Posts

The case for ESG in Real Estate Debt

Over the preceding decades, ESG has morphed from a niche add-on to a core part of any sensible investing strategy. Indeed, Standard Chartered estimates that $1 in every $4 is now invested in ESG. As ESG increasingly factors into investment decisions across the market, the case for real estate debt to consider ESG risk grows.

And it is easy to see why. ESG risks consistently feature in the World Economic Forum’s annual Global Risk Reports. For 2021, climate action failure and human-led environmental damage were among both the highest likelihood and highest impact risks of the next decade.

It is widely accepted that the next 10 years are crucial for tackling the climate crisis. Despite a temporary drop in GHG emissions resulting from the coronavirus pandemic, overall trends are that they continue to rise. With the race to net zero carbon one of the major global challenges facing the built environment, and one which is being targeted by corporates and governments alike, paying attention to ESG issues in real estate investing strategies has never been so critical.

The possibility of being left with stranded assets due to investment strategies being out of sync with emissions trajectories is fast becoming a reality. As we see regulations tighten, for example, minimum energy efficiency criteria for buildings, the reality is that these types of risks must be taken into consideration. Securing financing against an asset that could be unlettable in just a few years is not an attractive offer. As such, across the commercial real estate financial market, there is increasing pressure to disclose and mitigate ESG risk. And this extends to real estate debt.

Globally, green bonds and loans along with other types of sustainable debt rose to $465 billion in 2019 – an increase of 78% from 2018 (data compiled by BloombergNEF). These figures demonstrate that ESG is fast becoming a material consideration in debt financing. At EVORA we see this trend continuing, with the pandemic only heightening tenant and consumer expectations that the spaces they occupy positively impact on social and environmental considerations.

Sustainable real estate debt financing has grown rapidly over the last decade as alternative lending is increasingly sought. We see the momentum in this space continuing, and as the opportunities in this area continue to grow, early and effective ESG integration will be key.

EVORA works with clients helping them to develop ESG strategies and green debt frameworks, if you would like to discuss this you can contact us at contactus@evoraglobal.com

Climate Risk Readiness White Paper

1.   Why is climate change such an important investment risk for investors in real estate & infrastructure?

A summary of the factors driving change in the real asset markets.

In early 2020, before the pandemic hit, BlackRock’s Larry Fink called out the fact that “Climate Change is Investment Risk”. Three paragraphs of his annual letter stood out, highlighting the connection between material climate risk, their impact pathways, and the drivers of asset value:

“Will cities be able to afford their infrastructure needs as climate risk reshapes the market for municipal bonds? What will happen to the 30-year mortgage – a key building block of finance – if lenders can’t estimate the impact of climate risk over such a long timeline, and if there is no viable market for flood or fire insurance in impacted areas? What happens to inflation, and in turn interest rates, if the cost of food climbs from drought and flooding? How can we model economic growth if emerging markets see their productivity decline due to extreme heat and other climate impacts?

“Investors are increasingly reckoning with these questions and recognizing that climate risk is investment risk. Indeed, climate change is almost invariably the top issue that clients around the world raise with BlackRock. From Europe to Australia, South America to China, Florida to Oregon, investors are asking how they should modify their portfolios. They are seeking to understand both the physical risks associated with climate change as well as the ways that climate policy will impact prices, costs, and demand across the entire economy.

“These questions are driving a profound reassessment of risk and asset values. And because capital markets pull future risk forward, we will see changes in capital allocation more quickly than we see changes to the climate itself. In the near future – and sooner than most anticipate – there will be a significant reallocation of capital.”

On its own, this proclamation from the CEO of the world’s largest asset manager might have created a few ripples in the investment markets, but not create a wholesale market transformation. However, the letter sandwiched an unprecedented period in the history of mankind’s battle with climate change. At the end of 2018, the UN Intergovernmental Panel of Climate Change (IPCC) published a Special Report on the impact of global warming of 1.5°C, which provided a stark warning about the consequences of inaction on climate change. In the period between these two events, several other activities took place which reinforce the market change:

  • Public opinion about the need to act on climate change shifted significantly in favour of action, in no small part to the meteoric rise in popularity of Greta Thunberg’s ‘Fridays for Future’ school children protests and the disruption caused by other campaign groups, such as Extinction Rebellion (XR) protests, and legal class actions brought forward by student groups around the world.
  • Climate science and the quality of climate modelling continues to improve, with recent work showing that the likely outcome of global warming will be between an average global warming of 2.6°C and 3.9°C. This is well above the low-risk threshold of 2°C agreed at the 2015 Paris Climate Summit (COP 21) and the preferred target of 1.5°C.
  • Significant capital reallocation towards delivering ESG objectives happened during 2019 and continued into 2020.

