Wanted: A reliable benchmark for sustainability
Commercial properties are complex and often unique structures. Each property differs in terms of size, technical facilities, construction materials and intensity of use. Sustainability-focused investment management of a portfolio that may comprise hundreds of completely different properties in numerous countries around the world is thus no easy task. How can the sustainability status of the portfolio be monitored? How can shortcomings and improvement potential be identified and the sustainability performance of the portfolio gradually improved?
One system that provides precisely this functionality is Portfolio Sustainability Management (SoFi-PSM) from thinkstep, which is used by Union Investment and specifically designed for the real estate sector. This web-based software allows large volumes of data to be systematically recorded, managed and analysed.
Tenant involvement is vital
The quality of the results is dependent on recording all consumption data as precisely as possible. The focus is on key performance indicators (KPIs), mainly relating to the consumption of water, electricity and heating energy, and to waste volumes. Some of this information is directly available to the building owner, but occupiers typically agree their own utility supply contracts for the space they rent. In the case of single-tenant buildings, the user normally has responsibility for all utilities and waste disposal.
Asset managers therefore need the support of building occupiers if they want to obtain a complete picture of the sustainability of their portfolio. Without the relevant consumption data, no proper assessment is possible. Large property companies such as Union Investment maintain correspondingly close contact with their tenants and normally request details of energy consumption, water use and waste disposal once a year. All data is treated confidentially and anonymised for use in portfolio sustainability management.
Lower costs as the reward
For tenants, their voluntary involvement can result in real financial benefits. If comparisons with other buildings reveal unusually high energy consumption for heating, for example, the landlord can adjust the installed services accordingly. The occupier can then look forward to lower costs in the next service charge statement.
Ongoing reduction of the building’s carbon emissions will also have a positive impact on the tenant's own sustainability reporting. And the fact that continuous optimisation also benefits the environment due to a decreasing carbon footprint is likely to be welcomed by everyone involved.
Preventing a harsh winter from undermining sustainability performance
PSM can do more than just record data. One of the system's strengths is its ability to make adjustments for exceptional factors. For example, it can take vacant space in an office building into account and calculate consumption figures for full occupancy.
Similarly, an exceptionally cold winter or extremely hot summer – with correspondingly higher energy consumption for heating/air conditioning – can be stripped out of the assessment. Building usage times (24/7 or only certain times of the day) can likewise be taken into account, as can heavy users, such as a data centre with extremely high electricity consumption.
To make it possible to compare large and small properties, the system expresses consumption in terms of kilowatt hours per square metre, rather than a total value for the building. Without making adjustments to the data, it would be impossible to create benchmarks and to make meaningful comparisons between different properties.
Thanks to PSM, genuine, verifiable comparability between very dissimilar buildings is possible, whether they are located in Helsinki, Rome or Mexico City. Asset managers can now readily identify where their individual properties stand compared to others and use particularly efficient buildings as benchmarks.
Towards sector-wide benchmarking
In principle, this also allows asset managers to compare themselves with other investment companies. However, not all market players use the same calculation methodology, so sector-wide benchmarking has hitherto not been possible. The German Property Federation (ZIA), which acts as the voice of the German real estate industry, is therefore seeking a common denominator at least at national level. Union Investment is playing an active role in this process.
SoFi-PSM already offers tangible benefits for fund managers. It is an exceptionally powerful instrument for identifying and leveraging ecological, social and economic potential within their portfolios and can also serve as a benchmarking tool at company level. Furthermore, it can supplement or even replace building certification at modest cost. Since the data and figures are recorded annually, it is also significantly more relevant than a certificate which documents the status at one particular point in time. SoFi-PSM thus makes an important contribution towards maintaining or enhancing the value of individual properties and entire portfolios.