Update on IPD's EcoPAS Measurement
Service
Breakfast Seminar
Thursday 22 November 2012
Copyright © 2012 by K&L Gates LLP. All rights reserved.
Update on IPD’s EcoPAS
Measurement Service
Jess Stevens
22 November 2012
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Very many thanks to our sponsors...
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Agenda
•
IPD EcoPAS
- Background and Product Overview
- 2012 Contributors
- Sample Size
•
2012 IPD EcoPAS feedback
- Process
- Feedback
- Data quality
•
IPD EcoPAS results and analysis (as at
Q3 2012)
•
Next Steps for EcoPAS and IPD
Global Sustainability Update
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Background
•
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, the IPD, RICS,CBRE, AVIVA Investors, Henderson
Global Investors, Hermes, L&G and Prupim joined together to create a new,
higher level of portfolio-wide environmental metrics
•
This has represented a transition from ISPI to EcoPAS in the short-term, but in
the medium to long term, IPD will continue to produce headline performance
results on how sustainability impacts investment performance
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IPD Eco-Portfolio Analysis Service
(EcoPAS)
•
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.
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EcoPAS Questions
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2012 EcoPAS Contributors
Investors
Aviva Investors
Henderson Global Investors
Hermes Real Estate
L&G
Prupim
Standard Life
The Crown Estate
Valuers
Allsop
DTZ
BNP Paribas
Gerald Eve
Capita
Jones Lang LaSalle
CBRE
Knight Frank
Colliers
Montagu Evans
Crown Estates
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The IPD EcoPAS sample size as at Q3 2012
Sustainability data received from:
EcoPAS Universe
UK Quarterly Universe
2,023 Properties
21%
9,573 Properties
£32.5bn
30%
£108.8bn
Comparison between the quality of EcoPAS and UK Quarterly:
Split by Capital Value and Equivalent Yield
6.8%
8.2%
6.0%
8.5%
7.7%
6.8%
7.0%
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EcoPAS Process 2012
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IPD EcoPAS feedback
• Excellent first step for EcoPAS
• Only a few difficulties:
- EPC ratings at unit level
- Flood risk ratings and flood defences
- Different templates used between valuer, client and IPD
Questions answered well
Questions answered poorly
Energy consumption
GPS coordinates
Energy source
Flood defences
Water
Energy use
Waste
Adaptability
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‘Unknown’ and ‘known’ EcoPAS data by ERV for EPC
data and CV for all other environmental categories
Where ‘unknown’ for BREEAM and EPC includes both ‘not rated’ and ‘unknown’ data
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EPC analysis:
Breakdown by ERV
• 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)
Known EPC ratings as a Percentage of ERV
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Breakdown of Unknown EPCs by Number
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EPC analysis:
Breakdown by ERV and market sector
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EPC analysis:
Breakdown by number of total EPC ratings and market
sector
2, 386
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1, 606
826
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366
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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)
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Flood Risk Analysis:
Breakdown by Capital Value and market sector
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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)
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Water Efficient Practices Analysis: Breakdown by
contribution to Capital Value and Market Sector
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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)
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Waste Analysis:
Breakdown by contribution to Capital Value and
Market Sector
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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)
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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)
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Accessibility Analysis:
Breakdown by Capital Value and Market Sector
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Conclusions...
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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
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Next steps for IPD EcoPAS
•
•
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
-
IPD Sustainability /EcoPAS Training
• Expansion of EcoPAS to other markets
- France
- Netherlands
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IPD Global Sustainability Update
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Oceania
- IPD Australia Green Property Index
- IPD New Zealand Green Property Indicator
•
Canada
- Soon to release a Sustainable Property Indicator for the Canadian
market
•
France
– Green Building Indicator, produced since 2011
•
The Netherlands, Germany, Switzerland, Denmark and Austria
– Collect EPC data and provide a few clients with analysis on how their
EPC ratings relate to their performance
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Thank you for your time
Jess Stevens
Sustainability Risk Analyst
+44 (0)20 7336 9664
jessica.stevens@ipd.com
IPD, 1 St. Johns Lane, London, EC4M 4BL, UK
Intellectual Property Rights and use of IPD statistics as benchmarks
Whether in the public domain or otherwise, IPD's statistics are the intellectual property of Investment Property Databank Limited.
It is not permissible to use data drawn from this presentation as benchmarks.
© Investment Property Databank Limited (IPD) 2012. Database Right, Investment Property Databank Limited (IPD) 2011.
All rights conferred by law of copyright and by virtue of international conventions are reserved by IPD
Nov-12
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Institutional Investor Perspective
Will Edwards
Fund Manager – Legal & General Property
Introduction
• Legal & General Property (LGP)
• 18 Funds in the UK with total AUM of c. £10.5bn
• One of the 7 investment houses who are submitting data to EcoPAS
• LGP have submitted data from 5 balanced UK Funds with total AUM of c. £4.0bn
• My experience of EcoPAS
• The Fund that I am responsible for submitted data to IPD in Q3 2012
• The Fund is a balanced UK commercial property Fund comprising 45 assets with an
NAV of c. £700m
Why is sustainability important?
• From a fund management perspective sustainability is about protecting the medium to
long term value of a portfolio
• There is an increasing awareness that sustainability risk is a real threat and future
proofing portfolios against this is prudent and will be necessary to deliver long term
performance
• More value is being attached to positive corporate social behaviour
• This behavioural change is also due to regulation obliging owners of real estate to
measure aspects of sustainability – particularly energy usage.