These factors, combined with new and forthcoming government regulations, would suggest that climate change and broader sustainability (or Environmental, Social & Governance) issues are here to stay for investors. Their material impact on financial returns is starting to become better understood as more time and money is invested in improving our knowledge and its application in real asset investment markets. Ignorance of these issues is no longer an excuse.

The way in which climate risks are being understood is in 3 categories:

  1. Physical risk
  2. Transition risk
  3. Litigation, or Liability, risk

For physical risk, the first step is to understand which climate-related hazards present a material risk, both now and over the period of an investment, including the disposal value. For instance, the materiality of a flood hazard could increase over time as climate change creates the conditions for more frequent and/or more severe floods causing damage or disruption to an asset. The impact pathway for that hazard could be that the repair costs and frequency of the floods means that an asset becomes uninsurable. Another impact pathway could be that the flooding makes it impossible to access an asset, which in turn reduces occupancy and the related revenue that generates.

The complex nature of the changes brought about by our warming climate means that the risk hazards and impact pathways could influence the drivers of asset value in multiple ways.

Whilst some of these material risks are apparent today, there are many others which will become much more visible over the coming decade. The trends that we see which could accelerate changes to asset value include: increased environmental & social disruption; increasing government regulation; and the internalisation of these costs to mitigate climate change and to adapt to the consequences. Companies and asset managers need to be prepared to avoid the risk of litigation.

2. What are the expectations for how investors and asset managers will respond to climate risks?

There is increasing certainty about how to be prepared to action.

Climate-related financial risk is a new topic for investors. In 2015, Mark Carney, as the Governor of the Bank of England, gave a speech which warned of the threat of climate change to financial stability. He spoke of the “Tragedy of the Horizon” where inaction on climate change today imposes a cost on future generations that the current generation has no direct incentive to fix. Meaning that the time horizon for decision-making in typical business and investment cycle is not suitable for tackling the catastrophic impacts of climate change.

Earlier in the same year, the G20 asked the international Financial Stability Board (FSB) to report on how climate change risks could be accounted for in the financial sector. Both of these events were precursors to the UN Climate Summit (COP21) in Paris later that year. The international political agreement reached at COP21 was a watershed for international climate policy as governments agreed that a target of limiting global warming to 2°C is a necessity to avoid catastrophic changes and that getting well-below this figure was desirable, so 1.5°C is the stretch target. To achieve this target collectively, we need to stabilise greenhouse gas (GHG) emissions, measured in tonnes of carbon dioxide (CO2) equivalent, by 2050 – also known as getting to Net Zero Carbon or being Carbon Neutral by 2050. Failure to do this will mean that the Earth will continue to warm and the financial losses will be much greater.

This growing recognition that climate change and the related financial risks have to be considered in the financial markets led to the announcement during COP21 to establish a Task Force on Climate-related Financial Disclosures (TCFD) under the auspices of the FSB and chaired by Michael Bloomberg. The TCFD will develop voluntary, consistent climate-related financial risk disclosures for use by companies and asset managers in providing information to investors, lenders, insurers, and other stakeholders. Considering the physical, liability and transition risks associated with climate change.

One year later the TCFD published its Recommendations for consultation, which were finalised by the summer of 2017. Over the last 3 years since the Recommendations were released there has been considerable efforts made by the FSB-TCFD to build support for their adoption by actors in the financial markets. Recognising that preparing an organisation to embed a comprehensive response to climate-related risks could take 3 years.

In parallel to this promotion of TCFD over the last 3 years, GRESB has been piloting a Climate Risk Module as part of their annual disclosure and benchmarking process specifically for real estate and infrastructure. Other international Environmental, Social & Governance (ESG)/Sustainability reporting standards have also promoted more effective consideration of climate risks and preparedness.

Every year the UN published an Emissions Gap Report. In 2019, the report stated that we need to reduce global GHG emissions by 7.6% every year between 2020-2030. If we don’t start that level of reduction now, then by 2025 we will have to reduce emissions by 15.5% every year to hit the target and this will be more costly and still necessary. The later that we leave act to mitigate GHG emissions, the higher the annual cost of mitigation action and the increased likelihood of increase cost of adaptation to a changed climate. Many companies have now adopted science-based targets aligned with the UN to reduce emissions and to get to zero. Governments are following suit.

