What do ESG regulations mean for existing properties?

In order to achieve the goal of a climate-neutral community of states by 2050, corresponding investments are necessary, which governments cannot manage alone. Additional private investment in sustainable investments should contribute to achieving the target. For this reason, the European Union has created a set of rules based on the EU taxonomy that sets out criteria for advising investors on sustainable investments. These are the ESG regulations that came into force in 2021. In this article, you can find out why these are also of great importance for the portfolio.

Goals of the ESG

The term "ESG" can be divided into three sustainability-related areas of responsibility, with each letter representing an area: environmental social governance and corporate governance.

The focus is of course still on the environment, as the aim is to get closer to the goal of climate protection and CO2 reduction. However, ESG is more comprehensive and also focuses on the areas of social and governance. The social area of responsibility includes the treatment of employees, tenant satisfaction and social housing. Governance, on the other hand, looks at the application of sustainable structures within the company as well as existing compliance rules. In other words, it is about the entrepreneurial approach and the sense of responsible management. In short, the definition of ESG encompasses not only environmental protection and the careful use of natural resources, but also numerous ethical and social criteria. All in the spirit of sustainability.

Effects of ESG on existing properties

According to a recent climate protection report, a quarter of all CO2 emissions still come from buildings - including indirect and gray emissions. It is therefore essential that buildings that are modernized now are compatible with the climate targets for 2050. The ESG regulations therefore form an important piece of the puzzle.

Nevertheless, the regulations pose an enormous challenge for the real estate industry. If you look at the industry's portfolio, you quickly realize that we in the real estate sector are often talking about existing properties. According to a study by the German Energy Agency, there were around 19.2 million residential buildings in Germany in 2019. This figure has only risen moderately in recent years due to the sometimes high cost of building land. While around 243,000 building permits were issued in 1994, this figure had more than halved by 2019 to a total of 119,000 building permits. In order to achieve the energy and climate targets, energy-efficient refurbishments are necessary, for example by converting old buildings to a sustainable heat supply.

ESG also intervenes in a large number of processes and contractual relationships: from dealing with sustainability risks in the investment process to the criteria for the supply of consumption data by property managers and the documentation of sustainability criteria in new and existing buildings through to the adaptation of governance structures.

Digitization of existing buildings

In order to counteract the decline in value of "older" properties, the sustainable refurbishment of existing buildings is a key challenge for the coming years. It is clear that ESG is far more complex than just "green building". Sustainability is crucial to success today.

Portfolio holders must now report transparently on the effectiveness of ESG measures. Meaningful reporting is complex and affects the entire value chain. Digitalization can therefore make a decisive contribution to compliance with ESG regulations, according to a study by Bitkom. The integration of IoT services via a property management platform simplifies the management of buildings for property managers and creates innovative power that leads to streamlined processes. The result is cost and time savings as well as resource-efficient building use.
Even if people often think primarily of new buildings when it comes to digitalization, existing properties are also ideally suited for the use of IoT technology. All sensors can be easily retrofitted and can detect and repair damage, such as water damage, at an early stage.

The digitalization of existing buildings also enables their integration into a future-proof smart city ecosystem. In urban conurbations, smart districts offer attractive added value for residents and also contribute to the social aspect of ESG:

• Tenant apps offer a comprehensive service portfolio with experiences for a smart living and working environment as well as a platform for the burgeoning sharing economy.
• Residents and users can also gain a live insight into their consumption values (heating, electricity and water) via an app or smart building dashboards and thus have a positive influence on their carbon footprint.
• As "digital living companions", intelligent properties for senior citizens are a valuable alternative to retirement homes - the social property of the future.

The ROCKETHOME portfolio is versatile and offers the right solution for every requirement, so that housing companies, project and neighborhood developers can meet the requirements of the ESG criteria.

Climate targets can only be achieved together

We are in the midst of a climate crisis that we can only overcome if everyone involved pulls together - politics, business and society. ROCKETHOME has made it its goal to connect the various target groups and offer a range of services that is specially tailored to the needs of the real estate industry, energy suppliers, insurers and other service providers. After all, the climate targets for 2050 can only be achieved if everyone involved works together.

Would you like to work with us to bring digital innovations to your industry and your customers in order to make the real estate sector sustainable?

Get in touch with us at meet@rockethome.de or arrange a non-binding consultation.

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