ESG and its impact on property

ESG and its impact on property January 7, 2022Leave a comment

There is no dearth of criticism of the EU for its bureaucracy and labyrinthine rules. It is one of the stated reasons that the Brits left it. However, even they admit to its world leadership in standards-setting. If no one else has come up with a regulation or standard, you can be sure that the EU has devised one and knocked the heads together of its 27 members to come up with a suitable compromise. So the EU has become the standard for standards-setting.

ESG is, and will be, no exception to the rule of rule-making. What is this? Well, what it’s supposed to be is a framework of Environmental, Social and Governance regulations that will affect almost all investments and corporate decision-making. No less. We will look at only one (pretty big) aspect of the “E” in ESG because there is a compulsory part to it (a “directive” in EU-speak) as to how businesses must operate in 2022. And 2022 is now.

This aspect concerns buildings, their renovation for energy-savings and de-carbonisation. Some 220 million building units (85% of the EU’s building stock) were built before 2001. Most are energy sieves (44% of France’s total energy is consumed only by residences) and have to be renovated to meet the EU’s “Green Deal” agenda. Companies and financial institutions with large property  portfolios must undertake due diligence and report on what they will do about renovations and retrofits. And they must do it now.

Although ESG has slowly gained awareness as part of corporate reporting over the past 20 years, this has been lackadaisical and replete with good intentions. There is a complete lack of consistency on what is reported and what should be. The new EU regulations compel companies to assess the sustainability of their investments. However, the real problem is that the companies don’t know much about their properties — they have been geared only on how to make money by buying and selling them on. Lord Samuel, a real estate tycoon, said some 70 years ago that  “There are three things that matter in property: location, location, location.” Besides an Excel sheet to tally the holdings, not much has changed.

So these property holders and banks must scramble quick-time to make a comprehensive report on their assets and what they will be worth after dealing with the “E” in ESG.

They may get some help from technology. At least one company, SkenarioLabs, has a solution for them. SkenarioLab’s uniqueness is that it uses AI and advanced algorithms for calculating energy data for properties to assess environmental impact and risk exposure. It has solved the major challenge in ESG reporting, namely to be able to calculate the needs of an entire property portfolio even though existing data are limited, outdated or insufficient.

SAI has been working with SkenarioLabs in France and Sweden to introduce its solution to banks and property owners. If your house feels drafty, don’t call us. But if you need a sustainable, comprehensive and intervention-specific renovation plan for your principality or for the 1000-odd property units in your portfolio, then we’d be happy to help.  

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