Setting its sights on the decarbonisation of the building sector by 2050, The European Commission is looking into mechanisms to renovate existing stock, a key element to succeed the carbon neutrality challenge.
But a formidable challenge looms large: the persistently poor energy efficiency of existing buildings and low rates of refurbishment across member states, in a financially tense context. Significant roadblocks in the reduction of greenhouse gas emissions, they raise for proper support in the accurate estimation of transformational costs for specific performance targets.
With 45% of Investors intending to dispose of up to 20% of their portfolio in the next 5 years (namely the assets deemed to be non-ESG compliant1, it is key to understand which Buildings are risky in terms of premature obsolescence or potential depreciation
Deerns’ has tailored an advisory transformation process to forge a sustainable transition for real estate portfolios. This ranges from initial status check, the definition of transition roadmaps and pathways, through strategic plans for assets transformation. We achieve this via intervention cycles and periodic monitoring of performances to meet Decarbonisation and Resource-Efficiency targets.
How? Through our ESG (Environmental, Social and Governance) expertise, our solid Building technical knowledge and Deerns recognition as a Carbon Risk Real Estate Monitoring (CRREM) service provider. We analyse stranded assets that will not meet future decarbonisation targets and whose energy efficiency upgrade will not be financially viable.
Introducing the CRREM Initiative
Recognising the urgency of tools for the understanding how Assets align with a decarbonisation pathway, the EU is looking to enhancing the energy efficiency of existing property stock. A valuable outcome of this effort is the EU-funded research project CRREM, which stands for Carbon Risk Real Estate Monitor. This pioneering project is driven by a dual objective:
- Mitigating the carbon-risk factors associated with Building’s premature obsolescence.
- Potential depreciation of buildings due to evolving market expectations and legal regulations.
To address this challenge head-on, CRREM has pioneered the development of a sophisticated tool which empowers investors and property owners to thoroughly assess the exposure of their assets to stranding risks in link with their decarbonisation ability.
This tool is associated to accurate energy modelling with scenarios of intervention (upgrades or renovations). Tailored to the specific building and portfolio, it is possible to clearly design an accurate perspective of an Asset’s transformation.
Avoiding Stranded Real Estate Assets
In the realm of real estate, a robust company strategy and effective risk management are imperative. This includes compliance with ESG (Environmental, Social, and Governance) targets and mitigating CO2 emissions within a portfolio aligned with the stringent targets set by the EU.
Failure to meet ESG targets can lead to a stranded assets scenario.
Properties fall short of future market expectations, resulting in financial write-downs. Hence, there is an urgency for the members of the EU’s real estate sector to define a strategy and a path to safeguard the future of their assets as the 2030 and 2050 targets draw closer. New climate risk transition considerations should be integrated in acquisition and valuation processes.
" As a CRREM Service Provider, Deerns can assist real estate clients navigate the path towards Net Zero to avoid a stranded asset scenario.
Our in-depth knowledge goes beyond upgrading buildings to include digital infrastructure. This in turn drives data-driven decision making, the practical implementation of remedial interventions, and proposed interventions that can be scaled over time.
Deerns’ Support for enhancing Assets’ and Portfolio ESG performance
By matching CRREM assessment to a Deerns’ deep expertise about Buildings performance, we can deliver calibrated analyses that assess and model current and future predictive performance of real estate assets, both individually and at portfolio level, by generating various scenarios. These can be related to renovation interventions and consequent cost implications and resources savings. The result is an operationally accurate pathway of interventions. It provides a clear indication of how these position your asset in the decarbonisation roadmap and the expected date for the asset to be stranded. To support decision making, our team provides precise and aggregated information regarding:
- Electricity use prediction
- Gas use prediction
- Carbon emissions prediction
- Energy end-usage
- Water end-usage
- Building Systems – strategy and interventions
This process gives a clear understanding of the possibilities and implications – both technical and financial – of intervention measures based on realistic modelled scenarios. Creating digital twins of assets gives additional insights, monitoring and planning capabilities for data driven strategies.
Deerns’ five-point ESG approach
The Deerns approach to ESG for buildings is a five-step performance and transformation strategy.
Step 1. An initial status check that analyses corporate strategies whether in the planning or implementation phase to align with ESG criteria.
Step 2. ESG focused workshops and strategic team onboarding in which all ESG stakeholders consider and prioritise Environment, Social and Governance as stand-alone topics.
Step 3. Meticulous planning for scale and rapid transformation. Developing a strong ESG framework and a strategic transition pathway.
Step 4. Key to this is an ESG Integrated Dashboard and performance tools for precise sustainability tracking. Digitalisation is vital, demanding state-of-the-art infrastructure for seamless data collection.
Implementation of the ESG framework and strategies follow in three- to five-year cycles and are applied to prioritised assets that are closely monitored for performance and eligibility for relevant certifications.
Step 5.
- Periodic performance monitoring of assets and portfolio
- Verification of “Road to Target” through defined milestones
- Identification of deviations and formulation of a Revision Plan
- Preparation of the next intervention cycle.
Deerns’ tailored five-step transformation process, ensures alignment with sustainability goals and standards. With meticulous planning, strategic transition pathways, and digital prowess, we work to help our clients to meet their ESG targets. This forges a sustainable future where real estate assets thrive amid evolving market expectations. This collaborative effort underscores the vital role of engineering, right from the inception, in realising clients’ visions for a decarbonised, sustainable tomorrow.
1 Colliers Belgique, Study presented at REALTY2023
