ESG-Strategien für Immobilien Asset Manager

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OVERVIEW


Sustainability and ESG are high on the political agenda. This goes hand in hand with comprehensive European regulation, which particularly affects regulated financial market participants such as insurance companies and investment companies. We have reported the details in our previous newsletters. The pressure to act towards more sustainability is increasingly being passed on to the unregulated market participants in the real estate industry. Real estate asset managers and others are therefore faced with the challenge of taking concrete measures in a field that is not easy to grasp.

IN DEPTH


1. Definition, regulation

Already the definition of the ubiquitous terms "ESG" and "sustainability" is not easy and legally indefinite. "ESG" (Environmental, Social, Governance) stands for environmental protection and social measures as well as measures of good corporate governance. The EU is currently trying to clarify which activities are to be regarded as “sustainable” in the so-called “taxonomy” as part of its EU action plan for financing sustainable growth from March 2018. Regardless of this and due to the considerable social and political pressure, regulation is advancing. The EU has already implemented a number of measures or is currently preparing them to oblige market participants to implement ESG measures. Market participants, who are subject to the regulations on non-financial reporting based on the CSR Directive (§§ 289b ff. HGB) must already add a non-financial part to their annual management report, e.g. environmental, employee and social issues. The regulations are to be revised and expanded, a first consultation on this has just begun by the EU Commission. According to the EU Disclosure Regulation published in December 2019, financial market participants will soon be obliged to explain whether and how they incorporate sustainability aspects into their investment decisions. The aim of the taxonomy is probably to accept only energy-saving and resource-efficient buildings as sustainable assets in the future. must already add a non-financial part to their annual management report, for example environmental, employee and social issues. The regulations are to be revised and expanded, a first consultation on this has just begun by the EU Commission. According to the EU Disclosure Regulation published in December 2019, financial market participants will soon be obliged to explain whether and how they incorporate sustainability aspects into their investment decisions. The aim of the taxonomy is probably to accept only energy-saving and resource-efficient buildings as sustainable assets in the future. must already add a non-financial part to their annual management report, for example environmental, employee and social issues. The regulations are to be revised and expanded, a first consultation on this has just begun by the EU Commission. According to the EU Disclosure Regulation published in December 2019, financial market participants will soon be obliged to explain whether and how they incorporate sustainability aspects into their investment decisions. The aim of the taxonomy is probably to accept only energy-saving and resource-efficient buildings as sustainable assets in the future. an initial consultation by the EU Commission has just started. According to the EU Disclosure Regulation published in December 2019, financial market participants will soon be obliged to explain whether and how they incorporate sustainability aspects into their investment decisions. The aim of the taxonomy is probably to accept only energy-saving and resource-efficient buildings as sustainable assets in the future. an initial consultation by the EU Commission has just started. According to the EU Disclosure Regulation published in December 2019, financial market participants will soon be obliged to explain whether and how they incorporate sustainability aspects into their investment decisions. The aim of the taxonomy is probably to accept only energy-saving and resource-efficient buildings as sustainable assets in the future.

2. ESG and sustainability in real estate asset management

The pressure on measures is increasingly being passed on by the real estate investors concerned to their real estate asset and property managers. However, these should also have their own interest in managing the properties they manage “sustainably” and positioning themselves accordingly. But how does it work? A convincing approach is the introduction of an ESG strategy. Below are some examples of how to create and implement an individual ESG strategy.

a) Inventory and implementation

First, an inventory should be carried out, in which the company gets an overview of the legal and other requirements of its (institutional) customers. If the requirements of insurance companies or fund companies are known, an ESG strategy can be developed on this basis. The inventory should also include an examination of the information already available in the company and any measures already implemented. In our practice, we often see initiatives and approaches that have not yet been systematically recorded.

After the inventory has been drawn up, you can draft your own ESG & sustainability guidelines. Which objectives are set in the transaction area, which ones in asset and property management? What additional measures does the company want to take internally? Which priorities - E, S or G - should be set? What is possible and reasonable given the size and business of the company? The policy should then be anchored in the processes of the company and among the employees and regularly adjusted.

b) Implementation - data, contracts, certifications and other measures

When determining and implementing measures, the spectrum of possibilities extends as far as the large dimension of the terms "sustainability" and "ESG":

  • In our consulting practice, we regularly point out that the most comprehensive data collection possible is the basis of many measures. Data management is essential for the planning of specific technical or other measures, as well as for their implementation and the subsequent recording of improvements. This applies, for example, to public transport connections for real estate and other mobility data, land sealing, (renewable) energy sources and their consumption, resource management, life cycle assessments in procurement and construction measures, existing building certificates and much more.
  • In addition, careful contractual implementation is of great importance. Asset and property management contracts should include ESG and sustainability clauses and ensure the necessary data quality. The same applies to rental contracts, which should, as far as possible, be structured as so-called “green leases”. This means that specific clauses are included in the rental agreement on ESG and sustainability aspects. The spectrum of contract design ranges from joint declarations of intent and efforts to concrete and sanctioned obligations to achieve certain previously discussed goals that result from the ESG strategy. In the commercial sector, in our experience, at least for larger companies than tenants, the corresponding rental contract clauses should no longer raise significant concerns. In addition, there is a great deal of leeway when it comes to drafting a green lease individually. The same applies to asset and property management contracts. Here too there is a wide range of conceivable regulations on ESG and sustainability aspects.
  • Furthermore, sustainability and ESG certifications can now be sought at portfolio level, real estate level or for the management of (individual) real estate. The effort and costs involved should not be underestimated. For these purposes too, attention should be paid to the drafting of contracts with service providers. There can also be a variety of technical and other measures that can be implemented in all areas of asset and property management - it doesn't just have to be the beehive on the roof.

3. Outlook and evaluation

Unregulated real estate asset managers should now also deal with sustainability and ESG at the latest. You should develop your own strategy and implement it in particular in the contractual design. Regulation is increasing and it is out of the question to wait until the legislator specifies what needs to be done to market participants. If real estate is not managed appropriately, in the worst case this could result in loss of value and / or limited tradability - both when renting and when selling to certain investors. If the topic is taken seriously, capacities must be made available in the company.

We are happy to support and advise you, both on the regulatory and real estate law level.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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