New environmental demands provide new value creation opportunities

June 19, 2023

New environmental demands could give a financial benefit to those implementing the correct sustainability measures, Varig CEO Renate Straume writes.

The EU-taxonomy – and its sustainability requirements for operations, transparency, and reporting – has already become mandatory in many parts of the commercial real estate industry. To stay compliant, property companies need to document both the status and progression of their buildings’ environmental impact.

Nowadays, the view of a company’s profitability is not merely a mirror of its ability to make money. Value, and future value creation, is closely tied to whether the company is sustainable or not. This also applies to commercial real estate. The sustainability status of a building is key in determining the building’s value.

Green funding

With proper planning and measures, companies can turn the new environmental demands into financial benefits.

Green funding will be accessible to the companies that manage to operate in accordance with the framework. And there’s also an opportunity to be eligible for “light green funding”. The closer your operations are to be taxonomy compliant, the greater the financial benefit.

The gap between the terms and conditions offered for traditional loans and those offered in green loans is widening. We already see indications that the basic difference could be more than ten points.

The efforts to improve the environmental footprint is therefore no longer driven by idealism or corporate social responsibility. Now the valuation of the company is on the line. Improvements in sustainability – be it environmental or social – is really an opportunity to increase the company’s profitability. Regardless of industry.

Three simple steps

Norsk Eiendom has presented real estate companies with three simple steps as a guideline to get going in working in compliance with the EU-taxonomy.

The first step is to get an overview; what’s our current status? Step two is to monitor and identify the measures that could improve the sustainability of your operations. The last step is to follow through on these measures.

Personally, I’d like to add a fourth step; having objectives for continued positive developments.

Data control

To get on the front foot of sustainability work, you need to be in control of your data.

Varig delivers a sustainability software that makes it a lot easier for owners, managers, and tenants to get a complete overview of the buildings’ environmental performance. This way you can work systematically in addressing the measures that matter the most in your portfolio.

The software also has an automized reporting feature, which generates complete reports that document both the status and progression of your buildings’ environmental impact. Key information to get financial benefit from the new environmental demands.

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