Responsible Property Investment is an holistic approach to the investment and ongoing asset management of property that considers risks and opportunities relating to sustainability across the triple bottom line (incorporating social and environmental issues together with financial returns). There is increasing pressure on property owners to raise the sustainability performance and credentials of their asset base. There are many solutions to achieve this, some of which have cost implications. Identifying those which can deliver a positive value impact is a key concern for investors and holding companies.
We have developed a number of sophisticated tools to support the identification and management of risk in property portfolios relative to their sustainability performance.
The sustainability credentials of a property are likely to impact on values in a number of inter-related ways, and valuers are now being encouraged to take these into account in their valuation appraisals. For an example, an energy inefficient building is likely to:
These factors have the potential to push yields up and capital values down, with factors likely to affect future cash-flows and values needing to be incorporated into pricing today.
We compile and analyse baseline sustainability performance information for portfolios of property assets in accordance with industry best practice guidance, either using standard measurement and reporting tools such as the Global Reporting Initiative or bespoke frameworks developed to address particular client requirements.
Performance benchmarking provides invaluable intelligence on the sustainability / climate change risks and opportunities facing investment assets, but needs to be understood properly in the context of a range of factors which affect the investment performance of assets in the real estate sector.
We work closely with Sustainable Investment & Asset Management LLP to combine baseline environmental and social data with risks arising from leasing provisions and tenant propensity to take sustainability considerations into account in property decisions, impacts on depreciation costs and market positioning. This exciting collaboration brings together a combination of unrivalled expertise in sustainable property advice and unique, market-tested, tools to offer clients a new and unique service. Using sophisticated financial models, we have developed a technique for quantifying the risks relating to investment value and property performance and putting a price on various defensive measures. This helps property owners to identify assets which are most susceptible to climate change and sustainability risk and what can be done to protect and unlock value.
Drivers Jonas Deloitte has developed a unique, valuation-based appraisal process for screening new acquisitions for potential risks relating to sustainability across the triple bottom line.
The assessment tool has been designed specifically to provide a rapid, high-level view during the acquisition process on key issues, risks and mitigation opportunities and can be delivered within a matter of days to meet typical acquisition timetables.
The appraisal empowers investment managers with the knowledge to address these risks through the asset management strategy, both to protect rental income during the holding period, and to ensure that the full potential capital value of the asset is realised at disposal.
So-called ‘green leases’ – a lease of a commercial or public building which has additional provisions to determine how the building is to be improved, managed and occupied in a sustainable way – have attracted significant attention within the property market recently. Typical provisions include data-sharing between landlords and tenants, obligations to cooperate on energy saving initiatives, and ensuring that tenant activity does not prejudice a property’s asset rating for energy performance.
Significant debate continues on the efficacy of green leases, at Drivers Jonas Deloitte we advise property owners and occupiers on the benefits and risks of reflecting environmental performance and sustainability drivers within or alongside commercial leases.