A deep dive into how to navigate in real estate written by Rupert Snuggs, Senior Advisor to Pineapple Partnerships.
In my previous role, it became apparent - having returned to real estate after a 5 year hiatus - the immense task the global real estate market has, to decarbonise over the next few decades. The further I delved, the more interested and worried I became about how it was going to be achieved and by whom.
Joining Pineapple Partnerships, this year, to lead the Commercial Real Estate (CoRE) offer was a very natural decision for me. Pineapple’s aim: to accelerate the transition to net zero through the power of partnerships, to deliver at scale. As a former Capital Markets banker, Head of Strategy for a FTSE250 real estate company, a FIG banker and finally Capital Markets lead for a real estate fintech, my experience and network is broad and necessary to make some headway in this daunting task.
I returned to the real estate market in 2022 to a flurry of acronyms, associated with energy usage, environmental impact and decarbonization, that hadn’t been prevalent when I left in 2017. The below chart shows the number of times “sustainability” or “ESG” is mentioned in one listed company’s annual reports since 2016.
There has been a material shift.
Fortunately, and sadly many years’ ago, a number of measures (and acronyms!!) and rankings were created across the globe to help with measuring, reporting and benchmarking. Whilst these began as disparate, piecemeal analyses, some have become global benchmarks.
Learning what each letter meant was the start; understanding the detail and relevance of each is critical.
As Pineapple’s aim is to help real estate companies achieve net zero, detailed knowledge of each is necessary as we support clients across different sectors and geographies. If we are to be credible in our advice, we must use the best tools available to show how each lever (solar PV, lighting, building management systems, fabric, etc.) can have the greatest impact and deliver against each measure. This will ensure that when our clients complete the first stage of their net-zero journey, they will not only be compliant, they will be delivering fewer emissions, producing less carbon, saving money and in a strong position to continue their path to net zero, in a cost-efficient manner.
For those new to the real estate world (or returning after a break), knowledge of these is now an entry level requirement. Here, I provide a high level description of each, with a bit more detail on the history further down. This should be used as a cheat sheet and a reference point for further exploration.
Scope 1, 2 & 3 emissions
Set by | Greenhouse Gas Protocol (GHG Protocol) |
Measure | Standardized frameworks to measure and manage greenhouse gas emissions for all organizations, cities and countries. |
Started | 2001 |
Partners | World Resources Institute and World Business Council for Sustainable Development (WBCSD) |
Funders | Bezos Earth Fund, Climate Finance Fund, Gordon and Betty Moore Foundation, Google, Meta, Salesforce, Amazon, Cargill, UPS Foundation, IKEA |
Scope 1 emissions - are from sources/emitters that the organization owns or controls directly (e.g. vehicle emissions for a transport company, factory waste and emissions, etc.)
Scope 2 emissions - these are that the organization creates indirectly and come from where the energy it purchases and uses that are not owned or controlled by it. (e.g. emissions used in heating, lighting, etc. the office building for employees)
Scope 3 emissions - all those not in Scope 1 or 2, i.e. those that are not directly or indirectly controlled by the organization, but those emissions up and down value-chain. E.g. the purchase, use and disposal of a product from a supplier (a table, computer, car, extraction, manufacture of raw materials, etc.)
For more information, see appendix and visit: https://ghgprotocol.org/
GRESB Standards - Global Real Estate Sustainability Benchmark
Set by | GRESB Foundation (independent board) |
Measure | Rigorous, methodological framework to measure ESG performance of individual and portfolios of real estate assets (measured by GRESB BV for GRESB Members). |
Started | 2009 |
Partners | Summit Group partners GRESB Foundation. GRESB BV has Global, Premier, Industry, Media & Research and Standard Partners (all the known global real estate players) |
Funders | Partners, Members and Investor Members |
For more information, see appendix and visit: https://www.gresb.com/nl-en/
BREEAM - Building Research Establishment Environmental Assessment Method
Set by | BRE (Building Research Establishment) |
Measure | Science-based assessment, rating and certification for the sustainability of a building |
Started | 1990 (BRE founded in 1921, privatised in 1997) |
Partners | It is a Trust. Has funded PhDs in 4 universities in the UK and 1 in Brazil |
Funders | Commercial research, commercial programmes and digital tools |
For more information, see appendix and visit: https://bregroup.com/products/breeam
CRREM - Carbon Risk Real Estate Monitor
Set by | CRREM Project |
Measure | Assess risk of “stranding” versus the EU regulatory requirements, based on energy and emissions data AND creates a carbon reduction pathway |
Started | 2018 |
Partners | TIAS School of Business and Society, Ulster University, University of Alicante, GRESB, IIO Institute for Real Estate Economics |
Funders | EU 2018-2020, since 2020 the Laudes Foundation and APG, PGGM, Norges Bank IM |
For more information, see appendix and visit: https://www.crrem.eu/
NABERS - National Australian Built Environment Rating System
Set by | NSW Government, overseen by a national Steering Committee (public and private sector) |
Measure | Measures and compares the environmental performance of buildings and tenancies |
Started | 2018 |
Partners | TIAS School of Business and Society, Ulster University, University of Alicante, GRESB, IIO Institute for Real Estate Economics |
Funders | Australian Government |
For more information, see appendix and visit: https://www.nabers.gov.au/
EPC - Energy Performance Certificate
Set by | UK Government / DLUHC (Department of Levelling Up, Housing and Communities) |
Measure | Provides information about a property’s energy use, potential cost and steps to improve these |
Started | 2008 (2007 for domestic properties) |
Partners | None |
Funders | UK Government |
For more information, see appendix and visit: https://www.gov.uk/selling-a-home/energy-performance-certificates
MEES dates
1 April 2025 | all non-domestic rented buildings in scope to be registered and have a valid EPC |
1 April 2027 | all non-domestic rented buildings to meet minimum of EPC C (or have registered a valid exemption) |
1 April 2028 | all landlords of non-domestic rented must present a valid EPC |
1 April 2030 | all non-domestic rented buildings to meet minimum of EPC B (or have registered a valid exemption) |
Others:
LEED - Leadership in Energy and Environmental Design
A worldwide green building certification created by the non-profit US Green Building Council (USGBC). It provides a rating system for domestic, non-domestic and neighbourhoods for their design, construction, operation and maintenance and aims to help owners and operators to be more environmentally responsible.
