What do ESG regulations mean for existing properties?

In order to achieve the goal of a climate-neutral community of nations by 2050, corresponding investments are necessary, which governments cannot manage alone. Additional private investments in sustainable financial assets should contribute to the achievement of the goal. For this reason, the European Union has created a set of rules based on the EU taxonomy that sets criteria for advising investors on sustainable investments. These are the ESG regulations that came into force in 2021. Why these are also of great importance for the stock, you will learn in this article.

Goals of ESG

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

The focus, of course, is still on the environment, after all, 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, for example, the treatment of employees, tenant satisfaction and social housing. Governance, on the other hand, looks at the application of sustainable structures in the company as well as existing compliance rules. In other words, it's about corporate action and the sense of responsible business. In short, the definition of ESG covers not only environmental protection issues and the careful use of natural resources, but also numerous ethical and social criteria. All in the spirit of sustainability.

© Gabler Wirtschaftslexikon

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 grey emissions. Therefore, it is essential that buildings that are modernized now are compatible with the climate targets for 2050. Consequently, the ESG regulations are an important piece of the puzzle.

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

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

Digitization of existing buildings

To counteract the decline in value of "older" properties, the sustainable refurbishment of the existing stock is a key challenge for the coming years. It turns out that ESG is far more complex than just "green building". Sustainability is critical to success today.

Portfolio owners must now report transparently on the effectiveness of ESG measures. In this context, meaningful reporting is complex and involves the entire value chain. Digitization can therefore make a crucial contribution to meeting ESG regulations, a Bitkom study shows. The integration of IoT services via property management platform simplifies the management of buildings for property managers and creates a power of innovation that leads to streamlining of processes. The result is cost and time savings as well as resource-efficient building utilization.
Even if people often think primarily of new buildings when it comes to digitization, existing properties are also ideally suited for the use of IoT technology. All sensors can be retrofitted without great effort and can detect and repair damage, such as water damage, at an early stage.

The digitization of the stock also enables its integration into a future-proof smart city ecosystem. In urban centers, smart neighborhoods offer attractive added value for residents and also pay off on 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 emerging sharing economy.
  • Via app or so-called "smart building dashboards", residents as well as users also receive a live insight into their consumption values (heating, electricity and water) and thus have a positive influence on their CO2 footprint.
  • As "digital living companions", smart properties for seniors are a valuable alternative to retirement homes - the social real estate of the future.

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

Climate goals can only be achieved together

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

Get in touch with us via meet@rockethome.de or schedule a no commitment consultation.

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