Trends and expectations for sustainable real assets in 2019: Taking Climate Resilience Mainstream

Climate resilience has emerged as a key field of practice; however, a concern is that thinking and knowledge of this topic, and most importantly actions are not progressing quickly or purposefully enough for real estate managers to adequately prepare their assets for the potentially perilous shocks and stresses caused by climate change.

Resilience is becoming a major consideration for businesses, with impacts on insurance, valuation and rents already starting to show in many countries.

The impact of climate change has vast implications across societal, economic and environmental realms. Building managers and owners have unique responsibilities as stewards of essential economic and social assets. The well-being of communities and economies significantly depends on access to reliable working assets. Consequently, we believe that planning for and adapting to climate change is not only prudent but essential.


Below, we identify five key reasons for integrating climate resilience into asset management and investment planning decision-making.

  1. Increasing performance reliability – Assets capable of operating during climate crises will exhibit greater long-term return predictability.
  2. Sustaining and increasing asset value – Value will be protected for assets that are not significantly affected operationally by climate-related events, or that do not need significant capital expenditure after such events (when other assets may be experiencing downtime). There may also be opportunities for operational cost reductions through efficiency and resiliency gains.
  3. Identification of future opportunities – Demand for resilient assets is likely to increase. Investors are exhibiting increasing interest and understanding in climate resilient assets, particularly in sensitive areas. Investors are mindful of the economic consequences of disruptions and emphasising reliability and resilience is central to their requirements.
  4. Growing trust – Assets are designed to provide effective services throughout times of peak demand/need. Assets that operate most effectively during times of climate disruption are therefore likely to generate increased trust from tenants and other key stakeholders and thus retain financial, economic and societal value over the long term.
  5. Increasing influence – Investors who lead the evaluation and adaptation of assets and demonstrate the thoughtful performance of fiduciary duties are likely to have a more respected voice within policy discussions.

Progress

As mentioned above, resilience has emerged as an important topic. Whilst there is a long way to go, progress has been made. Some communities and assets around the world are embracing plans to be resilient to what the future will bring — and what the present is already delivering.

We identify five key marks of progress in the practice of resilience:

  1. The knowledge base on resilience is expanding
  2. Tools supporting resilience are increasingly available, yet remain difficult to select and use
  3. Science and practice are increasingly working together, but more collaboration is needed
  4. Resilience mandates are emerging in some countries and cities
  5. Funding from philanthropy and government has been crucial in field growth.

So, what should real estate companies do?

Consistent with our belief that investors need to deal with the risks of climate change as a practical issue now, rather than put it off into the distant future, we encourage a systematic assessment of the vulnerability of assets to climate risk, ideally by utilising an analytical modelling framework. This will enable the identification of risks, assessment of materiality and provide guidance to investing, considering the need for climate resilience in assets, new investment opportunities and the broader business plan.

Given the relatively short timeframes during which an investor might own a particular asset, a common attitude is that climate risk is of low priority for evaluation. However, by evaluating whether assets are vulnerable to business disruption due to the impacts of climate change, investors may be able to implement resilience measures that positively increase an asset’s valuation.

Modelling future climate and risk scenarios can assist climate due diligence by enabling consideration of how the asset may fair against risks posed by tomorrow’s climate and not just todays.

We advise a process for evaluating climate risks:

  1. At portfolio level to:
    – Identify relevant geographic climate risks
    – Score and map assets in the portfolio based on criticality and vulnerability
    – Prioritise climate risk mitigations in accordance with ratings
  2. At asset level to:
    – Evaluate key climate risks and their relative impacts on a physical assets condition, operational capacity, and for regulatory implications (fines, penalties)
    – This can then support development of a mitigation strategy which develops action plans based on highest value risk mitigation options per vulnerability reductions

Our conclusions

The cost difference between being pro-active now compared to being reactive in the future will be significant. Early actions have the potential to reduce losses in the short term as well as create significant value by enhancing the resilience of assets in the long term. Forward thinking investors alert to the implications of climate change can integrate adaptive strategies. This will avoid being caught off guard by climate shocks and incurring large remedial costs that could severely disrupt investment returns.

The real estate industry will adapt further as the resilience discipline itself evolves. Best practice is not universal across the sector, and the science and our ability to devise innovative solutions is constantly evolving. As we move through 2019, we recommend that all real estate firms consider resilience by asking the following questions; What does resilience mean? What risks are faced and how can they be mitigated? Progress towards development of a Resilience Strategy is a true win/win – good for business and good for the planet.

This post was originally posted on GRESB Insights

Real Estate Sustainability Performance (& Skydiving)

Skydiving can make you anxious. You may be reluctant to try it, you may not even entertain the thought of doing it. You’d certainly want to know that safety has been thoroughly planned, that you’re dealing with an experienced crew and a plane that actually works.