The Recommendations of the TCFD are not requirements, they provide voluntary guidance intended to help companies acting in the financial markets to better manage and disclose climate-related financial information. There are four key design features of these recommendations:

  1. They can be adopted by all organisations
  2. They are intended to be included in financial filings
  3. They are designed to solicit decision-useful, forward-looking information on financial impacts
  4. They have a strong focus on risks and opportunities related to the transition to a lower-carbon economy

As investors and asset managers consider how climate risks can be considered in their organisations, the TCFD core elements shown below provide a useful structure for getting the organisation ready to disclose the relevant financial information. The TCFD recommendations should be familiar in structure to CFOs and are reinforced by a recent opinion from IASB which recommends that IFRS reporting should include climate risk disclosure. This is almost a precursor to action on individual assets as the structure allows for a strategic approach to be systematically embedded in risk management and then embedded across all levels of the organisation, from corporate through entities / funds, investment, disposal, development and asset management processes.

EY’s ‘Global Climate Risk Disclosure Barometer’, which reviews the disclosure of 500 companies from 18 countries, shows mixed progress in 2019 in the adoption of the TCFD recommendations. Most progress has been made on ‘Metrics & Targets’ and ‘Governance’, whilst the quality of ‘Strategy’ and ‘Risk Management’ are the least developed. Their sector by sector comparison shows that the ‘Real Estate’ and ‘Asset Owners & Asset Managers’ sectors have made the least progress, in terms of coverage and quality. Suggesting that there is significant progress to be made by real estate investors and asset managers to be ready to manage and report on climate-related financial risks.

Whilst the TCFD Recommendations are voluntary, they are a precursor to mandatory disclosure in Europe resulting from the EU ‘Action Plan on Sustainable Finance’. At least for publicly listed companies and funds. Regulations which begin in 2021 will start this process of increasing disclosure.

The EU Taxonomy Regulation has set out a standard set of environmental impact categories, including Climate Mitigation and Climate Adaptation. This Regulation has established the principle of Do No Significant Harm (DNSH) and has set thresholds for what a ‘Significant’ positive impact looks like. It is expected that companies active in the EU will provide disclosure aligned to this taxonomy and it will provide investors with a common lexicon to use in global due diligence and in the scrutiny of fund performance as we experience more capital flowing into ESG funds.

3. How can a company ensure that they are prepared as an organisation to discharge their fiduciary duty?

There are clear steps that can be taken to be prepared to manage climate risks.

EVORA Global advises real estate and infrastructure investors and asset management in Europe and the USA who have global funds, with assets under management in over 30 countries. Our experience with these organisations has shown that there is a broad spectrum of Climate Risk Readiness. From the largest to the smallest they are considering how they respond to climate-related financial risks. They are having to do so now to ensure that they have access to the best capital.

To get ready, an organisation can undertake a Climate Risk Readiness Gap Analysis, which can be displayed on our EVORA Climate Risk Readiness Radar and compared to their peers. This assessment looks at the organisational readiness and is aligned with the TCFD Recommendations and upcoming regulations. It can be supplemented with fund and asset-level scoring of climate risk exposure and management readiness.

The EVORA Climate Risk Readiness Radar provides an evidence-based scoring mechanism to compare progress. Under each of the five categories – Governance; Strategy; Risk Management; Metrics & Targets; and Disclosure – there are five levels of organisational readiness, and each level has an associated set of actions. For instance, Level 1 Governance required all Board member are trained to understand their fiduciary duty regarding climate risk, including their main materials risks and disclosure responsibilities and requirements. The associated set of actions includes a risk materiality assessment of the organisation’s assets; formal training for the Board; and a declaration by the Board that all of its members have confirmed their understanding.

By understanding this gap analysis of organisational readiness, it is then possible to set out a roadmap for the coming years. This will enable the organisation to communication a clear plan to investors and other stakeholders.

Level 1 Strategy contributes to Level 1 Governance as it requires an assessment of material physical and transition risks through the use of climate scenario analysis. This should be segmented by time horizon, geography and/or sector. As this modelling is a standard requirement for getting to grips with climate risk there are several data analysis software tools now available on the market. The EVORA team has been evaluating which specialist data analysis partner to work with.

