Our industry is engaged in an important dialogue to improve sustainability through ESG transparency and industry collaboration. This article is a contribution to this larger conversation and does not necessarily reflect GRESB’s position.
The importance of carbon neutrality and net zero for the real estate industry
Background, regulations, and consequences
The building sector is responsible for 40% of global emissions. Minimizing its environmental footprint is therefore essential to combat climate change and maintain property value. To reduce emissions, the property sector has to develop innovative solutions and sustainable practices.
In this context, the terms “net zero” and “carbon neutrality” are used inflationarily by companies and countries. To date, there is no agreed definition, but there are a number of initiatives and regulations that can be attributed to this endeavor.
For example, as part of the European Green Deal, EU member states have committed to making the EU the first carbon-neutral continent by 2050. Concrete measures for a new climate, energy, and tax policy have already come into force in the real estate sector to achieve this goal. For example, targets for energy-efficient building renovation and subsidies for projects that help reduce CO2 emissions.
Asset managers and real estate companies are no longer able to implement sustainability strategies on a voluntary basis. Instead, they are confronted with a wide range of mandatory regulatory measures. In Germany, for example, the so-called Energy Act for Buildings (GEG) is of fundamental importance and contains regulations on heating technology, thermal insulation standards, and the thermal insulation of buildings. Financial incentives, such as the CO2 tax, also provide sufficient motivation to reduce CO2 emissions.
In practice, the numerous approaches to CO2 reduction mean one thing for the property industry: An ambitious, imprecise, and ever-changing ESG regulation, with significant financial costs associated with its implementation. In addition, energy efficiency and the conversion to climate-neutral buildings are playing an increasingly important role for investors. Institutional investors already invest more than 60% of their investment volume in sustainable real estate. Overall, ESG is increasingly becoming a risk factor for the value of properties.
Maintaining property value through sustainable and profitable real estate management
Understanding the status quo through data availability and standardization
In the absence of a uniform standard for ESG reporting in the real estate sector, comparability of ESG performance is lacking. A multitude of metrics and indicators or different definitions and calculations further complicate an accurate assessment. To understand the status quo, real estate companies further need to draw on different data sources, such as energy and water consumption data or waste rates. However, the barrier-free access and sufficient quality of these data is not always given. In addition, the properties in a real estate portfolio are usually located in different regions, which makes data integration and analysis difficult. Real estate companies and portfolio managers are therefore increasingly turning to specialized ESG management software.
ESG management software creates an accurate overview of the properties’ scattered and unsorted ESG data within a few days. The data is collected throughout the entire calendar year and generates a clean database with your ESG strategy, consumption values, data on technology as well as the building envelope. Thus, you have all the information in one place and can build on ongoing data collection rather than starting from scratch for your ESG reporting.
Maintaining property value through effective action planning
There is no doubt that the real estate industry needs to take action to minimize environmental damage and financial, legal, and reputational problems. However, the effectiveness of planned measures on sustainability goals is often difficult to quantify. Moreover, from an economic point of view, it is not realistic for asset managers to modernize all portfolios at the same time. It is therefore important to make informed decisions about which measures to implement for which properties and when.
ESG management software helps to define, prioritize, and track the implementation of measures at building and portfolio level. All planned measures take into account a profitability calculation and simulate the impact on CRREM pathways. This enables property managers to make informed decisions.
Achieving transparency through automatic reporting
Reporting on energy consumption and emissions is increasingly required to provide transparency and comparability on the environmental impact of real estate. Investors, tenants, and other stakeholders demand information to make informed decisions in line with their own sustainability goals.
ESG management software automatically collects relevant information. This allows you to quickly inform investors and identify areas for improvement. The collected data is then automatically integrated into established ESG reporting standards (e.g. GRESB, ECORE, GRI, CRREM, etc.) – allowing you to report transparently on your ESG performance and respond quickly to changes. You can use the platform to communicate your achieved goals and planned tasks and efforts. In addition, you can create your own reporting and scoring models and generate customized reports for different stakeholders.
Conclusion
ESG management software helps asset managers minimize the risk of value loss by simplifying data collection and analysis, and enabling informed action planning. By communicating effectively through the software, asset managers can be transparent about their progress and ensure the long-term viability of their assets in the marketplace. The use of ESG management software thus helps to turn ESG risk into opportunity.
Predium Technology GmbH aims to support the real estate industry in its sustainability journey. Predium offers an all-in-one software solution for easy collection and analysis of ESG-relevant data for residential and commercial real estate. The Predium Action Engine enables the definition, simulation, and prioritization of optimization measures, including profitability assessments, and facilitates communication with automated reporting in line with market standards or customized templates. In this way, the Predium software solution supports property owners in making economically and ecologically sound decisions and maintaining the value of their properties.
This article was written by Viktoria Niggemann, Communications Manger at Predium.
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