this in our e-newsletters and be sure to sign up early.

[clickToTweet tweet=”Here are Five Tips for @GRESB Survey Submission Success!” quote=”Here are Five Tips for GRESB Survey Submission Success!”]


Tips for ESG management and performance success

For more general advice on how to implement practical and tailored sustainability solutions, please refer to the following blog post: Environmental Management Systems: Plan-Do-Check-Act…Deliver?


About Us

Why firms choose us for GRESB survey submission support

EVORA is an independent, pan-European sustainability consultancy and software provider, specialising in (but not limited to) the commercial real estate sector. We are a GRESB Premier Partner Consultancy.

We have helped a large number of funds complete the GRESB survey, including Schroder Real Estate, AEW and Moorfield. Our experience and relationship with the GRESB team has enabled us to provide comprehensive client support – and in all cases improved results.

We can work with you to complete the submission and understand your scoring, as well as develop a sustainability plan that will improve your future GRESB performance and align with your organisation’s key environmental objectives.

For more information, please sign up to our newsletter and remember to look out for our upcoming GRESB Masterclass!

Giving Our Clients The EDGE With Our New Technical Engineering Division

I hope you are having a very happy new year, which will also bring you good health and prosperity. It has been three months since my last update bringing the exciting news of our rebrand to EVORA, recognising our own evolution, as well as that of the real estate industry, being transformed by the impact of sustainability.

A lot can happen in three months, as we experienced in 2016 with some pretty groundbreaking changes around the world. So, not to be outdone, we have some pretty groundbreaking news of our own with the launch of EVORA EDGE, our new technical engineering division.

[clickToTweet tweet=”CRE sustainability consultancy @evoraglobal launches EVORA EDGE – new technical engineering division” quote=”CRE sustainability consultancy, EVORA, launches EVORA EDGE – its new technical engineering division.”]


Technical Engineering Solutions for the Built Environment

EVORA EDGE, being an acronym for Energy, Design, Generation and Engineering, further positions EVORA as a leading full service provider to meet the ever-evolving needs of the commercial real estate sector. EVORA EDGE will complement our current energy and M&E consulting provision with a much more comprehensive breadth and depth of engineering solutions.

I am also delighted to announce that Andrew Cooper, an expert in asset and energy management, and Neil Dady, a senior building services engineer, have merged their respective businesses with EVORA to head up EVORA EDGE. Both Andrew and Neil have joined as Directors and bring a wealth of knowledge and practical experience.

[clickToTweet tweet=”Andrew Cooper & Neil Dady join @evoraglobal as Directors of its new technical engineering division.” quote=”Andrew Cooper & Neil Dady join EVORA as Directors of its new technical engineering division, EVORA EDGE.”]

EVORA EDGE will not only significantly strengthen our existing technical offering, which includes the delivery of Part L of Building Regulations, energy audits, EPC work and MEES (Minimum Energy Efficiency Standards) compliance, but will also provide us with a wealth of new services, including:

  • Building services specification and management
  • Compliance with the Heat Network (Metering and Billing) Regulations and with CIBSE CP1(Heat Networks: Code of Practice of the UK)
  • Indoor air quality performance auditing (health and wellbeing)
  • Life cycle assessment including embodied carbon

Please click here to see the full list of services delivered by EVORA EDGE.


Andrew Cooper

EVORA EDGE Staff Andrew CooperAndrew has over 23 years of property experience. He is regarded as an expert in asset and energy management, and has a background in lease advisory. He is a Chartered Institution of Building Services Engineers (CIBSE) Low Carbon Consultant (in Building Design, Building Simulation and Heat Networks), a CIBSE Low Carbon Energy Assessor (to Level 5, the highest level of accreditation possible) and a MEI Chartered Energy Manager. Andrew comments:

“I have worked as an independent consultant and Deloitte LLP sub-consultant since 2008, and I am delighted to be joining EVORA to help set up its new engineering division. EVORA EDGE will both complement and expand upon the existing technical services offered by company.”


Neil Dady

Neil has over 25 years Director-level experience in the building services sector, specialising in air conditioning and mechanical services. He has a wealth of experience in delivering energy audits, identifying inefficiencies and optimising energy performance whilst project managing deliverable solutions. Neil comments:

”Having worked with the EVORA team for many years, I am excited to be joining this dynamic business. EVORA EDGE will bridge the gap between design concepts and engineered projects. Our focus will be on practical solutions with measured and managed outcomes.”


Looking Ahead

This continues to be a very exciting time for EVORA. Our mission from the beginning has been to work with our clients to provide practical solutions whilst providing an outstanding level of service.

Our services now extend to:

  • EVORA – expert commercial real estate sustainability consultancy across Europe
  • SIERA – leading sustainability management software for the commercial real estate investment market
  • EVORA EDGE – industry-leading technical engineering solutions for the built environment

[clickToTweet tweet=”EVORA – providing practical #sustainability solutions and outstanding service to the #CRE sector.” quote=”EVORA – providing practical sustainability solutions and an outstanding level of service to the commercial real estate sector.”]


