UNEP FI developing framework
Logo from: UNEP FI
The UNEP FI is developing a framework for the Real Estate industry to employ sustainable metrics into factors concerning risk strategies and profit formulas.
As the real estate industry stumbles to get its footing, the UNEP FI is taking the right steps to mitigate the excessive risk taking which highlighted the 2000’s boom globally and the ensuing crisis.
As the financial sector adjusts its models, governments throughout the world have different histories with risks, some going well beyond limits in the 2000s are now on the most restrictive risk strategy. Especially in Northern Europe where countries were most impacted by the US housing boom and subsequent bust. Their strict controls on lending and development will need to be eased somewhat for the sake of sustainable development. This is important since all can agree on environmental and climate change needs co-ordinated with a financial boom with respect to green development supported by this project.
“We believe that sustainability risks are integral to both functional and physical depreciation of buildings. We see this as a key risk factor that should be incorporated in the real estate industry’s existing dividend discount models in assessing value. Only in this manner will we be able to manage our portfolio as a responsible investor on behalf of our clients”, said Chris Taylor, Chief Executive Officer, Hermes Real Estate.
The respite in the US markets and China’s need to cool down the Hong Kong and Shanghai markets are ripe for the strategies outlined in this paper.
“Our aim is to assist the financial sector with enhancing and protecting real estate value in ways that ultimately support UNEP’s agenda, which is to work towards a more sustainable, energy efficient and low-carbon economy. This report presents policy makers with an easy to understand analysis of sustainability management in the real estate sector and is a basis for action by investors”, said Charles Anderson, Director of the United Nation Environment Programme Finance Initiative.
As Charles Anderson outlines the metrics used are designed to assist the firms and regulatory organizations to plan for increased risks in the future and plans to protect owners, renters and the entire real estate industry to manage sustainable structures.
“From a RICS perspective, the UNEP FI metrics report could not have come at a better time. The January 2014 RICS Red Book edition now specifically lists sustainability as a factor that valuers need to take into account when performing valuations and risks assessments for their clients as these sustainability factors can influence investment decision-making. With the new Red Book and the Sustainability Metrics report we now have a holistic approach with guidance to valuers and associated capacity building programmes on the valuation side and guidance on the real estate investment and financing side. Both are aimed at raising awareness about the importance of data collection and sustainability metrics not only amongst valuers and responsible investors, but also amongst the wider investment community”, said Louise Brooke-Smith, President Elect of RICS.
“The PRI is proud to collaborate with its partner, the UNEP Finance Initiative, to deliver pragmatic solutions for investors that contribute to a more sustainable financial system. We are pleased to recommend this resource to the property investment management community as a useful tool to facilitate responsible investment practices” said Fiona Reynolds, Managing Director, Principles for Responsible Investment.
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