Sustainability metrics: translation and impact on property investment and management

This is due to a number of different but interconnected reasons, such as public and governmental concerns about climate change, the emergence of new risks due to the consequences of extreme weather events and energy price escalation. Initially the most important drivers have obviously been the increasingly stringent environmental and health-related legislative frameworks, along with the associated advent of sustainability as the overarching goal in planning and construction regulations and standards in most parts of the developed world. This has led to gradual shifts in market participants preferences and value systems.

As a consequence, sustainability is no longer a niche issue. Sustainability goals are no longer pursued by only a small group of enlightened property investors and managers but are now a concern in large parts of the property investment community; it is now mainstream. Many organisations have incorporated a dedicated corporate social responsibility (CSR) policy and an (admittedly often vague) appreciation now exists in the property community that there may be a basket of economic advantages in sustainable property investment and management practices. These benefits go beyond mere costs savings or improved compliance with governmental regulations. To a certain extent, sustainability is already embedded in many organisations mission statement, and is now filtering down to impact daily business routines and decision-making processes. Within some organisations, this development is also supported by a bottom-up process driven by employee initiatives.

Sustainability Metrics: Translation and impact on property investment and management provides a framework for a corporate real estate sustainability management (CRESM) system for property investment and management organisations. The framework can be used as a means (1) to meet their environmental, social and governance responsibilities whilst addressing the financial/risk implications of sustainability and (2) as an overall quality assurance tool and mechanism. Recommendations for best practices are made for different levels: corporate, portfolio and single building. These recommendations are a response to the findings that (1) the property investment community has developed a largely shared understanding of what sustainability means in relation to single buildings and investment vehicles, and that (2) although most of the information and data factors required for sustainability performance assessment and management are already being captured, this is not yet performed in a systematic and well-organised manner.

The various interactions of property market players and interrelated functions at different hierarchical levels within investment and management organisations create a complex web of interconnected information flows and requirements. This complex web needs to be understood and systematically managed. This will enable buildingrelated information and data to be utilized within business routines as a basis for sustainability-informed decisionmaking. Key challenges are identified for property investment and management firms: to organise information flows more efficiently, to ensure data accessibility and comparability across different corporate departments and between business partners and service providers, and to develop and implement appropriate decision-support instruments.

The purpose of this report is to improve the industry’s ability and sophistication in creating the necessary information links and feedback loops within the system (i.e. the property market). This allows the system’s actors to possess and see the financial incentive to change their behaviour. A list of applicable sustainability metrics is provided with explanations of (1) how sustainability considerations can actually be embedded within business routines and decision making processes at different corporate levels, (2) how existing tools and methods can be adjusted/fine-tuned accordingly, and (3) how buildings sustainability performance can impact on asset and portfolio value, corporate reputation and financial success.

The main audience is commercial property investment and management firms, but this report is also useful for other property professionals and decision-makers in related sectors (e.g. banking and insurance). The basic ideas and arguments presented in the report can also be applied to residential buildings and portfolios.

The report explains how property organisations can move from the currently perceived burden of collecting sustainability-related data to understanding how that data (and other existing data) can best be utilized by them in their regular investment and asset management routines. As such, this report will enhance the linkages between grand mission statements and strategies and the practical aspects of day-to-day business.