Real estate companies and sustainability: Land Securities and British Land lead the way
10.09.2009Buildings are the biggest end consumers of energy. Due to climate change and the shortage of natural resources, it is essential to reduce this level of consumption. Incorporating sustainability strategies in the construction of new buildings and in the renovation of older ones pays off in the long term. Therefore, investing in sustainable real estate, or in property companies with a good sustainability strategy, offers attractive opportunities. Using its own rating method, Sarasin identified those real estate companies with the best sustainability performance: Land Securities and British Land are the leaders.
Buildings shape our urban and rural landscape, with their long-life service and capital intensity being two distinctive features. As the construction and operation of buildings account for 40% of the world’s primary energy consumption, sustainable development is only possible if buildings are included. Sarasin, which has pursued sustainable investment for the last 20 years, focuses on real estate in its latest Sustainability Research report, “Sustainable real estate – Investing in bricks and mortar”. The report highlights key aspects of the real estate sector such as the potential and criteria for environmentally friendly construction methods, prospects for returns on sustainable properties, and the inclusion of real estate companies in a sustainable investment portfolio. By applying a proprietary method for assessing the sustainability profile of buildings and property funds, as well as real estate companies, Sarasin's Sustainability Research team identifies opportunities in these attractive asset classes to investors.
Green buildings vital to protecting the climate "Every climate protection concept needs to factor buildings into its strategy. The renovation of old buildings, in particular, offers enormous, and unlocked, potential for saving energy and reducing greenhouse gas emissions." Klaus Kaempf, Sustainability Research analyst and author of the report |
Energy as a key criterion
The most important factors for determining the value of a property are its location and type of use. With the limited availability of fossil fuels and the threat of climate change, reducing energy consumed by buildings and using more renewable energy sources are growing in importance. The higher costs for sustainable construction or renovation of buildings are ultimately offset by lower running costs, higher rental income and a higher market value. Sustainable building designs increasingly factor into the value of a property.
Sarasin’s systematic rating system offers simplicity and transparency
Sarasin has developed a proprietary method for rating the sustainability profile of buildings and real estate companies. This systematic approach provides a simple and transparent tool for investing in sustainable property. When assessing buildings, the main criteria include: the environment, health and wellness factors as well as use of the building and local amenities. One unique feature is that the evaluation explicitly factors in the enormous – and mostly unlocked – potential in modernising old buildings. The assessment of property companies is based on Sarasin’s tried and tested method for rating a company’s sustainability performance, which has been adapted to the specific features of the industry.
What is Sarasin’s understanding of sustainability as practised in business? Sarasin defines sustainability in business as the production of goods and services with broad social acceptance using production methods with a low potential for conflict. |
Two UK real estate companies lead the way
Sarasin’s current research universe comprises 160 listed property companies in 17 countries. Sarasin has rated 64 of these as sustainable. Two UK companies, Land Securities and British Land, were rated as leaders. Among other European companies, two French real estate companies, Gecina and Unibail-Rodamco, received above-average sustainability ratings. While environmental criteria in Europe are defined by legal minimum requirements, voluntary standards and certificates tend to dominate in Asia and the US. Many of the companies with below-average ratings are in the US or Asia. Exceptions include Mitsubishi Estate in Asia which has an above-average rating, for example.
Case study: British Land British Land has implemented environmental and social goals through detailed action plans. All new office buildings need to comply with the BREEAM (Building Research Establishment Environment Assessment Method) Excellent Standard. In the early stages of construction projects, British Land consults with local residents and other interest groups. When building on greenfield sites, the company places particular importance on public transport connections. British Land’s climate protection strategy includes reducing energy consumption and using renewable energy sources. This applies not only to buildings used by the company itself, but also to the premises it lets. In situations where the company is unable to exert a direct influence, it supports tenants in climate protection measures. The company's fleet of vehicles is also included in the climate protection concept. Any unavoidable greenhouse gas emissions are offset. |
Mitsubishi Estate has had a comprehensive sustainability strategy in place for some time now. Around two-thirds of the company’s environmental management system is certified to ISO 14001. The company runs information campaigns to encourage tenants to save energy. With new buildings, the company tries to ensure the highest possible recycling quota, the use of timber from sustainable sources and the minimisation of emissions during construction.