The majority of data services available today are focused on analysing physical risks, like the extreme weather impacts of heat, flooding and storms. Our approach to assessing the materiality of physical risks, and to answer the question “so what?”, is in three broad phases:

  1. A portfolio or fund screening of a range of weather hazards to prioritise a deeper investigation of the high-risk assets,
  2. An assessment of the impact pathways to create a shared understanding of how the hazard risk could impact the drivers of asset value, and
  3. A detailed investigation and assessment at asset-level of the specific, material hazards which impact value and are prioritised from 1 & 2 above.

These three phases provide a deeper understanding of risk than a high-level screening can provide. The intention is that this provides a detailed evidence base on which to define a credible, effective and appropriate climate risk strategy and the related processes for risk management. Both of these areas of climate risk management are presently considered weak in most company disclosures.

Today, there is not an existing data partner which can deliver on all three of these phases end-to-end so we collaborate with specialist partners to deliver a comprehensive Climate Risk Materiality Portfolio Assessment service for fund managers. EVORA usually extends this assessment to also cover Transition Risks, in particular forthcoming regulations which could affect value.

These two EVORA Assessments on Readiness and Materiality are essential building blocks in understanding the effort and exposure for an organisation’s preparedness on climate-related financial disclosure. The outputs will provide a clear roadmap for integration over the next few years.

Investor expectations of climate risk have moved on quickly over the last few years. Our expectation is that this acceleration in understanding and scrutiny will continue. Reinforced by new regulations, particularly the regulations flowing from the EU Action Plan on Financing Sustainable Growth and Paris’ climate mitigation goals, ever-improving climate models and continued emissions of greenhouse gases which are not in line with a Net Zero Carbon trajectory. Those investors who are not prepared are much more likely to acquire assets which are at risk, that is not aligned with science-based decarbonisation pathways and/or exposed to a changed climate. The need for organisational preparedness, embedded across all aspects of investment – i.e. asset management; acquisitions; developments; and disposal – is essential portfolio management. Good quality data and information is vital in delivering expected returns in a market which is transitioning to become low-carbon and adapted for a changed climate. 

EVORA is engaging with companies and relevant institutions to better prepare the real estate and infrastructure sectors for climate mitigation and adaptation disclosure. The approach outlined in this paper is difficult to fast-track in large organisations to ensure it is properly integrated. One of the biggest challenges which remains is solving the ‘Tragedy of the Horizon’ as this means that the actions required in an investment portfolio cannot always be taken within the investment lifecycle. The TCFD initiative is designed to address this challenge and, to be successful, this requires early and comprehensive adoption by real estate actors. We would recommend to our clients that early action on climate risk reduces the risk of Litigation or Liability Risk, as well as falling disposal values of asset exposed to Transition and Physical Risks. The steps outlined here will guide substantial and measurable progress.

EVORA’s Climate Resilience Service

Addressing the social impacts of climate change: What if we unlocked the social value hidden in the UK’s industrial and logistics assets?

In the discourse on social value and the built environment, we most often hear about infrastructure, multi-residential developments, and office spaces. However, 15% of the UK’s real estate market value is held in logistics and industrial parks [1]. These sites support many business types, with e-commerce businesses now taking up a larger proportion of tenants than in previous years. In fact, the manufacturing, transport and storage industries support just less than 4.6 million jobs in the UK alone [2].

In 2018, the manufacturing, transport and storage industries generated an estimated 30% of the UKs carbon emissions. Carbon emissions are a direct driver of climate change. Climate change is a global process which, carries with it significant social impacts. This short article makes the point that we should be considering the social value potential of all asset classes, especially those with greater environmental impacts.


What are the social impacts of climate change?

Impacts such as rising temperatures and poor air quality have the ability to affect the physical and mental health of the population, as well as their wider quality of life. By 2020, sustainability-conscious landlords are already familiar with monitoring consumption data to reduce their emissions. This often translates to prioritising initiatives focussed on energy usage. Although these activities are vital to reducing the extent of the climate crisis, sustainability programmes should continue to address the existing environmental, but also social impacts of climate change. This can be done by undertaking social initiatives at the asset level.


Taking Action

Individual assets have the scope to improve the lives of their occupants, visitors and surrounding communities. To address the social impacts of climate change, social value initiatives should seek to improve the physical and mental health of these people, as well as their wider quality of life.

There are a number of practical ways to implement social value and social impact improvements at individual assets.