• EcoPAS aims to chart the correlation between sustainability attributes of buildings,
and rental growth and values
Data collection - how does it work in practice?
IPD’s questions for EcoPAS 2012
Section A: Energy
A1
What are the EPC ratings for the asset for each lettable unit?
Valuer/Investor
A2
In which year was the EPC rating taken?
Valuer/Investor
A3
Where is the buildings energy sourced from?
Valuer
A4
What is the total annual energy consumption for the building?
Investor
A5
What is the energy provided by the owner used for?
Investor
A6
What is the Net Lettable Area of the whole building?
IPD/Investor
Section B: Flooding (Environment Agency’s website)
B1
What is the asset’s flood risk rating?
Valuer
B2
Are there on-site flood defences in place at the asset?
Valuer
B3
Are there flood defences in place that cover the asset’s
location?
Valuer
B4
What are the XY coordinates of the asset? (GPS Coordinates)
Valuer
IPD’s questions for EcoPAS 2012
Section C: Water
C1
Is there any evidence of on-site water efficient practices?
Valuer
Section D: Waste
D1
Is there any evidence of on-site or off-site waste recycling?
Valuer
Section E: Adaptability
E1
Is this property capable of conversion for alternative uses?
Valuer
Section F: Accessibility
F1
How close is the asset to a well-used public transport node
IPD
IPD’s questions for EcoPAS 2012
Section G: Quality
G1
Does the building have a recognised building quality rating?
(BREEAM Offices 2008 or similar)
IPD/Investor
G2
What is the date of the BREEAM (or equivalent) rating?
IPD/Investor
G3
What is the construction date of the asset?
IPD/Investor
G4
If there has been a major refurbishment on the asset, what
was the year of the last one?
IPD/Investor
Summary
• EcoPAS is an independent measurement of the portfolio’s sustainability credentials by
a reputable organisation
• Data collection is a simple exercise
• Useful tool to help Fund Managers and Investors understand the current
environmental condition of their assets and portfolios and how much potential risk they
are exposed to
• It will show whether we are more or less exposed to risk than our peers; and provide
information on whether we are reducing our risk over time
• The importance of understanding sustainability and positioning for the future will grow
• Those that ignore the issue will be left behind
Disclaimer
• Legal & General Investment Management does not provide advice on the suitability of its products or services for pension fund clients
• The FTSE UK, FTSE All-World™ and FTSE4Good™ index series are calculated by FTSE International Limited (“FTSE”). FTSE does not sponsor,
endorse or promote these funds. The FTSE Global Bond index series is operated by FTSE International Limited in conjunction with Reuters, the Institute
of Actuaries and the Faculty of Actuaries. FTSE, Reuters, the Institute of Actuaries and the Faculty of Actuaries accept no liability in connection with the
trading of any products on these indices.
• All copyright in the indices’ values and constituent lists belong to FTSE. Legal & General Investment Management Ltd has obtained full licence from
FTSE to use such copyright in the creation of this product.
• ““FTSE™”, “FT-SE®” and “Footsie®” are trade marks of the London Stock Exchange Plc and The Financial Times Limited and are used by FTSE
International Limited (“FTSE”) under licence. “All-Share”, “All-World” and “FTSE4Good™” are trade marks of FTSE.”
• “Macquarie®” is a trade mark of Macquarie Bank Limited and its related entities and both marks are used by FTSE International Limited (“FTSE”) under
license. Neither FTSE nor Macquarie nor the Exchange nor the FT shall be liable (whether in negligence or otherwise) to any person for any error in the
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accept any liability in relation to its issue, operation and trading. All copyright and database rights within the index values and constituent list vest in
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a number of sections “the pooled funds”. Investment management and marketing is delegated to Legal & General Investment Management Limited.
• Both companies are authorised and regulated by the Financial Services Authority
EcoPAS
The Surveyor’s Perspective
Lee Bruce - CBRE
CBRE Role
• Development of CBRE Sustainability Checklist in
2010/11.
• Checklist that could be used to differentiate properties based on
agreed ‘sustainability characteristics’.
• Evolved to support collection of data for ISPI
• Sponsored the IPD initiative in 2011 and checklist
adopted by RICS/IPD.
• Recorded data on one third of the EcoPAS funds
this year representing approximately 600
properties (£10.5bn in CV).
CBRE | Page 38
The Challenges
• National inspection programme.
• Internal Inspections
• Tight time-schedule
• Surveyor education – No ‘one’ Green team!
• London workshop
• Regional ‘road shows’
• Liaison between valuer, managing agent and
fund manager – worked very efficiently on the
whole.
• Reporting of data late August/September.
CBRE | Page 39
Areas to improve....
• Clearer definitions:
•
GPS location on a large estate
•
Adaptability – what is a reasonable cost?
• No quantification of water and waste practices
• Accessibility – Most business parks have bus
stops but does that make them as sustainable as
an in-town location?
• Reduction in number of ‘unknowns’ in data.
CBRE | Page 40
Outcomes
• Comprehensive database of sustainability
information on 30 real estate funds.
• Ongoing roll out of sustainability data gathering
across our client portfolios.
• Increased sustainability awareness among
valuers and fund managers.
• Stronger position to respond to future market and
sustainability developments.
CBRE | Page 41
Update on IPD's EcoPAS Measurement
Service
Breakfast Seminar
Thursday 22 November 2012
Copyright © 2012 by K&L Gates LLP. All rights reserved.