Before Retrofitting Begins, Take The Time To Understand An Asset’s ESG Performance
ESG plays an increasingly pivotal role in real estate decision-making. When investors and property owners are seeking to acquire, sell or renovate an asset, they need to generate a clear picture of its environmental performance and how they intend to improve it.
This can be a daunting task. However, there are tools available to fully assess an asset and gain a picture of its current state and a strategy for how to retrofit a building as cost-effectively as possible.
“Across Europe, an extremely high proportion of real estate portfolios contain old, inefficient buildings,” Partner Property Consultants Sustainability Consultant Anni Li said. “Investors and property owners come to us knowing they need to retrofit real estate, but they don’t know the most cost-effective way to proceed. By fully assessing properties, we can help them determine the best way forward.”
Li recommended owners and investors start their process by creating an environmental, social and corporate governance benchmarking checklist. The report produced provides clarity on environmental performance and the key retrofit requirements for a property for owners, while an investor can use it to negotiate the most appropriate price and navigate key sustainability requirements and risks.
To create an ESG checklist, the Partner team starts with site visits and document reviews. What the team brings into the assessment depends on the client’s goals and how the asset relates to a wider portfolio.
“One client might prioritise energy and water usage, while another might need to report on greenhouse gas emissions to stakeholders,” Li said. “While investors will need to consider their own and stakeholders’ priorities, property owners need to make sure their buildings are as attractive as possible to tenants in order to guarantee the longevity of their portfolio.”
Partner’s team carries out energy and water audits that create a baseline to build upon. The findings are then used to generate recommendations for reductions and opportunities for carbon savings.
An important element of ESG that needs to be considered is a property’s energy performance certificate. A commercial property needs a minimum EPC rating of E or better in England and Wales, a requirement that varies across Europe. From 2027, the proposed minimum rating in the UK will be C for commercial landlords, followed by B in 2030.
“All commercial landlords and investors need to be aware of these upcoming deadlines, but it’s not always clear whether a property has a valid EPC and whether it meets energy-efficiency requirements or proposed future regulations,” Li said. “Partner is often asked to research an asset’s current position or assess an asset for an EPC.”
Partner also carries out climate risk and resilience assessments to help property owners and investors understand how climate change could impact assets in the future. The team integrates climate change models with detailed property characteristics, existing resilience measures and regional governmental policies.
This approach includes a thorough assessment of the property’s current risk level due to climate change, along with an evaluation of associated costs. This ensures that recommendations are actionable and tailored to the specific circumstances of each property, Li said.
“Physical climate change risks are primarily determined by location, topography and regional hazard data,” she said. “This is why we analyse asset-level data in conjunction with regional climate hazard data to understand specific vulnerabilities.”
Once an investor has a full picture of a property’s condition and ESG performance, as well as its resilience to future risks, they can estimate the cost of any necessary retrofitting work. This will take into account initial outlay, such as the cost of upgrading HVAC to meet current efficiency standards or anticipated future demands, as well as the predicted payback period. Partner can also recommend the use of building management systems and International Organization for Standardization certification standards or whether the property owner would benefit from carrying out a BREEAM In-Use assessment.
As demand for ESG clarity grows, Partner is expanding in Europe. The ESG team comprises engineers, building surveyors and real estate experts who address all aspects of sustainability. Li said that as Europe's journey toward net-zero continues, the team is primed to provide clients with the clarity they need to invest in the most effective ESG strategies.
This article was produced in collaboration between Partner and Studio B. Bisnow news staff was not involved in the production of this content.
Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.