To learn more about any of the services delivered by EVORA EDGE, or to contact Andrew or Neil, please don’t hesitate to get in touch.

New Guidance on Climate Related Disclosure and Reporting

On December 14th 2016 the Financial Stability Board’s Task Force on Climate Related Disclosure published its long-awaited recommendation report. The report sets out recommendations for helping businesses disclose climate-related financial risks and opportunities.


The report states that the impact that global warming can have on economies is widely recognised.  However, at present, it is difficult for investors to know which companies are vulnerable to climate risks.  It is recognised that without financial disclosure, the financial impacts of climate change may not be effectively priced.  Pricing of risk is an essential function of financial markets.  It it is increasingly important to also understand the governance and risk management context in which financial results are achieved.

[clickToTweet tweet=”At present, it is difficult for investors to know which companies are vulnerable to #climaterisks.” quote=”At present, it is difficult for investors to know which companies are vulnerable to climate risks.”]

The Task Force states that non-financial disclosures should be:

  • Adoptable by all organisations
  • Included in financial filings
  • Designed to solicit decision-useful, forward-looking information on financial impacts
  • Strong focus on risks and opportunities related to transition to lower-carbon economy

The Task Force’s recommendations apply to all financial sector organisations including real estate asset managers and owners. Importantly, it is recognised that large asset owners and asset managers sit at the top of the investment chain and, therefore, have an important role to play in influencing the organisations in which they invest to provide better climate-related financial disclosures.

Recommendations are structured into four categories, as summarised below.

Governance

Organisations should disclose their governance approaches covering climate-related risks and opportunities.

Recommended disclosures:

  • The board’s oversight of climate-related risks and opportunities
  • Management’s role in assessing and managing climate-related risks and opportunities

[clickToTweet tweet=”Orgs should disclose their #governance approaches covering #climate related risks and opportunities” quote=”Organisations should disclose their governance approaches covering climate-related risks and opportunities.”]

Strategy

Organisations should disclose actual and potential impacts of climate-related risks and opportunities.

Recommended disclosures:

  • Climate related risks and opportunities the organisation has identified over the short, medium, and long term
  • The impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning
  • The potential impact of different scenarios, including a 2°C scenario, on the organisations businesses, strategy, and financial planning (a clear link to the adoption of science based targets)

[clickToTweet tweet=”Orgs should disclose actual and potential impacts of #climate related #risks and #opportunities” quote=”Organisations should disclose actual and potential impacts of climate-related risks and opportunities.”]

Risk Management

Organisations should disclose how they identify, assesses, and manage climate-related risks.

Recommended disclosures:

  • Processes for identifying and assessing climate-related risks
  • Processes for managing climate-related risks
  • Processes for identifying, assessing, and managing climate- related risks are integrated into the organisation’s overall risk management

[clickToTweet tweet=”Organisations should disclose how they identify, assesses, and manage #climate related risks” quote=”Organisations should disclose how they identify, assesses, and manage climate-related risk.”]

Metrics and Targets

Organisations should disclose how metrics and targets are used to measure and manage risk.

Recommended disclosures:

  • Metrics used to assess climate risk
  • Scope 1, 2 and if appropriate (3) GHG emissions
  • Targets used to manage climate change risks and opportunities

[clickToTweet tweet=”Organisations should disclose how #metrics and targets are used to measure & manage #risks” quote=”Organisations should disclose how metrics and targets are used to measure and manage risk.”]

To underpin these recommendations, the Task Force also sets out seven principles for effective disclosure.

  1. Disclosures should represent relevant information
  2. Disclosures should be specific and complete
  3. Disclosures should be clear, balanced, and understandable
  4. Disclosures should be consistent over time
  5. Disclosures should be comparable among companies within a sector, industry, or portfolio
  6. Disclosures should be reliable, verifiable, and objective
  7. Disclosures should be provided on a timely basis

The Task Force’s recommendations provide a foundation to improve investors’ and others’ ability to appropriately assess and price climate-related risks and opportunities.   They are wide ranging but also practical in the near term allowing the financial industry to develop and grow capability to report within a structured framework.

For information and if you want to get more involved, a public consultation to solicit views on the Task Force’s recommendations is now open until 12 February 2017 and can be accessed here.


EVORA is uniquely positioned to support commercial real estate organisations in the development and reporting of climate risk strategies through to implementation of management plans and collation and analysis of sustainability data using SIERA – our industry leading sustainability management software.

Please do not hesitate to contact us for more information.

[clickToTweet tweet=”EVORA is uniquely positioned to support #CRE firms with dev & reporting of #climate risk strategies” quote=”EVORA is uniquely positioned to support commercial real estate organisations in the development and reporting of climate risk strategies.”]