Clean Energy for all Europeans Package: future implications for the real estate sector

On the 13th of November the European Parliament adopted new targets for energy efficiency and renewable energy generation as part of its wider package of clean energy initiatives.

The “Clean Energy for all Europeans Package” aims at moving towards a renewable future with reduced dependence on coal, gas and oil. The new agreements adopted this week target a 32.5% energy consumption by 2030, as well as requiring 32% of energy spend be on renewably sourced energy by 2023 within the bloc. Additionally, 14% of fuels utilised in transportation will have to be issued from renewable sources by 2030.

The legislation, divided into three major documents, stipulates that member states will have to roll out specific measures to address disparities in energy production and provision, and make renewable energy available for citizens to produce, purchase and sell.

Each member state will be asked to develop a 10-year national plan addressing energy and climate, detailing objectives, contributions, policies and measures, by the end of 2019. This will then have to be updated each decade.


What does it mean for real estate investors with pan-European portfolios? 

The agreement aims at reducing CO2 emissions, maximising energy efficiency, reducing energy costs for European consumers, and fighting global warming. These are goals that have been growing in prevalence over the past decade and are now at the heart of the EU’s agenda, with this recent legislative development further evidencing its importance to the bloc. With buildings consuming around 40% of the energy used worldwide, real estate is inherently at the heart of this commitment.

Firstly, real estate investors with pan-European portfolios can expect a wave of new incentives and regulations promoting renewable energy over traditional energy sources. The design, extent, and stringency of new legislation could however vary from country to country as each is being allowed to develop its own action plan. Considering renewable energy projects at your assets or switching to green energy contracts, now available from most major suppliers, are great ways to contribute toward these goals and enhance your portfolio’s environmental credentials.

An additional benefit of moving toward renewable energy sources is reduced exposure to the price volatility of traditional energy sources such as coal and oil as a result of geopolitical, legislative and environmental dynamics. Not only is renewable energy better for the planet, it may not be long before it comes at a lower and more stable price.

Real estate investors with pan-European portfolios can expect a wave of new incentives and regulations promoting renewable energy over traditional energy sources

It is unclear as to whether national-level plans will mainly apply to primary energy producers, and the extent to which they will involve public and private bodies. It is likely, however, given the scale of this new European directive, that such national goals will to some degree affect all stakeholders involved in the energy supply chain.

As the real estate sector is at the very core of the fight against climate change and in the reduction of greenhouse gas emissions, real estate investors may be expected to comply to new emission thresholds, standards and increased transparency, in order to meet new national targets. This will certainly require additional resources and capacity to be devoted to better, more structured and regular energy and environmental reporting to external governmental and institutional bodies. Moreover, these new commitments should act a trigger for creating a more transparent energy supply chain for buildings. Re-evaluating and adopting a better step-by-step energy supply strategy will become increasingly important in the years to come.

Real estate investors may be expected to comply to new emission thresholds, standards and increased transparency, in order to meet new national targets

Finally, the initial Energy Efficiency Directive of the European Commission clearly stated the overarching goal of this agreement. By reducing greenhouse gas emissions, improving air quality and using resources efficiently, the idea is to move towards a healthier, more comfortable and respectful future for people and the environment. It is of fundamental importance that all stakeholders understand the role that businesses and investments play in shaping the years ahead, and how this legislative step fits into a larger framework of creating resilient value for the future.


Sources:

  1. Energia, efficienza e rinnovabili al 32,5 e 32 per cento nel 2030. La Repubblica. Published.
  2. European Commission. 19 June 2018. Energy efficiency first: Commission welcomes agreement on energy efficiency American [Press release].
  3. European Commission. 13 November 2018. Commission welcomes European Parliament adoption of key files of the Clean Energy for All Europeans package. [Press release].
  4. European Commission. Buildings.

Health, Wellbeing and Resilience: where do we start?

Earlier this month, we had the pleasure of hosting our first breakfast event in our newly expanded London office. Speakers included our own Oli Pye, Jo Smallwood from M&G Real Estate, Richard Hamilton-Grey from TH Real Estate and Roxana Isaiu of GRESB. A lively two hours of presentation and discussion followed. Many points and some great examples were raised. Here are some of the headlines.


Health and wellbeing – a roadmap approach

Health, wellbeing and resilience in particular needs to be defined at organisational level. Oli presented a structured road map approach – recommending that real estate organisations map boundaries, consider materiality, manage risk and opportunities and monitor performance, before feeding back through a continual improvement loop. Assessing materiality is key to reducing the long list of possible impacts into a short list of material issues, taking account of the key business risks and opportunities as well as stakeholder expectations.

EVORA Global health and wellbeing roadmap approach

 

It was notable that both Oli and Jo highlighted the need for health and safety to be recognised as a key component of the broader health and wellbeing agenda, with the former being more the protection of value and the latter creating value. Oli recommended the use of existing certification standards such as FITWEL to provide content and guidance to your approach rather than trying to create an approach from scratch. In the same way, Oli highlighted existing resources which had been developed to identify political, climatic and natural hazards around the world.