  • Tenant engagement can kickstart a productive, bottom-up approach to establishing specifically what these actions might be. For example, tenants may identify that due to rising temperatures or extreme weather events, their work environment is sub-optimal.
  • Valuable, quick-win opportunities include provision of facilities to increase public transport use or cycling/walking, encouraging use of the stairs for building users and making healthier food options [3].
  • Access to the natural environment both internally and externally can both improve the mental and physical health of tenants, as well as supporting climate adaptation through green infrastructure.
  • Due to the location of buildings within logistics and industrial parks, there are opportunities at the wider estate and public realm level, managed by landlords to provide social benefits to tenants.
  • In the longer term, employment and community initiatives can look to support education, work placement or employment opportunities for members of the community.

It is possible to quantify and report the positive impacts of the above. For example, certification schemes BREEAM and FITWEL have resources to assess and certify health and wellbeing aspects of buildings in multiple asset classes [4]. Whilst BREEAM encompasses most asset classes, FITWEL currently covers office, multi-residential and retail buildings.

Assessing the social value outcomes for occupants and visitors to buildings can also be done through quantitative social value metrics. EVORA has used HACT in past projects to assess outcomes of community engagement programmes.

To let us know your thoughts, please don’t hesitate to get in touch.


[1] Statista. (2020). Commercial property investment value UK 2017 | Statista. [online] Available at: https://www.statista.com/statistics/747082/commercial-property-investment-value-in-the-united-kingdom/ [Accessed 12 Feb. 2020].

[2] Ons.gov.uk. (2020). EMP13: Employment by industry – Office for National Statistics. [online] Available at: https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/datasets/employmentbyindustryemp13 [Accessed 12 Feb. 2020].

[3] Fitwel.org. (2020). Fitwel. [online] Available at: https://www.fitwel.org/ [Accessed 12 Feb. 2020].

[4] BREEAM. (2020). BREEAM In-Use – BREEAM. Available at: https://www.breeam.com/discover/technical-standards/breeam-in-use/ [Accessed 12 Feb. 2020]

Seeing the Value in Real Estate Supply Chain Sustainability

Do the companies you partner with – your supply chain – understand your approach to ESG issues, and can work with you to meet your goals?

Supply chains can often be global, highly complex and of significant scale. Historically, technical quality, cost-effectiveness, speed of delivery and reliability has been the focus. Sustainability has now been added to the procurement and sourcing criteria because of operational, financial, regulatory and reputational risk drivers.


Real estate organisations are encouraged to embrace resiliency and responsibility in their supply chain management to adapt to externalities such as geopolitical conflicts, changing weather patterns and new legislation in areas such as modern slavery; and to improve their impacts on the workforce, local communities and the environment in the places where they develop, manage and invest. By improving ESG performance throughout their supply chains, organisations can enhance processes, save costs, uncover product innovation, achieve market differentiation and have a significant impact on society.

As organisations apply a sustainability lens to the design, development, management and marketing of their buildings and services, the inputs, construction methods, labour conditions, workforce health and safety practices, and environmental and community impacts of these processes will be under growing scrutiny.

The continuous improvement process expands supplier relationships significantly beyond auditing and monitoring, investing in training and incentivising top performers. Organisations share commitments with suppliers in order to achieve their sustainability goals. Procurement process preference is given to suppliers who can help them achieve these goals.

Leading organisations recognise that the sustainability attributes of their assets can offer market differentiation, resulting in increased lettability and stronger and long-term relationships with tenants.

They achieve competitive advantage in the supply chain through establishing meaningful, collaborative dialogue between themselves and their suppliers, alongside technology innovation, greater efficiency and supplier diversity. Suppliers are viewed as an extension of their business with a shared sustainability ethos integrated seamlessly throughout.

Maturity model - supply chain
Figure 1 – Maturity model supply chain

EVORA provides consultancy support for the development and implementation of an effective strategy to endorse sustainability within supply chains, including:

  • Assessment of materiality to focus on the most pressing issues
  • Development of sustainability criteria and alignment with the procurement process
  • Providing training and knowledge sharing capabilities across the organisation and with suppliers
  • Stretching existing sustainability goals beyond direct operations, to include tiers of the supply chain
  • Advice on deploying technology to increase accountability and transparency through comprehensive supplier performance metrics
  • Guiding participation in industry collaborations and initiatives to leverage buying power and influence towards supply chain sustainability
  • Disclosure of supply chain information within integrated reporting, beyond stand-alone sustainability reporting mechanisms.

Contact us to speak to a member of the team.

EVORA Global announced as headline partner on Estates Gazette new Sustainability Programme

EVORA is pleased to be working in collaboration with the Estates Gazette and other industry leaders to share knowledge and key learnings about sustainability with the real estate industry.

