Hot Topic Highlight - Sustainability

Posted on 26 / 07 / 17
by Jen Lemen

Hot Topic Highlight - Sustainability

Building a better you

Property Elite’s sole aim is to build better property professionals - supporting your career every step of the way, whether you are completing a RICS accredited degree course, your RICS APC or simply seeking engaging CPD.

Our Hot Topic Highlight blog posts will arm you with information on the hottest topics - ready to tackle an important client meeting or begin revising for your RICS APC final assessment.

This blog article will focus on sustainability, in particular the new Better Buildings Partnership Acquisitions Sustainability Toolkit. We will focus on other aspects in future blogs.

You can also download our blog in audio format and listen on the move. When you're done, request your free CPD certificate.

Why is this relevant?

With fossil fuel depletion, climate change and increasing natural resource costs (e.g. energy, water), we need to future proof not only our businesses but our wider activities and global presence.

Sustainability needn't just be 'green wash' or pursued only to satisfy Government targets - it can have genuine bottom line benefits in economic, social and environmental terms.

RICS competency guidance

Sustainability is a mandatory level 1 RICS APC competency, which can be taken to levels 2 or 3 as an optional technical competency.

The RICS define this competency as 'requiring a broad appreciation of the core elements of sustainability – economic, social and environmental. It covers knowledge of the emerging issues in a broad context, and an understanding of the arguments surrounding the effect of sustainability on property performance, worth and value. It also includes the tools and techniques being developed to embed the concept into professional property practices such as property agency, investment, management and valuation practice'.

At level 1, you need to 'demonstrate knowledge and understanding of why and how sustainability seeks to balance economic, environmental and social objectives at global, national and local levels, in the context of land, property and the built environment'. Examples of knowledge required include (taken from the Commercial Property pathway guide):

  • Historical background/context – Earth Summits, Climate Change
  • Knowledge of the legal and policy framework – UK legislation and EU directives
  • An understanding as to how sustainability relates to property – (energy efficiency, accessibility etc), including an appreciation of the key threats to sustainable property use and performance
  • Understanding how property occupiers and investors are affected by economic, social and environmental sustainability concerns
  • Demonstrate knowledge of current research being undertaken on Sustainability

At level 2, you need to 'provide evidence of practical application of sustainability appropriate to your area of practice, and of awareness of the circumstances in which specialist advice is necessary'. For example (taken from the pathway guide):

  • Using and interpreting reports produced with the main sustainability related tools
  • Understanding the aims of analysis and be able to explain how the technique may be adapted to various scenarios within your own area of professional property practice

At level 3, you need to 'provide evidence of reasoned advice given to clients and others on the policy, law and best practice of sustainability, in your area of practice'. For example (taken from the pathway guide):

  • Providing reasoned advice/qualitative comment to clients or other stakeholders on the potential financial impact of sustainability on a property/project
  • Providing reasoned comment to clients or other stakeholders on the impact of sustainability legislation/policy

What is sustainability?

Frustratingly, there's no 'official' definition, although the Bruntland report (1992) definition is considered to be widely accepted; 'development that meets the needs of the present without compromising the ability of future generations to meet their own needs'.

The three core triple bottom line principles are economic, social and environmental.

Who are the Better Buildings Partnership (BBP)?

The BBP comprise 28 members, including some of the UK's main property owners and managing agents. This includes over £180bn managed assets and over 42m sq m of commercial property.

What is the Acquisitions Sustainability Toolkit?

The Toolkit aims to 'provide commercial property owners with practical guidance on how to ensure sustainability risks and opportunities are reviewed as part of the acquisition process'.

The Toolkit is being utilised by investors such as Aberdeen Asset Management, Aviva Investors, Capital & Regional, CLS Holding, The Crown Estate, Grosvenor, Hammerson, Landsec, Legal & General Real Assets, LaSalle Investment Management, M&G Real Estate, TH Real Estate and Workspace.

It includes two parts; a Sustainability Investment Checklist and a 100-Day Review, and tackles current hot sustainability topics such as Minimum Energy Efficiency Standards (MEES), land contamination, flood risk and operational portfolio performance.

What is the Sustainability Investment Checklist?

This provides a comprehensive overview of the key sustainability due diligence a prospective buyer should undertake.

What are some of the key recommendations?

  • Review EPC to assess MEES risk, i.e. is it F or G rated, if so - what are the potential costs/risks around raising the EPC rating to E or above
  • Is there a third-party sustainability rating, e.g. BREEAM, LEED, SKA?
  • Does the building fabric/M&E equipment present any risks, e.g. asbestos, deleterious materials, air conditioning refrigerant?
  • If spaces/units can be separately let, are there sub-meters to facilitate recharging energy bills?
  • Has a flood risk assessment been undertaken?
  • Is the underlying land contaminated? Have you checked historic site maps?

What is the 100-Day Review?

This helps to review the post-acquisition process to optimise future asset and property management.

What are some of the key recommendations?

  • Has all relevant due diligence information been integrated into your IT system?
  • Is there any outstanding due diligence information?
  • Is the information received of satisfactory quality and reliability?
  • Have you adequately avoided, minimised or mitigated risks identified during the due diligence process?
  • Has all property management information been handed over and integrated into your management system?

What do the early adopters say about the Toolkit? (Credit - BBP)

'It is absolutely critical that sustainability risks and opportunities are reflected in owners’ investment decisions. The responsibility for this, however, should not be the preserve of the ‘sustainability experts’ but simply part of business as usual. This toolkit supports this by enabling investment teams to understand the issues and take the lead in embedding them within their own internal processes'. said Sarah Ratcliffe, Programme Director, Better Buildings Partnership.

Robert Cass, Head of UK Property Transactions, Aberdeen Asset Management said: 'the ‘sustainability profile’ of new properties can not only significantly influence an owner’s ability to achieve its sustainability objectives, but can also have important implications for capital investment programmes, leasing and service charge arrangements. This Toolkit, developed by the industry, for the industry, is of huge value in helping owners approach this subject'.

Louise Ellison, BBP Chairman and Head of Sustainability, Hammerson said: 'Property investors are increasingly looking for streamlined, standardised processes for managing complex data within transactions and this Toolkit achieves just that for sustainability. Brought about through strong collaboration between the businesses and teams that will use it, this is an excellent example of the sort of practical, market-based resource that the BBP has built its reputation on. I fully expect this Toolkit to become the standard for the industry and establish a common approach for everyone to follow, saving time and money whilst improving information flow'.

How can I find out more?

  • Access the full Toolkit if it's relevant to your area of practice
  • Watch some of the Sustainability TED talks - we like them because they are interesting and easy to digest
  • Check out some of the other Toolkits published by BBP, e.g. Managing Agents Toolkit, Sustainability Benchmarking Toolkit
  • Go to the RICS website and review some of the latest sustainability guidance relevant to your area of practice, e.g. Sustainability and Residential Property Valuation (1st Ed, 2015), Sustainability and Commercial Property Valuation (2nd Ed, 2013) and Contamination, the Environment and Sustainability (3rd Ed, 2010)
  • Find out more about some of the key third-party sustainability rating systems, e.g. BREEAM, LEED and SKA. Try to assess them critically - is the assessment method sound, what is highest weighting attached to when considering sustainability features/building fabric, are they widely adopted?

Want to know more?

  • Book your RICS APC final assessment review & feedback service here - there is limited availability so contact us before it's too late
  • Contact us on 07491 252 025 / jen@property-elite.co.uk for your free & friendly 30 minute RICS APC consultation
  • Make sure you sign up for your free CPD certificate

Stay tuned for our next blog post to help build a better you