Energy efficiency in real estate unlocking finance through aneffective regulatory framework

Money Matters – How to mobilise private finance for energy efficiency

February 13, 2012

Tatiana BosteelsHermes Real Estate - IIGCC

10 April 2023 Hermes Real Estate I 2

Energy efficiency and real estate

Buildings are key to energy efficiency

Existing buildings are real challenge!

Regulatory pressure has been one of main drivers for sector

No evidence, yet, of impact of sustainability on financial performance

Increasing market pressure from institutional investors

Growing sense in industry that sustainability is risk and opportunity that will impact financial performance

Crucial to understand real estate’s sustainability barriers

Dynamic and cyclical nature of European real estate markets

Large number of practitioners during long life cycles

Complex management arrangements, fragmented responsibilities and conflicts of interest between them

Limited investment terms by each practitioner

Lease conditions limits opportunities for ‘carbon events’

Small investment scale and lack of energy economics

Lack of market information, demand, impact on financial performance

Limited information and skills among large variety of practitioners

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Financing energy efficiency in real estate

Energy efficiency and clean technology funds backed by multilateral banks

– Able to support building energy efficiency products and services industry

– Often government backed and public sector targeted

– Few directly applicable for commercial and residential

OR

Energy efficiency investment theme within real estate investment and management

Large potential capital investment opportunity within EU real estate investment industry

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Key is strong regulatory framework Sensitive to buildings complex management arrangements

EU and MS, sound and comprehensive mix of sustainability policy instruments

However some flagship policies poorly conceived and partially implemented

Real estate effective policies need

Account for complex management arrangement and conflict of interest between practitioners

Who has control over energy consumption and control over capital allocation in building’s life cycle

Improved skills of all practitioners in sector

Fiscal incentives necessary to unlock full potential

Policies should support internalisation of sustainability in real estate financial performance

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