European property companies have made great strides in making them-selves greener and improving transparency, as Graeme Newell reports
European property companies have taken a strong leadership role in the area of environmental sustainability. This article showcases some of the strategies they use in delivering excellence and best practice in sustainability. Sustainability has taken on increased importance in recent years, with increased awareness internationally that sustainability is a number one priority. In particular, the property industry has a major impact on the environment, with buildings contributing up to 50% of CO2 emissions, 40% of energy requirements, 16% of water usage, 40% of solid landfill waste, 50% of raw materials and 71% of electricity consumption. Official legislation regarding sustainability has also been introduced at both the international and local levels; this includes the Kyoto Protocol, UN Principles of Responsible Investment and the EU Directive on Energy Performance of Buildings. Importantly, the property industry has actively contributed to this sustainability agenda. This has seen both the UN Environmental Program Finance Initiative and the Institutional Investors Group on Climate Change having property working groups to specifically address property issues in these key forums.
In the UK, groups such as IPF have established a Sustainability Special Interest Group and IPD recently established an environmental code for commercial property. This has also been evident via the World Green Building Council, which includes several European members (UK, Germany, Greece, Switzerland, Turkey) among its 25 members, as well as a range of green building rating schemes established, including BREEAM (UK), LEGEP (Germany), Equer, ESCALE and HQE (France) and EcoQuantum (Netherlands). Importantly, sustainability has been embraced at all levels, including government, tenants, owners, investors and the community. This has seen a number of property investors effectively integrate sustainability into their business platform at all levels of their commercial property activities. In the UK, leading sustainable commercial property players include PruPIM, Hermes, Land Securities, British Land, Hammerson and SEGRO; in Europe, they include Unibail-Rodamco, Klepierre, Castellum and Wereldhave. This has also seen the language of sustainability become a fundamental part of the language of the property industry, with terms such as triple bottom line, responsible property investment, environmental footprint, carbon neutral space and future proofing becoming increasingly evident in property strategic plans and annual reports.
How do European property companies rate regarding their sustainability practices at a global level? The good news is that they make a significant contribution and several are amongst the world leaders.For example, in the Global 100 index for 2008, comprising the top 100 sustainable companies in the world, there are three European property companies (British Land, Land Securities and Liberty International). Similarly, in the Dow Jones World Sustainability Index, seven of the thirteen property companies included are from Europe (British Land, Castellum, Hammerson, Klepierre, Land Securities, SEGRO and Wereldhave). Amongst these, Land Securities is rated #1 in the property sub-sector and is also rated #1 in the broader financial services sector which includes 69 companies; an outstanding achievement (see Figure 1 for the Land Securites DJWSI profile). Also, in the FTSE4Good index, 26 of the 46 property companies included are from Europe; including France (eg, Gecina, Klepierre, Unibail-Rodamco) and UK (eg, British Land, Hammerson, Land Securities, SEGRO, Workspace and 21 others). European property companies also actively contribute to the Carbon Disclosure Project on climate change risk management.What are the best practice sustainability strategies now being utilised by European property companies? Many of these strategies are top-down and highlight how sustainability has now been embedded in European property company culture and strategy.
Many European property companies now produce an annual corporate responsibility report, covering all aspects of environmental sustainability; these are separate from their annual reports and are up to 80 pages. The level of sustainability reporting in these CR reports has improved considerably in recent years, with considerable detail and performance information now provided. This includes:Environmental policy statements; Sustainability strategies; Targets, including objectives, targets and KPIs (eg, environmental, suppliers); Progress against targets (eg, energy consumption, CO2 emissions); often audited by independent groups (eg: Bureau Veritas); Future sustainability objectives; Environmental management performance; benchmarked at a company, sector and industry level.
Ecological footprint and carbon audit; often in conjunction with the Carbon Trust (eg, Liberty International, Workspace; see figure 5);
Assessing progress to environmental targets via an Upstream ‘Third Dimension' report (see figure 6); this assesses portfolio risk-adjusted returns against a sustainability score, benchmarked against other sectors (see figure 7) (eg, Helical Bar, Workspace, PRUPIM);
Presenting the company's DJWSI profile; benchmarked at a sector and global level (eg, Land Securities, Hammerson; see figure 1).
Figures 2-4 give typical examples of this detail now provided by European property companies in these sustainability reports. These reports are typically presented using the UN GRI format for sustainability. Several innovative aspects concerning environmental reporting are also now provided by European property companies; these include:
Other specific sustainability detail now reported includes:Carbon disclosure report details; Sustainability awards at local, industry and
government levels; Use of green power and carbon bio-sequestration initiatives to make specific buildings carbon neutral; Use of green leases.
This article has only been a snapshot of some of the major sustainability initiatives now being implemented by property companies in Europe and internationally. EPRA will shortly be publishing a fuller report on the more detailed study I have done for EPRA regarding sustainability practices by European property companies, including case-studies. Check some of the sustainability reports I have mentioned in this article; they are on the property company websites and are excellent examples of what the European property leaders are doing in sustainability. They clearly demonstrate the strong sustainability agenda now being implemented by many property companies in Europe. More needs to be done at all levels of sustainability in the property industry, with the examples cited in this article clearly showing the strong leadership in sustainability coming from European property companies.
Graeme Newell is professor of property investment at the University of Western Sydney