Investors urge EU to promote energy efficiency in buildings

European institutional investors have called on EU policymakers to improve the regulatory framework for promoting greater energy efficiency in the property sector if capital investment in low-carbon technologies is to be delivered at the speed and scale required to meet EU targets.

The Institutional Investors Group on Climate Change (IIGCC), whose members represent EUR 7.5 tln of assets under management, published a paper on Thursday which lists a number of ways in which the current regulatory framework can be improved.

Recommendations include targeting policy measures at the parties who actually pay for energy and utility costs so that they are the beneficiary; shifting the focus of regulation from new construction to the operation and refurbishment of the existing built stock; and introducing market and fiscal instruments such as carbon taxes or tax breaks to help integrate sustainability risks into the investment decision-making process.

Institutional investors allocate an average of 5.5% of total assets to property investments and these face significant long-term performance risks as a result of environmental issues.

‘Buildings are responsible for 40% of energy consumption and 36% of carbon emissions in the EU and existing policy is not doing enough to encourage the changes in behaviour which would drive sustainability improvements,’ said Stephanie Pfeifer, executive director of the IIGCC. ‘The EU has said that achieving its 20% energy efficiency target by 2020 could create up to two million new jobs, with savings in the annual energy bill across the EU of a potential EUR 200 bn. A regulatory framework which places sustainability issues at the centre of property investment and management decisions will be essential if these targets are to be met.’

Tatiana Bosteels, head of responsible property investment at Hermes Real Estate, added: ‘The technology to significantly reduce the total energy consumption of buildings exist, however current policy and voluntary measures have failed to scale up capital investment in low carbon technologies in the real estate sector. A more effective regulatory framework should be more sensitive to the complex management arrangements in place and the long economic life-cycle of buildings, and target policy at those responsible at any given time for the energy and utility costs of a building.’