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BSRIA: Energy & Sustainability Network Meeting IPD’s EcoPAS measurement service, an investor’s

perspective Jess Stevens, Sustainability Product Manager

28 February 2013


• IPD is a global information business, dedicated to the objective measurement of commercial real estate

• IPD recognises the impact that sustainability considerations have on financial performance (both risk and return)

• Data collection is a hugely challenging issue for the investors, as is the definition of what constitutes an ‘environmentally sustainable property’

• IPD is not a certifying body and does not offer a certification tool nor an environmental management tool

Introduction

BSRIA: IPD’s EcoPAS measurement service, an investor’s perspective


• Since 2009, IPD has produced ISPI (IPD Sustainable Property Indicator)

• IPD has been unable to draw any conclusions about any outperformance by the more sustainable properties due to:

- small samples sizes

- the fact that sustainability had not yet been priced into market valuations; and

- no standard definition of a ‘sustainable property’ in the UK

• In order to bridge this gap, IPD, RICS, CBRE, AVIVA Investors, Henderson Global Investors, Hermes Real Estate, L&G and Prupim joined together to create a new, higher level of portfolio-wide environmental metrics

Background



EcoPAS is a comprehensive benchmarking service that:

• measures the environmental risk of every asset in a portfolio;

• identifies what the precise sources of those risks are;

• determines whether a portfolio is exposed to greater risk than its competitors; and

• recognises whether a portfolio is reducing its risk over time and if it is doing so as fast as its competitors

• It is not a management tool, nor a certification tool. It is a whole portfolio service to which portfolio managers are subscribing. It is a service created by investors and valuers, for investors and valuers.

Background



Questions


ENERGY

FLOOD

WATER

WASTE

ADAPTABILITY

ACCESSIBILITY

QUALITY


UK Valuers:

• Sustainability Inspection Checklist

• RICS backing

• All large UK valuers on board – CBRE, Knight Frank, DJ Deloitte, JLL, C&W etc.

UK Investors:

• EcoPAS template in Excel (submission with usual data to IPD)

• 7 management houses in 2012, 30 Funds

How does it work in practice



EcoPAS Universe


EcoPAS Universe (Q3 2012) UK Quarterly database (Q3 2012)

2,023 properties 21% 9,573 properties

30 Funds 27% 112 Funds

£32.5bn 30% £108.8bn

Comparison between the quality of EcoPAS and UK Quarterly: Split by Capital Value and Equivalent Yield

Standard Retail

Shopping centres

Retail Warehouse

Standard Offices

Office Parks

Industrial

Other

5.8%

7.2%

6.2%

9.2%

6.8%

6.5%

9.6%

8.5%

6.8% 6.0%

7.7%

7.0%

6.8%

8.2%


‘Unknown’ and ‘known’ EcoPAS data by ERV for EPC data and CV for all other environmental categories


3.7

37.6

94.3 86.5

62.2 64.1

85.2

96.3

62.4

5.7 13.5

37.8 35.9

14.8

0

10

20

30

40

50

60

70

80

90

100

BREEAM EPC Rating Flood Risk Rating

Accessibility Water Waste Adaptability

Unknown %

Known %

Where ‘unknown’ for BREEAM and EPC includes both ‘not rated’ and ‘unknown’ data


• 5,184 units with an EPC rating (30% total units)

• 614 units with an F&G rating (4% total units)

• 11,992 units with an Unknown rating (70% total units)

• ERV of £1.5bn with an F,G and Unknown EPC rating (65% of total ERV)

EPC Analysis


0.3%

10.7%

32.5%

30.0%

18.9%

3.6% 3.9%

A (2)

B (481)

C (1748)

D (1550)

E (789)

F (297)

G (317)

7,762

1,944

1,806

480

Retail

Office

Industrial

Other

Breakdown of Unknown EPCs by Number Known EPC ratings as a Percentage of ERV


Flood Risk Analysis: Breakdown by Capital Value


EcoPAS flood risk ratings, as a percentage of Capital Value

• 192 properties with significant and moderate flood risk ratings (10% total) • 27 properties with unknown flood risk ratings (1.3% total) • Capital Value of £4.3bn with significant, moderate and unknown flood risk ratings (15.8% of total CV)