Once you do it though, you’ll probably love it, want to tell everyone about it and do it again, but next time from even higher! Fortunately, if you don’t want to do it, no one is going to force you out the plane. This is not the same, when it comes to setting real estate fund and asset sustainability performance targets.


Taking a few steps back though, I have seen many similarities in people’s thought process when considering performance targets, as you may see when skydiving for the first time. Like skydiving, that hesitation has a rational basis. Companies may not want to set a performance target due to barriers including:

  • Knowledge– where does one start
  • Uncertainty- how to drive forward improvements
  • Cost- a lack of budget
  • Responsibility- a lack of authority
  • Ultimately- a fear of failure

Planning, with the right expertise, can overcome all of the above barriers.


There are two common approaches to performance targets:

  • Top down– identifying where you want to be (often in the long term and often with far reaching improvement targets) and then setting about to accomplish the target through a series of strategic goals. This approach is commonly seen when setting Science Based Targets.
  • Bottom up– identifying improvement actions and setting a performance target based on the expected improvement to be gained from each action. Consolidating a range of asset level improvements can lead to the establishment of portfolio level performance targets.

EVORA is experienced in applying both approaches. Often, it is a combination of approaches that delivers most success for a simple reason that people find it harder to associate with (and then take accountability for) a long-term target and then recognise how it can be achieved. This is particularly true in commercial real estate where asset transactions in funds concerned can cause disruption.

There is plenty of literature available on setting top-down Science Based Targets and I draw your attention to our posts.

Less guidance is available on delivering successful bottom up strategies, and it is often these shorter-term targets that help companies on the road to longer-term more ambitious journeys. As such, we provide below, a staged approach, using insight from our experiences.

  • Stage 1: Prioritisation – Understand your portfolio and prioritise action at assets that have the greatest impact, greatest opportunity for improvement and/or where you have greater influence over performance.
  • Stage 2: Identification and analysis – Undertaking energy audits is a necessary step to identify performance improvement actions; EVORA has experience of more than 400 audits in the past eight years. Recommendations need to be technically and economically feasible, and importantly, aligned with the asset business plan to gain most chance of approval.
  • Stage 3: Asset level improvement plan – From our experience, this is a critical step. Property and Asset Management teams must work to agree and budget for implementation of specific actions within agreed and defined timescales with responsibilities and budgets clearly set out. Change does not happen without action and action does not happen without buy-in.
  • Stage 4: Portfolio level performance target – Portfolio level performance targets can be set through rolling up multi-year savings expected from asset level improvement plans. Establishing an accurate baseline and having clarity on reporting outputs and metrics is essential at this stage.
  • Stage 5: Implementation and tracking – Improvements can rely on operational and technology change. At EVORA, we have experience of both. Our SIERA Monitoring & Targeting software has led to operational energy savings up to 30%. While our engineering EDGE team has substantial experience on design, specification and project management of M&E installation. All performance data should be tracked in sustainability software such as SIERA to enable review.
  • Stage 6: Communication – Finally, and importantly, success must be shared with stakeholders including tenants and investors. Often the value of communicating responsible investment practices can be greater than the value of energy saved through such programmes

The above approach has proved successful for our clients and helped many get underway with performance targets. The process works as it delivers assurance to key stakeholders at all levels that the programme is practical, feasible and, importantly, adequately resourced to deliver success.

As for the obligatory targets, there is already certainty that these are coming for new and existing buildings.It may be driven by a combination of legislation and industry wide programmes but we can see these coming on the horizon. Planning now will help you keep pace with the industry.

If you want to go sky diving, please make sure your trip is planned, on a well-maintained plane and with an experienced crew (and don’t forget to share the news with us!). Happy flying!

To find out how we have assisted clients to develop and then achieve UK and pan European performance targets please do get in touch.


This post was originally written and published for GRESB Insights

EVORA set to expand consultancy team after annual promotions

The EVORA team is growing rapidly in response to huge market demand for sustainability consultancy services and a number of great client wins.

Here at EVORA, we pride ourselves on building a positive, like-minded team of experts, and providing them with training and progression opportunities which enables us to deliver value to our clients.

I am pleased to announce, following our annual review process, that several staff have been given promotions.

This really is testament to the enormous amount of talent we have in-house, and our dedicated and hard-working team. We also announced recently that Louise Russell has been promoted to Associate Director.

If you’d like to join the EVORA team, you can find out more about working with us, and see our current vacancies on our Jobs page.

Addressing Environmental Risk in Shopping Centres

Environmental impact is not the first thing that comes to mind when we pop down to the local shopping centre. However, going behind the scenes offers a very different viewpoint.

