Improving market information on sustainability
IPD last week presented a new industry-backed initiative to support the measurement of sustainable investment in commercial property. At CBRE’s Sustainability Breakfast on 29 February, IPD launched a new set of questions, the answers to which will provide the property industry with a new, improved index of sustainable properties – the ISPI, or IPD Sustainable Property Index version 2.0 – and a benchmarking service (EcoPAS).
Paul McNamara, head of research at Prupim, said that “The EcoPAS concept offers an exciting route to gaining much needed traction in the currently mired area of asset level, investment-related, environmental metrics. It is absolutely not ‘another sustainability metric’. Indeed, it is not a sustainability metric at all – it is an investor service built by investors and valuers for investors and valuers and should be seen in that way.”
IPD says the sustainability characteristics of properties are now beginning to have an effect on asset value and investment performance, alongside such usual considerations as the quality of a property, covenant strength, and lease length. Investors need to understand these impacts and manage the risks they face, the institute says, and in order to do this, they need this information at asset level. “This is one of the reasons why valuers are coming under increasing pressure to reflect the relevance of environmental characteristics of buildings in their valuations,” it adds.
IPD says that if valuers collect data on a set of variables relevant to asset value and investment performance when on their regular site visits, it will be straightforward for them to send investment-related environmental data to clients and to IPD along with the other information they already send. IPD will be able to analyse these variables at asset and at portfolio level, to provide the new Eco-Portfolio Analysis Service (EcoPAS). The variables that will initially underpin EcoPAS have been agreed by five leading property-investing institutions – Aviva, Henderson, Hermes, L&G and Prupim, together with IPD and CBRE. Talks are now underway with RICS to establish how this initiative can be implemented more widely in order to increase the amounts of environmental data collected.
Bill Hughes, managing director at Legal & General Property, noted that “Current metrics systems are designed to look at all aspects of ‘sustainability’ rather than the different and more narrow issue of ‘the investment implications of sustainability’. As such, they cannot do this very necessary job for investors in the way that EcoPAS can. In time, this critical project will bring the impact of sustainability upon investment performance into the boardroom.”
