11 February 2010
by Graeme Davies
With governments around the world desperately trying to reduce their carbon emissions one quick win to improve energy efficiency and reduce carbon impact is to be found in the property sector. Our properties, both residential and commercial, are sources of significant energy wastage and consequently carbon emissions. And while home owners are being constantly exhorted to reduce their energy use, insulate and even install our own energy microgeneration with government feed-in tariffs announced this month, commercial property owners are lagging behind in their energy efficiency policies according to recent research.
Three of Europe’s biggest pension fund investors, the UK’s Universities Superannuation Scheme, and PGGM and APG of Holland, who between them run more than €250 billion of funds under management, commissioned the University of Utrecht to survey the global commercial property industry to establish its environmental credentials. The three fund management giants are strong proponents of socially responsible investing and want this reflected in their investment decisions in the property sector. But the responses to its survey make somewhat sobering reading.
For a start, the survey of more than 700 property companies around the globe found that less than one in five could report figures for energy consumption, water consumption and carbon emissions and this despite the fact that energy-saving investments can improve the performance of portfolios for both owners and tenants. In total 67 per cent of respondents were classed as ‘green laggards’ with no environmental policies or implementation plans.
But there were some bright spots, particularly for the better performing UK companies such as Big Yellow, Hammerson, British Land and Capital & Regional as well as European property giants like Unibail-Rodamco. Indeed the survey identified the larger companies as the leaders in environmental best practice and the survey authors believe that their creation of an ‘Environmental Real Estate Index’ could encourage the adoption of new technology and environmental management best practice across the industry.
If this survey is able to create a benchmark for property companies to aspire to and encourage better practice then maybe in the long run it will encourage better estate management. Improving the environmental performance of our commercial buildings can create value for landlords, tenants and investors and a better return on assets. As property analysts from JP Morgan put it: ‘We believe sustainability and environmental performance will be increasingly on the radar of investors and tenants. Additionally we expect these aspects to increasingly influence future value creation and shareholder returns.’
The results of the survey prove that there remains a long way to go for the property sector to meet suitable environmental standards but this creates a big potential opportunity for property companies and, by proxy, for FM companies that can provide a green edge. Indeed, many properties do not need complete overhaul to improve their environmental performance, small incremental expenses can produce significant environmental improvements and this is where progressive management of buildings comes into its own and where contracts can be won and lost.
Graeme Davies writes for Investors Chronicle
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