Many impacts need to be considered and managed including energy and water usage, waste management, potential water discharges (think car washes), noise, air conditioning, climate change resilience, flood risk, EPCs and Minimum Energy Efficiency Standard (MEES) obligations. I could go on and I haven’t even mentioned social, economic or health and wellbeing factors also at play. Left unmanaged, these issues can cause harm to the environment, waste money and even impact on asset values. This blog explores the benefits of implementing an Environmental Management System (EMS) to a shopping centre.

To provide a bit of background, I have worked at EVORA for 18 months now.  My role is varied and late last year I successfully completed my first ISO 14001 EMS implementation project. I thought I had better get my ideas down and quickly.


Proactive

Environmental issues are regularly dealt with on an ad hoc basis. Understanding risks and legal requirements is key in mitigating potential incidents and pollution events – otherwise they may only be identified after an incident has occurred. An EMS provides a proactive approach to managing risks as it provides a mechanism and structure to identify, understand and manage the site-specific issues appropriately.

As an example, a site I visited recently benefited from an interceptor, however, it had not been inspected for several years (due to access issues) and maintenance records did not exist. As a result, if there had been a significant spillage, the interceptor may have failed and resulted in a pollution event occurring in the local environment. An EMS, if implemented and used correctly, identifies risk, potential legal requirements and, in this case, would have ensured a regime of maintenance was implemented and sustained.

It could be argued that such an approach can be developed without an EMS – true – but in this case it was not.  Our project used EMS implementation to address this issue.


Legal Compliance

The environmental regulatory landscape can be a minefield for those unfamiliar with the subject. This can result in difficulties in maintaining legal compliance (you cannot comply with legislation if you don’t know what you have to do). Having worked for EVORA for the past 18 months, I have spent a lot of my time building up an understanding of the nuances and intricacies of environmental legislation.  Spoiler alert – it is never as straightforward as it seems! There are many different areas of environmental legislation applicable to shopping centres (and the wider arena of properties in general).

Examples include:

  • Ensuring that waste is stored correctly and disposed of appropriately, if treated on-site, waste exemptions must be considered
  • Maintaining the availability of accurate waste documentation
  • Ensuring EPCs are in place where applicable and compliant with MEES requirements
  • Arranging boiler servicing and F-gas leak testing to be undertaken in line with defined timescales by appropriately competent people
  • Maintaining the integrity of on-site fuel storage and associated systems such as interceptors
  • Bird control (one of the shopping centres we support has a significant seagull issue!)

An EMS can help ensure legislative requirements are understood and implemented.


 A Structured Approach

At first glance it can be difficult to understand the widespread benefits of an EMS. On my first EMS project I asked the question ‘Why are they were pushing ahead with ISO14001?’

On reflection, I think there are multiple reasons:

  • Structured control of environmental risks
  • Identification of improvement opportunities that reduce operating costs (energy savings)
  • Ability to demonstrate environmental credentials to the outside world.

An EMS provides a defined methodology for risk management. It can be implemented on a single site or across an entire business. Furthermore it can integrate with other systems (think health and safety or quality). The setting of objectives helps to manage risks (i.e. energy use) and improve performance often resulting in reduced costs. Progress is monitored in order to determine if objectives are on course to be achieved. This all drives continual improvement, which in turn ensures shopping centres with effective environmental management systems become more resilient to environmental risk and helps in future proofing the asset.


To Certify or Not to Certify

ISO 14001 is the international standard for environmental management. An EMS can be certified against this standard. This is not essential, however, it can be useful for an external party to certify the EMS as it can provide a fresh pair of eyes and helps to confirm that the system is working effectively. A certified ISO:14001 EMS provides external proof and strengthens reputation, provides good publicity for the business, improves GRESB scoring (where relevant) and is often perceived favourably by tenants.

Environmental Management Systems – Worth Far More than the paper they are written on!

If you want to find out more about Environmental Management Systems and wider sustainability strategies in shopping centres contact EVORA today.

HQE (Haute Qualité Environnementale) certification for buildings in operation: how does it compare on health and wellbeing?

Although many may not be overly familiar with it (in comparison to the likes of BREEAM and LEED), HQE certification has the strongest presence in Europe by area, with buildings totalling approximately 85 million m2 certified at the end of 2017[1].

While HQE was first developed in France, the new international platform Cerway has brought it to an international audience.

Overall, HQE certification presents comparably comprehensive coverage of sustainable construction to BREEAM In-Use and LEED certifications, with a major focus on overall quality and assurance of the result. Additionally, HQE certifications present a non-prescriptive nature, which aims to rely less on application standards and specific thresholds, and rather account for local context and conditions, therefore providing a flexible, yet clear guidance.

