Environmental social governance (ESG) criteria is now embedded in every stage of the property lifecycle according to senior property executives. From due diligence to acquisitions, leasing and asset management, CBRE’s Senior Managing Director in Queensland, Bruce Baker said every step of the commercial property process is required to stack up against ESG criteria.
“With the energy used to heat, cool and light buildings accounting for 28% of all global carbon emissions, pressure is growing on building owners, operators and occupants to reduce their carbon footprint,” Mr Baker said.
Carbon reduction efforts will “play a prominent role in preserving asset value” from now on as organisations become increasingly reluctant to occupy buildings with sub-optional environmental performance. “And as occupier and investors are drawn to properties that are more sustainable, these assets will be worth more,” Mr Baker said.
CBRE is marketing one of the first major ‘green’ buildings to be offered this year, Brisbane’s Energex House. Built in 2010, it is Queensland’s first 6.0 star Green Star office building and last year was awarded the maximum 5 star Global Real Estate Sustainable Benchmark 2021 (GRESB). This placed Energex House amid Australia’s top core corporate office investments from an ESG perspective, and now its developer, Cromwell Property Group, feels timing for a sale is optimal given investor appetite for assets with “robust ESG credentials”. An expressions of interest campaign is being run by CBRE’s Mr Baker along with Peter Chapple and Tim Phipps in conjunction with JLL’s Paul Noonan and Seb Turnbull. Price expectations are around the $360 million mark.
Energex House was purpose built for Energy Queensland which occupies over 90% of the building on a lease to August 2030. It features the largest office floorplates in Brisbane at around 4600sqm, full-height atrium spaces bridged by interconnected staircases, and a location in Brisbane’s popular Newstead Riverpark area which experienced some of the city’s highest population growth over the five years to 2020.
ESG standards are fast becoming the highest priority of socially conscious investors. Environmental refers to a company’s performance around such issues, social to how relationships are managed with everyone from employees to suppliers and communities, and governance to dealings involving leadership, executive pay and internal controls as well as shareholder rights.
Luke Billiau Director Sales and Investments for JLL in Brisbane recently told media ESG issues were impacting investor sentiment more than ever, adding that this year “could see the largest volume of transactions in our lifetime, with people either down-weighting non-ESG assets or up-weighting ESG assets.”
Responsible investment (RI) reached new highs in 2020 rising to $1.28 billion, up from $983 billion the year prior. Now ESG has gained such momentum that 92 per cent of investment managers surveyed by KPMG in 2021 reported having RI policies. KPMG’s 20th Responsible Investment Benchmark Report (Benchmark Report - Responsible Investment Association Australasia (RIAA) ) also found RI funds just as resilient as non-RI funds, and that approaching investment responsibly did not mean a loss of performance.
Likewise, CBRE’s 2021 Global Investor Intentions Survey (Global Investor Intentions Survey 2021 | CBRE ) found a notable rise in ESG focus than in previous years. The sentiment was unanimous across the Asia-Pacific, Europe, the Middle East, Africa and the Americas, and top sovereign wealth and super funds had come to value ESG a key driver in decision making, according to the survey.
The KPMG report warned however that regulations around sustainable investment were tightening. “Investors face increasing risks from legal action if claims made about their responsible investment products are not accurate,” according to KPMG’s Head ESG & Responsible Investment Sustainability Services Mark Spicer who authored the report. “As asset managers move to increase the rigour of their ESG investment approaches, impetus will fall on investee companies to continue to improve their approach to sustainability and ESG reporting in order to attract and retain investment.”
New NABERS rating on the way
On the environmental ratings front, one of this year’s newest additions to performance benchmarks will be the Renewable Energy Indicator from NABERS (National Australian Built Environment Ratings System). The indicator is designed to recognise and reward the purchase of renewable energy and will eventually replace the GreenPower rating tool after a two year transition period. NABERS says the new indicator will “provide clear and transparent information on the rating certificate on the proportion of renewable energy used in the building”. It follows NABERS update to emissions factors in July 2021 to include those from different energy sources.
Among purchases recognised under the Renewable Energy Indicator will be renewable electricity from state and territory-based renewable energy targets, like the retirement of large-scale generation certificates, and Greenpower.
The indicator tool will be officially launched later this year, with a date still to be confirmed, and will be free with all NABERS Energy rating certifications. Find out more about the new indicator here Consultation – Recognising uptake of renewable energy | NABERS