Amsterdam-based ING Real Estate Finance is taking sustainable real estate to a new level in its home base in the Netherlands with an innovative plan aimed at incentivising its clients to ‘green’ their properties.
After launching a five-step plan in 2016, ING REF recently sent a letter to its Dutch clients requiring them to submit a sustainability plan for their office buildings and industrial assets in the course of this year. If they fail to do so, ING REF will not extend existing loans from 2018.
The five-step plan is aimed at preparing ING REF’s clients for the future, Peter Göbel, managing director of ING REF’s Dutch operations, told PropertyEU. ‘It has really frustrated me that so little has improved in recent years in terms of making real estate more sustainable. There was a lot of talk [but too little action]. As a bank, we believe it is vital that steps are taken to make real estate more sustainable. We believe we have a social responsibility to ensure that effective action is taken to reduce CO2 emissions, but we also believe it makes business sense for both the bank and our clients. ‘Green’ buildings are the future, ‘brown’ buildings are not.’
Higher rents
The future is now, he added. Academic research that ING has undertaken with the University of Maastricht reveals that ‘green’ buildings generated 12-18% higher rents between 2015-2016 and 9-11% higher asset values compared to ‘brown’ buildings.
ING REF’s five-step sustainability plan anticipates future legislation in the Netherlands, Göbel said. ‘We already point out to our Dutch clients that their buildings will be legally required to have an energy-efficiency label that is no lower than C [on a scale from A to G ed] by 2023. Sustainability is no longer a wish, it is an imperative. The key is that we take action now.’
Opinion leader
ING REF’s Dutch unit accounts for roughly half of the group’s total commercial real estate lending portfolio – or €14 bn. However, it is difficult to compare that figure with other banks as they also [often] count outstanding loans from local bank branches as well as loans extended to owner-occupiers, Göbel said: ‘But it’s not important for us whether we are market leader in a quantitative sense. What is important for us is to be a qualitative market leader – and opinion leader – with a vision of what should happen with real estate.’
Göbel said he was pleasantly surprised by the small number of negative reactions from clients to ING REF’s letter. ‘In fact I only received one negative reaction, the rest were positive and encouraging.’
Sample contracts
ING REF is now also working on initiatives to allow real estate owners to benefit from the advantages of investments in sustainability. Investors are often too pessimistic about the costs of greening their portfolios, he says. ‘But it’s possible to invest a lot from regular maintenance costs. At the moment, tenants rather than investors reap the advantages in terms of lower energy costs. If the landlord were to draw up a contract with a rental price that includes a fixed fee for energy consumption, any benefits from investments made to green the building would translate into lower energy costs and savings for the investor.’
ING REF is currently working together with legal advisors to find out whether any sample contracts exist that provide for this situation. ‘In addition, we are working together with the University of Maastricht to develop a case for a ‘green value’ that explains the difference in value between a green and a brown building.’
Sustainable financing app
The operation will cost ING ‘millions of euros’, Göbel said. The bank has not only developed a sustainable financing app, but also offers a free scan for savings above €15,000. ‘We have already done more than 450 scans so that adds up.’ It all fits into the bank’s policy: ING was recently lauded as the most sustainable bank and the fourth leading sustainable company in the world by Sustainalytics , a global leader in the field of sustainability research.
Göbel: ‘This shows our market leadership – we are helping reduce CO2 emissions and making our portfolio future proof in the long term. ING REF is taking up the gauntlet in commercial real estate.’
Strategic partner
Commenting on the initiative, ING REF’s global head Annerie Vreugdenhil said the bank was recognised as one of the leading real estate financiers in Europe thanks to its 'robust' local country networks and expertise.
'The intensive support we offer local investors in the Netherlands to undertake the important energy transition, reflects how we work together with clients to deal with changing regulations and local market conditions and expectations. This is an example of how we strive to be a true strategic partner to our clients and empower them with flexible, tailor-made solutions that prepare them for future developments as well as maintain a robust business model.’
For the moment, the initiative is restricted to the Dutch market, she added.
The full interviews with Peter Göbel and Annerie Vreugdenhil are published in the March editions of PropertyNL and PropertyEU