For more information, please visit: https://www.usgbc.org/leed
Green Star
Green Star is an environmental impact rating system, originated in Australia by the Green Buildings Council of Australia, that assesses the sustainability of projects at all stages of the built environment life cycle from design to construction and through to operation.
For more information, please visit: https://new.gbca.org.au/green-star/rating-system/
DEC - Display Energy Certificates
DEC are records of the energy usage of public buildings to increase transparency about the energy efficiency of public buildings. It was created in response to the EU Energy Performance of Buildings Directive which all EU member states had to implement by 2009
For more information, please visit: https://energylegislation.co.uk/display-energy-certificate/
Appendix
GRESB Standards - Global Real Estate Sustainability Benchmark
A mission-driven, profit-for-purpose organization that provides transparent ESG data for Real Estate and Infrastructure investments. Through a GRESB Membership, Members’ assets will be assessed on a yearly cycle - and third-party validated - from which a score will be generated and imputed into the 4 ESG benchmarks it has created for the industry. These are:
Real Estate Benchmark
Real Estate Development Benchmark
Infrastructure Fund Benchmark
Infrastructure Asset Benchmark
Furthermore, the assessments are guided by what investors, stakeholders and broader industries consider material factors, which are aligned with the Sustainable Development Goals, the Paris Climate Agreement and other international reporting frameworks.
For more information, visit: https://www.gresb.com/nl-en/
BREEAM - Building Research Establishment Environmental Assessment Method
BRE is a profit-for-purpose organization founded in the UK in 1988 and is now operational in over 70 countries worldwide. It established BREEAM in 1900, which is a science-based assessment, rating and certification of the sustainability of a building. It evaluates water usage, transport, waste, materials, ecology, health and more. It rates and certifies buildings into five categories, ‘Poor’, ‘Good’, ‘Very Good’, ‘Excellent’ and ‘Outstanding’.
As part of the assessment report, BREAAM supports owners in strategies for Net Zero Carbon, Whole Life Performance, Health and Social Impact, Circularity and Resilience, Biodiversity and Disclosures and Reporting.
Since its initial focus on buildings, the BREEAM has extended into Construction, Home Quality, In-Use, Refurbishment and Communities
For more information, visit: https://bregroup.com/products/breeam
CRREM - Carbon Risk Real Estate Monitor
Funded under the EU’s H2020 Energy Efficiency, the CRREM Project was established in 2018 to help real estate owners align their portfolios with the Paris Agreement and regulatory requirements. It does this by assessing their exposure to stranding risks based on energy and emission data. This is a science-based carbon risk assessment which can help establish a pathway for decarbonisation for a building or a portfolio.
As retrofit works commence, CRREM will assess how the assets’ carbon usage is performing against expectations, regulatory requirements and the PAris agreement (both 1.5oC and 2.0oC). It can also ensure alignment with other real estate standards such as GRESB, PCAF, INREV, etc.
For more information, visit: https://www.crrem.eu/
NABERS - National Australian Built Environment Rating System
NABERS began in Australia in 1998 (expanded to NZ in 2012 and the UK in 2020). It provides a simple and reliable sustainability measurement that can be used to compare commercial real estate assets across sectors. Since its establishment, 82% of buildings in Australia have a NABERS rating. This is helped by the fact that in 2010, the Australian government brought in the Building Energy Efficiency Disclosures Act, which meant all CRE buildings had to disclose their energy efficiency to prospective tenants or buyers.
The initiative uses “Accredited Assessors” who have to pass training and exams to become qualified. Whilst building owners and tenants can carry out an online self-assessment, results are not allowed to be published. Only NABERS certified ratings can be published.
The assessment covers energy performance of a building - not the design. A 6 star rating system covers 4 key areas of energy efficiency: Energy, Water, Waste and Indoor Environment. The ratings do not penalise for “factors beyond their control”. It must be renewed annually.
For more information, visit: https://www.nabers.gov.au/
EPC - Energy Performance Certificate
An EPC is carried out by a qualified and accredited energy assessor. They will examine key aspects of the property including: insulation, heating systems, boiler, windows, radiators and cavity walls. The energy assessment of these aspects are loaded into a software system that then rates a building from A-G (A being the best).
The EPC provides information about the property’s energy usage and potential energy costs. It also provides high-level steps to improve a property’s energy efficiency and to save money.
It has been roundly criticised due to the lack of invasive investigation and the fact that it does not look at energy bills, measure carbon usage or assess the source of energy. Furthermore, there have sometimes been questions over the ability of asset owners to influence the inputs of the independent assessor.
The recently updated MEES regulation has set specific EPC ratings that domestic and non-domestic buildings need to attain by certain time points.
For more information, visit: https://www.gov.uk/selling-a-home/energy-performance-certificates
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