4.9% 5.2%

11.5%

72.8%

5.7%

Significant Moderate Low Nil Unknown


Flood Risk Analysis: Breakdown by Capital Value and market sector


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Nil Low Moderate Significant Unknown

Pe

rcen

tage

of

Cap

ita

l V

alu

e

Retail

Office

Industrial

Other


Water Efficient Practices Analysis: Breakdown by Capital Value


• 600 properties with no water efficient practices (30% of total) • 869 properties with unknown water data (43% total) • Capital Value of £18.4bn for properties with no water efficient practices or unknown water data (60.3% of total CV)

39.8%

22.5%

37.8%

Yes No Unknown


Waste Analysis: Breakdown by Capital Value


• 285 properties with no waste recycling practices (14% of total) • 768 properties with unknown waste data (38% of total) • Capital Value of £13.8bn for properties with no waste recycling practices or unknown waste data (45.5% of total CV)

54.5%

9.6%

35.9%

Yes No Unknown


Adaptability analysis: Breakdown by Capital Value


• 749 properties that are not adaptable to alternative use types (37% of total) • 338 properties with unknown adaptability data (17% of total) • Capital Value of £19.8bn for properties that are not adaptable to alternative use types or have unknown adaptability data (67.3% of total CV)

32.7%

52.5%

14.8%

Yes No Unknown


Accessibility Analysis (time to nearest well-used public transport node): Breakdown by Capital Value


• 510 properties greater than 15 minutes from a well-used public transport (26% of total) • 260 properties with inadequate accessibility data (13% of total) • Capital Value of £12.2bn for properties greater than 15 minutes from a well-used public transport node or with inadequate accessibility data (37.1% of total CV)

31.6%

17.9%

10.2% 3.2%

23.6%

13.5%

0 - 2minutes 2 - 5minutes 5 - 10minutes

10 - 15minutes >15 minutes Inadequate data


• Feedback from existing EcoPAS participants and valuers:

- Data collection process (valuer, investor, IPD)

- Questions (amendments/additions)

- Difficulties/challenges

- EcoPAS Benchmark Report (current data analysis)

• Further enhance and grow EcoPAS in the UK:

- RICS support (seminars, conferences, guidance)

- Increase the current EcoPAS sample size to continually improve findings and make them more meaningful

• Expansion of EcoPAS to other markets

- France

- Netherlands

Next steps



Conclusions


• Industry-lead

EcoPAS is an excellent example of how the industry has organised itself to create a solution for a shared-problem

• Driven by IPD

IPD follows an independent and transparent measurement approach, which is crucial to the development and progress of this initiative

• In order to ensure sustainability’s place in core real estate analysis

Although the first EcoPAS pilot is a good step in the right direction and has achieved great market coverage, sustainability can only grow in its importance of being considered a key driver in investment performance


Green Star performance for A-Grade office markets: Two year annualised results to September 2012

IPD Australia Green Property Index: Q3 2012



Thank you for your time.

Jess Stevens Sustainability Product Manager +44 (0)20 7336 9664 [email protected]

mailto:[email protected]


Global enquiries +44.20.7336.9200 www.ipd.com

Australia +61.2.9248.1900 www.ipd.com/australia [email protected] France +33.1.58.05.36.90 www.ipd.com/france [email protected] Germany +49.611.3344.990 www.ipd.com/germany [email protected]

Hong Kong +85.2.8175.4388 www.ipd.com/asia [email protected] Japan +81.3.5211.1455 www.ipd.com/japan [email protected] Netherlands +31.88.328.22.00 www.ipd.com/netherlands [email protected] South Africa +27.11.656.2115 www.ipd.com/southafrica [email protected]

Spain +34.917.610.271 www.ipd.com/spain [email protected] Sweden +46.8.400.252.30 www.ipd.com/nordic [email protected] UK & Ireland +44.20.7336.4783 www.ipd.com/uk [email protected] USA +1.312.646.6240 www.ipd.com/usa [email protected]

How to contact IPD around the world

http://www.ipd.com/

http://www.ipd.com/australia


http://www.ipd.com/france


http://www.ipd.com/germany


http://www.ipd.com/asia


http://www.ipd.com/japan


http://www.ipd.com/netherlands


http://www.ipd.com/southafrica


http://www.ipd.com/spain


http://www.ipd.com/nordic


http://www.ipd.com/uk


http://www.ipd.com/usa


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