ESG performance has become fundamental to the financial performance of assets within the UK commercial real estate sector, according to a leading industry figure.
Katie Whipp, who heads financial advisory Deepki UK, which specialises in implementing ESG strategies in the commercial property sector, said that 66% of UK institutional commercial real estate investors and property professionals have seen a decrease in both the capital and rental value of their portfolios due to poor sustainability performance.
“Real estate investors and owners recognise that they will see the value of their assets decline if they do not make the transition to net zero,” Whipp told ESG Insight.
“ESG affects both capital value and rental income.Katie Whipp
However, “this path is often complex and requires data intelligence, analysis and the expertise to take the appropriate action,” Whipp continued.
Singling out a recent study that was conducted by Deepki, which claims to be the only company in the world offering a fully populated ESG data intelligence platform to help commercial real estate investors, owners and managers improve the ESG performance of their real estate assets and enhance their value.
Over three-quarters of the respondents predict the capital value and rental income of their real estate assets to depreciate by over 20% if their ESG performance does not improve, highlighting the importance of commercial real estate sustainability in the UK.
High carbon footprint
The research also called attention to the scale of the ESG challenge facing UK commercial real estate, with 12% of those questioned saying that 5% to 10% of their real estate portfolio has poor energy efficiency or a high carbon footprint. A further 21% and 42% said that this was the case for 10-15% and 15-20% of their assets respectively.
Adressing poor ESG performance
The research also asked what actions respondents were likely to take to address the poor ESG performance of their real estate portfolios:
- 72% said that they would actively engage with the property management team to make improvements
- 61% said they would invest in improving energy efficiency
- 45% said they would work with a third party to develop an ESG strategy and measure performance against KPIs
- 28% said they would demolish and rebuild failing assets
- 10% said they would sell their assets
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