Systematic and tiered approach to health and wellbeing

Jo presented M&G’s approach to health and wellbeing, talked about the systematic and tiered approach M&G take and the target to reach 10 million people with their health, wellbeing and inclusivity programmes by 2025. This was underpinned by their three pillars of health and wellbeing;

  • Training and Awareness for the property managers to deliver enhanced support and customer service;
  • Information and Services, providing information on building accessibility and facilities – great examples Jo gave were changing accessible toilet signage in shopping centres (not all disabilities are visible) and the use of apps for tenant engagement;
  • Physical Environment to positively affect customers’ experience, with a good example being the introduction of shared electric vehicles at residential developments.

Resilience to protect and grow long term value

Richard took the audience through TH Real Estate’s approach to resilience to protect and grow long term value through evaluating cycles, understanding megatrends and focusing on cities. As well as the consideration of political, societal and technological megatrends, Richard highlighted the importance of resilience at the asset level to protect exit yield from specific areas such as future regulatory risk, climatic impact, reputational risk and potential obsolescence.

He also explained the importance of TCFD – the Task Force on Climate-Related Financial Disclosures to provide the governance and transparency of reporting on climatic impacts for an organisation such as TH Real Estate.


GRESB real estate assessment

Finally, last-but-not least, Roxana discussed changes to GRESB. Happily for most of us, there are no major changes planned for 2019! She discussed the importance of buildings being healthy, resilient and efficient if they are to be sustainable and the requirement for GRESB to include these key elements into the survey. Health and wellbeing has been a separate module in GRESB for the last three years and in 2019 it will be fully integrated into the real estate assessment. Roxana discussed key learnings over the last three years, which included that investors care about health and wellbeing, that it has the ability to differentiate buildings and create value, and importantly that unlike environmental impact change that is driven by the capital providers, health and wellbeing is driven by the tenants and employees.


So, in conclusion, organisations should identify and define health and wellbeing and resilience strategies at the top level and establish systematic approaches to manage them (with continual improvement being a key element), as well as implementing controls and improvements at asset level to deliver on strategy promises.

For more information, please don’t hesitate to get in touch.

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Health and Wellbeing: Emerging or Mainstream?

For many professionals working in the built environment, Health and Wellbeing still feel like relatively new buzzwords. In some ways this is surprising given that the subject area has been around for many years; for example, the term “sick building syndrome” was coined by the World Health Organisation (WHO) in 1986.

In reality though, the subject area has received a massive uptick in attention in recent years and a simultaneous increase in the number and robustness of relevant building standards: RESET was released to the public in 2009, the WELL standard (V1) was published in 2014 and Fitwel in 2015.

Perhaps in part this is due to an increase in available academic research linking employee see ativan online https://ativanusa.com/ best sleeping pills ativan health and wellbeing with improved productivity, which significantly boosts the business case for it to be taken seriously. And arguably, being taken seriously it is…

  • WELL boasts it has projects covering 195 million of square feet.
  • The health and wellbeing GRESB module will be integrated with the main GRESB survey in 2019. Indeed 32% of Real Estate participants and 52% of developers responded in 2018.

All of this makes me wonder whether Health and Wellbeing is now genuinely becoming mainstream?

Well, in my view the trajectory is certainly forward however, Health and Wellbeing certifications are not desirable for all buildings. Typically, these standards are being applied to new buildings and major renovations where clearly, the application of Health and Wellbeing will always be easier with a blank canvas. For me the challenge really lies in the integration of Health and Wellbeing improvements in existing buildings. According to Defra 80% of the current UK building stock will still be standing in 2050; thus there is a huge imperative to address what can be done to make the spaces in which we work and inhabit supportive of long-term health and mental wellbeing.

As a first step towards achieving this goal for existing buildings, we work with clients to baseline the Health and Wellbeing credentials of their portfolios. This identifies gaps and key opportunities that will make a material difference and optimise the available budget. Whilst it may not be possible to redesign the fabric of the building or available daylight, improving the cycling facilities can enable tenants to switch their mode of commute. ‘Enable’ is the key word for landlords here. Although more direct interventions are possible through improvements to the ventilation and thermal comfort following a review of the building management system and the installation of sensors. These are but some of the scalable solutions that can be considered regardless of the inherent constraints of a building.

Going a step further if Healthy Buildings are to become mainstream this must be tackled in conjunction with the understanding that buildings do not operate in isolation.

Going a step further if Healthy Buildings are to become mainstream this must be tackled in conjunction with the understanding that buildings do not operate in isolation. The fact that the built environment can make a positive impact to enable ‘Healthy Placemaking’ needs to also be considered. Linking the internal with the external does move the goal post but it is all the more necessary if we are to be truly successful at enabling healthy outcomes for tenants and communities alike and fostering resilience.

The WELL Community standard seeks to address this and it will be interesting to track its adoption. Taking an integrated approach further boosts any derived benefits from interventions made at the asset level. Returning to the example of the improved cycling facilities within the building. Where this is made in conjunction with improved access to local cycling routes outcomes can be further enhanced. Approaching Health and Wellbeing as part of a joined-up strategy that situates the building in its locality will ensure we create truly Healthy Buildings and urban environments that serve many generations to come.

This blog post was first published on GRESB Insights.


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