In recent months we have seen how school children went on strike, in London they arrested people for the rebellion of extinction and how climate change activists blocked the headquarters of polluting companies. Not only is this, we have also been able to verify how an increasing number of severe weather events occurred: Cyclone Fani, which caused great floods in India, torrential rains in the midwestern United States, unprecedented floods of the Mississippi and double blow of the cyclones Idai and Kenneth that hit Mozambique. Therefore, it is expected that climate change will once again occupy a prominent place in the social and political agenda. But fortunately, the real estate industry is already struggling to improve this and there is much to do.
- The Carbon Reduction Commitment that was being carried out until April of this year was abolished and replaced by Streamlined Energy and Carbon Reporting (SECR). Companies that qualify must report their carbon emissions annually, which could expose them to social and shareholder pressure to reduce their energy consumption.
- April has also marked this year for the entry into force of the Minimum Energy Efficiency Standards. Many of the main owners had been struggling for several years and had worked hard to anticipate it, so the MEES effect was not as abrupt as many feared. The MEES is forcing a change in the EPC rating, an F or G will be illegal in 2023, unless there is a valid exemption.
- December 5, 2019 is the deadline for qualified companies to meet their audit obligations and report the results in Phase 2 of the Energy Savings Opportunity Plan. ESOS reports are not public in the way the SECR is, and energy audits have to be reviewed by the company's board of directors, which may realize that implementing some of the recommended changes will reduce costs and improve the results. In addition, these changes will strengthen your sustainability credentials and will be a great marketing strategy.
- The deadline to submit the 2019 reports to those participating in GRESB is closer, with the results (and the news of who will receive Green Stars this year) that will be released in September. GRESB (previously known as Global Real Estate Sustainability Benchmark, but now it is not an acronym, since it covers more than just real estate) is an important benchmarking system in which several fund managers, asset managers and others participate annually.
If we take into account current legislation, increasing investor interest and, of course, political and social pressure, it is expected that the main consequence is that more and more organizations are building their own full-time internal sustainability teams to fully comply with sustainability. With the different existing sustainability agencies firmly focused on how to achieve net zero carbon by 2050, there will be many more regulations and best practices to come and sustainability teams will have a lot of work in the coming years.
There is a path towards more stringent criteria for sustainability ratings, which will make it much more difficult for homeowners to meet and, if resources are lacking for the continued application of sustainable criteria, some may assume a calculated risk and not bother to apply them.
In my opinion, the direction it is leading is the increase in regulation and compliance, as well as a clear emphasis on market forces and commercial, investor and public pressures that drive real change. However, perhaps the most unknown pressure of all is that of employees, who increasingly consider including sustainability in the companies where they work. Traditionally, the imperative for tenants has always been to find the right space, at the right place, at the right price. While these fundamentals remain essential, the space sustainability credentials, along with their Internet connectivity, are increasingly important in the battle of the current market. All of which makes it increasingly important to cover things like the fulfillment of the United Nations Sustainable Development Goals. A great ambition indeed!