Sustainability of real property

Everybody is talking about ESG. As the real property sector with approximately 40% of energy consumption and approximately 36% of greenhouse gas emissions is the largest consumer of energy resources in the EU, the environmental (represented by the “E” in ESG) sustainability of real property is of particular importance. 

Despite the high level of regulation in both the European and German context and the ambitious goal of achieving climate neutrality by 2050, the question of when a property is considered sustainable has not been conclusively defined. The Taxonomy Regulation, or, more specifically, the technical Annex to the Delegated Regulation of 4 June 2021 that came into force on 1 January 2022, gave new impetus and topicality to the issue.

It focuses, in particular, on the criteria of energy efficiency and greenhouse gas emissions. Due to the lack of data both in a European and national context, makeshift approaches, such as the “best-in-class” approach, are used, although the lack of data is also noticeable here. 

However, it is only a matter of time before standardised requirements regarding the sustainability of real property will be imposed. Therefore, in the meantime, it is all the more important for players in the real property market to review the various areas of activity with regard to ESG compliance and take action accordingly. 

In portfolio management, the first step is usually to define own ESG standards and evaluate the portfolio properties against such standards, followed by the setting of future targets and, if necessary, the sale of properties not complying with the defined own ESG standards. 

Separate ESG due diligence is conducted within the scope of real property transactions, contracts are checked for sustainability regulations during legal due diligence and the corresponding CAPEX measures are evaluated within the scope of the technical due diligence.