Jan von Mallinckrodt, Head of Sustainability at Union Investment Real Estate GmbH
Union Investment / Adele Marschner

Collaboration is key to success

Only a few months after it was founded, the ESG Circle of Real Estate (ECORE) industry initiative already has around 40 members. Their shared objective is to establish a reliable, widely acceptable industry standard for measuring the sustainability performance of properties and portfolios.

Ever since the Paris Agreement and the UN’s 2030 Agenda for Sustainable Development were adopted in 2015, the question has not been whether the real estate industry will take action to ensure sustainability and help fight climate change, but how exactly to implement such action. This is an important political issue for the EU and the individual countries – and the coronavirus pandemic has done nothing to change that. The real estate industry needs to be prepared for tougher regulation.


 


A concrete roadmap for achieving climate protection targets

The new ECORE scoring model provides valuable support in this respect. It already takes into account the goals of the Paris Agreement and the definition of sustainable financial investment (taxonomy system) in the EU’s Action Plan on Sustainable Finance. The model will also be continuously updated to reflect new EU instruments. Properties are analysed using three clusters: governance, consumption and emissions, and asset check. On a points scale from 0 to 100, tenants, owners and investors can instantly see the extent to which a property or portfolio meets climate targets and ESG criteria. In addition, the model provides a concrete roadmap with milestones for achieving the ESG goals. It also enables properties and portfolios to be compared, including across different providers. As such, the scoring model does not compete with green building certificates. While certificates serve their own particular purpose, for example in the planning and construction phase, there are big differences between them and they aren’t comparable with each other. This causes problems when assessing the sustainability of a portfolio. They also typically fail to illustrate the environmental progress made by properties. 


Modest effort, many benefits

The content of the scoring model has been finalised and the pilot phase is already under way. More than 500 properties from members’ international real estate portfolios will be scrutinised in the first year. The findings from the pilot phase will be compiled by mid-2021 and the scoring outcomes released to the wider market. Benchmarking across multiple countries and asset classes is also planned. Collaboration is key to success here, though. For an industry standard to be useful, a substantial number of players need to be involved. That’s why more companies will be encouraged to participate this year, even though critical mass has already been reached in Germany. To ensure that as many market players as possible are able to use the new industry standard and it doesn’t become a burden, some elements of the “atmosphere” scoring system developed by Union Investment in 2019 – which forms the basis of the new ECORE industry standard – have been omitted. Union Investment is something of an exception and has been conducting Sustainable Investment Checks on properties for ten years now, collecting a substantial amount of information. The asset check in the ECORE model is not quite as detailed. The important thing is that this model is a step in the right direction and everyone should be able to use it.


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