measurable.energy’s Post

The reality of carbon reduction in our built environment is certainly beginning to bite. The attached piece is worth a read first those with large real estate portfolios to manage. As I’ve said many times before though, the focus needs to turn to value creation and not be bogged down by the shorter term costs associated with many of our buildings.

Investors are starting to understand the CO2 emissions risk associated with their real estate portfolios, here's an interesting article here by Bloomberg explaining the CAPEX exposure within the real estate industry...👇

The Energy Performance Directive presents an opportunity for RE investors and Asset Managers in UK markets to acquire and upgrade stranded assets with short term capital burdens.

📢 Material Impact Update in Real Estate Investment Sector! 🏢💼 Real estate investors need to take bold steps towards sustainability as they tackle the pressing issue of the Energy Performance of Buildings Directive. (https://lnkd.in/d3vJ_D6K) In a recent Bloomberg article by Frances Schwartzkopff & Gautam Naik, "Real Estate Investors Sitting on Huge CO2 Risk Turn to Lawyers," the focus is on how investors are addressing this challenge head-on. Key takeaways from the article include: 🌱 Investors recognising the significant carbon dioxide risk associated with their real estate portfolios. 💡 Seeking the right delivery partner to navigate the complexities of carbon emissions and #NetZeroCarbon. 🌍 Increasing importance of incorporating sustainability and #NZC strategies into investment decisions. Extract; "Europe’s new energy-performance law is likely to affect tens of thousands of buildings across the region. By 2033, property owners will need to have renovated a quarter of the EU’s biggest energy-guzzling buildings. Fossil-fuel boilers are out and solar-panel-ready buildings are in. And by 2030, all new buildings must be emissions-free." This article identifies the CAPEX exposure within the real estate investment community to mitigate environmental impact. The UK has around 70% of building stock which will require an EPC rating of C or above by 2027 with an estimated investment of £150 billion. 🎯 This is where our team at BFY Carbon Strategies can help. It's difficult to balance regulatory demands, reporting requirements, and boardroom expectations. As your #NetZeroCarbon delivery partner we help you shift the dial, thinking beyond glossy reports and frameworks, to deliver value creation across your portfolio. #RealEstate #Sustainability #CarbonFootprint #InvestmentStrategy #AssetOwners #EnergyEfficiency #Decarbonisation #ValueCreation What are your thoughts on this important shift in the industry? How do you envision sustainability shaping future investment decisions? Let's discuss! 🌟

Bloomberg Green / March 25, 2024 Real Estate Investors Turn to Lawyers After ‘Huge’ CO2 Shock Real estate investors already battered by high interest rates now face the prospect of significant writedowns triggered by new European regulations. Property owners across the region will need to invest vast sums in renovations to ensure their buildings aren’t emitting illegal levels of carbon dioxide or consuming excessive amounts of energy, according to lawyers advising the sector. The situation “is causing huge problems,” said Rory Bennett, a managing associate at the real estate practice of Linklaters in London. Portfolios containing energy-inefficient buildings face “the task of expending a huge amount of capital to bring that up to scratch, together with refinancing or redeveloping at the highest interest rates we’ve seen in decades.” This month, lawmakers in the European Union passed the "Energy Performance of Buildings Directive". The rollout will be gradual — lasting more than a decade — but property owners that fall too far behind risk being saddled with assets that can no longer be sold or rented. The directive is intended to force property owners to embark on large-scale renovations to improve the environmental credentials of buildings across Europe, and ensure the bloc meets its commitment to the "Paris Agreement". For now, refurbishments in the region only reduce annual energy consumption by 1%, according to the European Commission. To meet its climate requirements, the EU says property owners need to raise spending on renovations by €275 billion ($300 billion) a year. The UK also is planning rules that will force property owners to embark on environmental upgrades. Mount Street, a London-based company managing €65 billion of European real estate loans, estimates that about 70% of Britain’s commercial property currently has an energy performance certificate (EPC) grade of C or lower. That implies major upgrades ahead as the UK plan gives all building owners until April 2027 to reach a grade of at least C. By April 2030, a building’s grade can’t fall below B for it to stay operational. #UKenergyperformancecertificates #EUenergyperformancvedirectives #ParisAgreement

Europe's new energy-performance regulations present a formidable challenge for real estate investors. With the EU and UK mandating significant environmental upgrades, the sector faces a dual threat from high interest rates and substantial renovation costs. Compliance is not optional; failure to meet these green standards risks turning assets unrentable, impacting their capital value. This regulatory shift underscores the urgent need for strategic investment in sustainability to future-proof portfolios. #RealEstateInvestment #Sustainability #EURegulations #GreenBuildings

In this article, Mark Carney highlights the risks to property owners and lenders from older buildings that cannot adapt in a move to net zero, resulting in “significant stranded assets” in commercial real estate. This is underscored by a report by investment manager AEW finding that "European real estate investors need to increase their annual capital spending by 30 per cent to get on top of upgrading buildings". Infrastructure is an area that will require significant prioritisation in coming years in order to transition to a low carbon economy but also to protect the value of investments in assets, minimising the risk of assets becoming stranded. #sustainableinfrastructure https://lnkd.in/e4TQSwYj

Just read the recent article from FT on asset value, transition risk and pressing pressure on efficiency. How to tackle all these with the most reasonable investment needs the integration and professionalism. The article also mentioned reconstruction vs retrofit, which is another hot topic related to embodied carbon. Link and a quick summary below for reference. https://lnkd.in/g2up2MCw Mark Carney, former central banker and chair of Brookfield Asset Management, highlighted the growing risk of “stranded assets” in commercial real estate as governments aim for net-zero emissions. Older buildings, unable to meet stricter energy efficiency standards, face becoming obsolete, posing challenges to property owners and lenders. Investors are already dealing with a sharp decline in asset values due to rising interest rates and increased pressure to upgrade properties for energy efficiency. A report by AEW found that European real estate investors must raise annual capital spending by 30% to meet the Paris Agreement’s targets. While countries agreed at COP28 to double the rate of energy efficiency improvements by 2030, upgrading some older buildings may be financially unfeasible due to poor location or low rents. Additionally, demolishing older buildings raises concerns about embodied carbon in construction materials like steel and concrete. Carney warned against relying on regulatory deadlines being postponed, emphasizing that it’s a significant risk to assume timelines for energy efficiency upgrades will shift. Despite concerns over climate risks in the sector, Carney expressed confidence that commercial real estate risks to financial stability remain low, as the financial sector is not overly reliant on property-related liquidity pressures.

🏠📉 Over 75% of UK Homes Lack Recent EPC Data 🌍🔋 🏡 The UK's housing stock is one of the oldest and least efficient in Europe, and also one of the slowest to decarbonise. 📚 Almost 50% of UK homes have no Energy Performance Certificate (EPC) data at all 🌱 The prevalent use of outdated, free data in lending and retrofit decision-making is a major obstacle in the UK's progress towards net zero. This approach hinders effective decision-making and slows down necessary improvements in energy efficiency. 📖✨ Discover more insights and solutions in our white paper, 'The [hidden] cost of free data'. Dive into how we can overcome these challenges and accelerate the path to net zero for UK housing: https://lnkd.in/eAmvnNVF #UKHousing #EnergyEfficiency #NetZero #EPCData #propertyzero