Find out more here.

  • Read the article “How real estate is mobilised to face a real and present danger” by Chris Bennett here.
  • Listen to the podcast “Hope or fear? How the built environment needs to approach the climate change” featuring Ed Gabbitas here.
  • Listen to the podcast “Property and the climate crisis: how should real estate respond?” featuring Matthew Brundle here.

There has never been a better time to be talking about climate change and the broader sustainability agenda and Estates Gazette are ideally placed to inform the industry as a whole. Working with the Better Buildings Partnership, Hammerson and Drees & Sommer, we aim to share our wide knowledge of the industry and sustainability with the EG audience. 

Real estate is one of the biggest contributors to global warming, representing around 40% of global carbon emissions, which means it is also an industry that has the biggest opportunity to make a difference.

“We are fortunate to work with many clients who already have sustainability high up on their agenda, but we recognise the wider real estate industry still needs guidance and support. With the sustainability agenda ever evolving and climate change and net zero at the forefront of everyone’s mind, we believe it’s the ideal time to share our knowledge and expertise with a wider audience. By partnering with the Estates Gazette provides the perfect platform to share our learnings and  support the industry to rise to the challenge and tackle this issue head on.”

Chris Bennett, MD, EVORA Global

The new programme coincides with the launch of the Climate Change Commitment by the Better Buildings Partnership (BBP), which has been signed by 23 of the UK’s leading commercial property owners.

The Commitment highlights the need for buildings to be net zero carbon by 2050 and commits signatories to publicly publish their own pathways to achieving this by the end of 2020. Read the full BBP press release here.

If you would like more information about how EVORA Global can support your business in achieving its climate goals, please do contact us.

Social Value Part 1: What is social value?

Social Value is the quantification of positive public benefits and outcomes. It originates from a collection of principles aiming to improve health, wellbeing, quality of life, and communities[1].

Social Value is considered in a variety of industry sectors, but recent uptake in the built environment has been sharp, and the future is focused on developing implementable social value strategies for commercial real estate.


Key factors for Social Value in the Built Environment

Social Value has been brought to the forefront of planning requirements by The Public Services (Social Value) Act (2012).  The Act gives no official definition or guidance on what process could be followed to implement Social Value. However, research from the U.K. Green Building Council (UKGBC) into Social Value provides comprehensive guidance into the most relevant aspects for development projects.

EVORA Global Social Value blog table Source UKGBC

How do we measure Social Value?

The most asked question in Social Value is ‘how do we measure this?’ Answered simply, Social Value is typically measured by the following 3 methods.
·     Fiscal, including Social Return on Investment (SROI)
·     Numerical quantification e.g. = number of people affected x outcome of action
·     Qualitative (storytelling)[2].

Social Value: Nice to have or must-have?

The rising global population means that the 3.5 billion people currently living in the world’s urban centres is set to increase. By 2030, this number set to rise to 4.9 billion. As the population grows and our cities become ever closer together, the challenges of living and working comfortably alongside each other are increasing. Understandably, government, the public and investors now expect more from those shaping our built environment. Unforgotten though, is that the built environment is a for-profit industry. It is therefore important to many that sustainability actions can be quantified with financial returns[3]. Social Value reporting gives us an updated set of sustainability principles and a way of quantifying them.

EVORA is now supporting our clients to develop and deliver Social Value programmes. You can read more about this topic in our next blog post in the series ‘5 key challenges for Social Value in Real Estate’.

Alternatively, please don’t hesitate to get in touch if you would like to discuss Social Value in more detail.


[1]Baldwin, C. and King, R. 2018. Social Sustainability, Climate Resilience and Community-Based Urban Development. 1st ed. London: Routledge.
[2] Maas, K. and Liket, K. 2011. Social impact measurement: Classification of methods in Environmental management accounting and supply chain management (pp. 171–202). Dordrecht: Springer.
[3]Emerson, J. 2003. The blended value proposition: Integrating social and financial returns. California Management Review, 45(4), pp.35–51. doi:10.2307/41166187

EVORA revealed as finalists in Edie’s Sustainability Leaders Awards

In EVORA’s first year of entering, we are thrilled to be finalists in three categories for the Edie Sustainability Leaders Awards 2019.

We are proud to be finalists in the ‘Consultancy of the Year’ category, along with a number of other outstanding organisations and we also made the list of finalists for the ‘Energy Efficiency’ category with our client Schroder Real Estate Investment Management.

