GLOBAL - The Investment Property Databank (IPD) has launched a majorglobal initiative to help real estate owners measure and understand theenvironmental impact their buildings have, as officials believe suchdata will become a component of future real estate pricing andlegislation.
The initiative was launched by IPD, Barclays, Bureau Veritas and CB Richard Ellis, with the support of 20 major corporations and the UK's Confederation of Business and Industry (CBI), in the hope all companies will eventually publish their findings within corporate reports.
The downloadable IPD environment code is designed to be used by both tenants and landlords, anywhere in the world, to measure the carbon emissions of any type of building through the collection of ‘core measures' - looking at energy, water and waste usage - along with ‘qualitative measures', and then track and assess a building's environmental status and make changes to improve that status if it is considered appropriate.
The report contains detailed information on the energy consumption to be measured, and how the use and production of renewable energies might be offset, as well as questioning how water and waste usage contributes to a carbon footprint.
IPD officials say it will realistically take least three years to collect the data on each building and note each country will have slightly different ways of measuring carbon, so the code content's is being reviewed again in 2010 for possible refinement.
That said, it is hoped this data could then eventually converted into benchmarks and performance targets for different types of building, potentially serving as a form of energy performance certificate (EPC), as real estate experts predict firms will eventually be enforced to meet the growing number of national and international regulations.
Officials also predict shareholders and investors will soon be asking for such information as part of a company's environmental and social governance (ESG) requirements, and argue the environmental data could impact a property's yield.
Speaking at the launch of the environment code inside Greater London Authority Building in London - itself a property run on renewable energy and water - Chris Hedley, IPD director, described the project as "moving in the right direction because it is time for action" on environmental management.
"20% of global carbon comes from corporate buildings. It is a big challenge we have to manage and measure, and to bridge the gap between the technical experts and the businesses so the business can really understand how they are doing and what progress they are making. It is unashamedly international and it is a global problem requiring a global solution."
He continued: "If the plan is to have A to E ratings for EPCs, and if the classification changes over time, how on earth are we going to measure it? Carbon is going to have to be the most important thing you take into account, but with waste and water and other aspects also assessed. The data needs to be collected on performance for people to move towards. We think this will the help the corporates to manage their brand, their risk and the corporate responsibilities, and not least for legislation," added Hedley.
Much of the qualitative measures data could be considered more subjective, but officials say it also acts as a wider healthcheck list on the decisions a company makes to then manage the building environment - such as encouraging staff to use public transport or cycle to work or the appliances used by tenants.
Charlotte Eddington, group head of energy and sustainability at CB Richard Ellis, warns real estate owners will need to take it seriously because environmentally-conscious tenants are likely to start demanding changes be made.
"What I hope is corporates embrace this methodology but as the carbon commitment comes in they will be forced to embrace it. When we are starting to look at leases, people are building in green lease clauses so they will start to request required changes.
"As [environmental] awareness is rising, investor awareness is rising and that in turn might have an impact on the valuation of buildings. It is interesting to see how this, along with EPCs and ratings, will perform. It suggests good buildings will maintain their value, while poor-performing buildings will drop in value," she added.
Hedley also made a mixed economic case for adopting the environmental code in real estate management, as he added: "This is an opportunity for companies to manage down the use of natural resources and improve the bottom line. The extend to which that drives property leasing and property behaviour is unclear as surveys suggest there is a willingness to pay a bit more for a green building but not much. The pay back is on the other corporate activity but it often has a longer timeframe compared with the outlay."
It is suggested this code will impact pension funds, both directly via real estate holdings or indirectly through ESG as a shareholder, But do you agree? And should pension funds follow the code too?
Further analysis of this issue will be presented on IPE Real Estate.com next week. But if you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com