HQE’s non-prescriptive focus addresses primarily:
1) Environmental and Energy Performance
2) Health and Comfort

In the first category, attention is focused on sustainable practices and management, with a particular distinction drawn between on the one hand, the intrinsic environmental quality of the asset, and on the other hand, the effectiveness of environmental practices.

The second category focuses upon the assets’ qualities that contribute to the health, comfort and wellbeing of its occupants.


So where does health and wellbeing fit in?

While BREEAM In-Use and LEED allocate substantial coverage to the environmental and energy aspects of a building, their coverage of health and wellbeing is to a lesser extent in comparison to HQE. HQE embraces both equally and provides an approach that aligns with current trends in the real estate sustainability sector. In my opinion, HQE has adopted a proactive approach which has foreseen and been able to react to the increasing need for stronger health and wellbeing monitoring. HQE’s direction aims to ensure that the assets will benefit equally from a reduction in energy consumption, good management of resources and better health and productivity for the occupiers. Hence, it has the potential to deliver long-lasting value for real estate investors and tenants, whilst providing enough flexibility on the “how” to achieve them through its non-prescriptive nature.

EVORA Global HQE image one

GBC, F. (2015). International Environmental Certifications for the Design and Construction of Non-Residential Buildings. Paris: France GBC, p. 4

Approximately 50% of the HQE certification focuses on health and wellbeing, whereas in BREEAM In-Use the scoring is split is 17% in part 1 and 15% for parts 2 and 3, respectively, based on the proportion of the overall available points.
BREEAM’s definition of health and wellbeing encompasses a wider range of aspects (outdoor rest space, active lifestyle options, safety and security); however, the percentage coverage dedicated to health and wellbeing in the BREEAM In-Use certification is smaller than in HQE. LEED puts less emphasis upon health and wellbeing, with a focus on general indoor environmental quality, and a more limited weighting coverage for comfort.

Out of the fourteen categories, the HQE rating system requires an asset to perform highly in at least three categories and achieve a basic level for a maximum of seven categories. Categories are not weighted, as they are considered to be equally important to obtain the certification[2], which further strengthens its duality in its coverage of energy and comfort.


Is HQE for you?

If you wish to challenge your assets with a new certification, HQE offers a balanced assessment of both energy and environmental factors and health and wellbeing features. This being said, certifications are continually evolving to remain relevant. All certifications will likely be aiming to grow their coverage of health and wellbeing factors as the topic begins to become more of a mainstream consideration in real estate sustainability. In my opinion, at some point it will become as equally important to ‘sustainability’ as energy currently is. Additionally, there is a growing realisation that these aspects are heavily interlinked. Working on one aspect will benefit the other, which will help to achieve greater sustainability overall.

All in all, HQE provides a useful, comprehensive and straightforward evaluation of an asset regarding management and performance, with equal attention paid to sustainable construction and, management, comfort and health & wellbeing, which would secure a comprehensive and solid assessment of your assets. Irrespective of whether the certification is being obtained for identifying improvement opportunities, benchmarking between assets, marketing or GRESB, the end output should be a certification which meets your needs and expectations. If those expectations include a good balancing of energy performance and health and wellbeing, then the HQE certification may be more suited to your needs than the more widely known certifications of BREEAM and LEED.

If you would like to receive more information about which certification would be most relevant to your assets, do not hesitate to get in touch with our consultancy team here at EVORA.


  1. HQE, Ceerway (2017). HQE Certification: Whom for? What for? How?. Paris France, p.6
  2. Bernardi, E., Carlucci, S., Cornaro, C., & Bohne, R. A. (2017). An Analysis of the Most Adopted Rating Systems for Assessing the Environmental Impact of Buildings. Sustainability, p. 10.

EVORA appoints new Associate Director

I am delighted to announce that Louise Russell has been promoted to Associate Director.

Louise is EVORA’s longest serving employee and we couldn’t be more thrilled to offer her this opportunity as Associate Director in recognition of her hard work. She was our first Junior Consultant when Chris, Paul and I started the company six years ago and over that time, has worked her way through the ranks and developed her skills and knowledge.

Louise delivers invaluable support to several of our clients, including L&G, Schroder’s, EQT and more. She will now join the Senior Management Team to provide further strategic direction to the business.

Louise said “It has been really exciting to watch the company grow and for me personally to be a part of it. Despite our growth we have still maintained the same values that attracted me in the beginning. The drive for sustainability in the built environment continues to evolve, but I feel EVORA is ideally placed to spearhead the conversation.”

Find out more about Louise here.

If you would like to join EVORA, you can find out more about working with us and our current vacancies on our careers page.