Our Founder and Managing Director, Chris Bennett is also one of the finalists for ‘Energy Management Leader of the Year’ and will be presenting to the panel of judges later in the year.

Chris said, “This is an amazing accomplishment for EVORA. We have doubled in size over the last year and have built a really forward-thinking team, we’re also very fortunate to be working with some great clients. It’s wonderful to be recognised for the work that we are doing in the real estate sustainability sector and we have some really exciting plans on the horizon.”

The team looks forward to meeting fellow finalists and judges at the awards ceremony on 6 February.

There were a record-breaking number of entries this year for the awards, which have undergone a major revamp, with a new judging panel and additional new categories for 2019. The awards are a celebration of organisations who are embedding sustainability in their operations, business models and products, the winners are in the vanguard of sustainability and are driving demonstrable results through innovation, engagement and a commitment to doing business better.

You can find the full shortlist here.

Sustainable cities: innovative “hubs” and battlefields against negative change

Only ten years ago, knowing about sustainability meant that you might have accidentally read a piece of avant-garde research, speculating about harmful changes in our climate. In the blink of an eye, sustainability has gained wider momentum, and today has established itself as a global goal for our future and that of our planet.

However, years have passed but we still have a long way to go: threats to our environment and humankind haven’t disappeared as quickly as we’d hoped, and industrial production has largely been favouring short-term interests over environmentally-sound long-term benefits. Hence, the war against negative environmental impact is still on. What better battlefield than cities today?


Cities are expected to be home to over 70% of the world’s population by 2050[1]. In Europe, urban areas account for 75% of the population already. It is anticipated that US350 trillion are to be spent on urban infrastructure over the next 30 years[2]. How can we use those monetary resources effectively and sustainably?

Real Estate is a sector with one of the most comprehensive sets of tools and practical standards aiming to improve sustainability and resilience in cities. And thankfully so, as buildings account for almost 40% of carbon dioxide emissions globally, and in bigger cities up to 80%[3]. Ensuring that buildings are sustainable means finding ways to use resources efficiently, without compromising their overall purpose. Buildings should be designed with the best solutions and ideas at stake and should be a grounding element of future-proofed cities.

Great theory, great lesson, but what has been done so far?


Practical learning n 1: Business for sustainability, or sustainability for business?

A lot of initiatives and developments have taken place in the real estate sector to advance sustainability holistically. More and more, environmental standards and certifications such as BREEAM, LEED and many more have set out criteria to measure buildings’ sustainability and determine which actions can contribute to better results. Along this line, the GRESB sustainability survey has become a turning point for real estate investors’ business-wide future decisions. The speculative market environment can therefore easily be influenced by what investors believe to be future risks. This means that sustainable cities and structures are at the core of the international agenda, and they have the power to steadily shape what is next.

Practical learning n 2: All that glitters today is not gold tomorrow

Industries such as Real Estate, which deal with infrastructures that need sustainable (re)development, have started rewriting their founding lessons, with an eye for long-lasting value, rather than short-term benefit. Why is business, often the enemy to our environment, suddenly turning towards more sustainable solutions?

Industries such as Real Estate, which deal with infrastructures that need sustainable (re)development, have started rewriting their founding lessons, with an eye for long-lasting value, rather than short-term benefit.

Sustainable cities mean resilience, hence resistance to future risks and challenges. This means better stability and reward for the years to come as well as a greater understanding of how to peacefully live within our environment, rather than harming it or feeling threatened by it.  More in cities than anywhere else, where consumption patterns are the direct cause of environmental degradation, there is a need for enduring value, which can only go hand in hand with an increasing respect and understanding of how to treat our urban surroundings. What glitters today is not going to be the gold of tomorrow, if it cannot last until tomorrow!

Practical learning n 3: The happier, the better

Cities are a hub of production, which means innovation, creativity, financial reward, increasing services and ambitious professional, social and cultural opportunities. As a result, however, cities can also be stressful environments, filled with people, vehicles, infrastructure, but with little space and resources to support them. This does not only affect the resilience of businesses and infrastructures, but also of the people contributing to them, who increasingly suffer from psychological distress, anxiety and hence lower productivity. Sustainable cities and their infrastructures can only achieve enduring value if they become healthier environments for their people.

The Real Estate sector has recently made advancements in establishing health and wellbeing as a part of the sustainability agenda. Not only do sustainable buildings mean good management of resources, which inevitably meet future human needs, but research has shown that proximity to more natural elements within our urban spaces is fundamental to advancing our well-being, and as a result our productivity[4][5]. Standards such as the WELL, RESET and Fitwel have taken health and wellbeing as their main focus to aspire to resilient and thriving communities within urban spaces. Similarly, GRESB recently introduced a health and well-being module in their annual survey and it will likely gain wider coverage in future years. It seems that if you feel great within your environment, you will be happier, healthier and will reach your full potential. Isn’t this what we are all looking for?

If you agree, then you have reason to believe that because our current cities are the major obstacle to improving sustainability and finding enduring value, they are also the inherent solution.

This blog post was originally written for and published on GRESB Insights.


[1] Neij, L., Bulkeley, H. & McCormick, K. (2015) Cities and climate change: The great decarbonisation challenge, Climate in Focus, 1-4.

[2] WWF (2012) Reinventing the City: Three Prerequisites for Greening Urban Infrastructures, p. 6

[3] WF (2012) Urban Solutions for a Living Planet. P.10

[4] WF (2012) Urban Solutions for a Living Planet. P.9

[5] Ryan, C., Gaziulusoy, I., McCormick, K & Trudgeon, M. (to be published) Virtual City Experimentation: A Critical Role for Design Visioning. In: Evans, J., Karvonen A. & Raven, R (eds) The Experimental City. London: Routledge.

Why sustainability cannot be ignored by the real estate industry

A key motivation when we started this business was for sustainability to be seen and accepted as a valuable asset management tool by the property industry. Seven years on, has our goal been achieved? Read on!


What is sustainability in Real Estate?

Sustainability can mean many different things to many different people so to keep it simple, I see sustainability in Real Estate as delivering enduring value. For the real estate industry, ultimately, for a building to be sustainable it needs to be occupied both now and for the foreseeable future, delivering an acceptable return to the investors.

Delivering value comes down to the key drivers of occupancy, rent, lease length and covenant strength so if a sustainable approach can enhance any of those key elements it will deliver value, in the same way as any other asset management tool. That has been my approach for the last seven years although I hope some of our methodologies have matured!

Sustainability is far more than managing energy, water and waste. Don’t get me wrong, these are important aspects, which can reduce the operating costs of a building and improve its resilience, all of which should be attractive to the occupiers.

Does this deliver quantitative returns?

The answer is not obvious in Europe, although the award-winning study entitled “Decomposing the Value Effects of Sustainable Real Estate Investment: International Evidence” measured the impact of sustainable investment on the value and performance of listed real estate investment firms (REITs) and found that strong sustainability practices are associated with superior investment performance.

More importantly, if you ignore sustainability you marginalise your ability to attract the broadest scope of occupiers, potentially those most likely to have the best covenant strength who often also have the strongest CSR credentials. We have experienced, on a number of occasions, corporates matching this profile, willing to commit to longer leases for buildings which have excellent green credentials. This is of course not a one size fits all.

What does this mean?

At a regulatory level, in the UK it is now unlawful to let a building if it does not have a minimum EPC energy rating of an E. In addition E rated properties may still be at risk from MEES regulations. This is significant. For the first time we have energy efficiency regulation that impacts rental income and value. It will be interesting to see if this transitions into Europe in the future.

Interestingly though, we have seen greater uptake of sustainability through voluntary reporting than enforced regulation. GRESB, the global sustainability benchmark survey has mobilised the real estate industry over the last few years with 850 portfolios participating in 2017, representing more than USD$3.7 trillion in assets under management. GRESB is investor driven, to assess the environmental, social, governance (ESG) performance of their investment managers, where many see ESG as a fiduciary duty to protect and enhance future value of their investments. It is also interesting to note that research in July 2017 by Dirk Brounen and Maarten van der Spek identified a return premium of 3% between the highest and lowest GRESB scoring participants.

What practically should we be thinking about for the future?

So there appears to be some quantitative correlation to performance if enough research is done. But what practically should we be thinking about for the future?

For me, the three big impacts to plan for will be climatic change, technological advances and a generational shift in behaviour. I’m not going to dwell on climate change but the combination of rapidly advancing technology with a changing work culture will see a move away from honest work for honest pay to meaningful work in a meaningful environment. The advent of health and wellbeing to deliver a ‘meaningful environment’ is already upon us and my instinct tells me this will be the new face of sustainability, which will mobilise the industry far more quickly than just measuring energy.


To speak to a member of the team about how we can support you, please contact us.