Environmental services: a new alternative to BREEAM

29.05.09

Property owners looking to find out how environmentally friendly their buildings are have traditionally relied on rating systems such as BREEAM or US system LEED. However, both investors and property owners have accused these of being inadequate.

The main criticisms are that they focus too much on building materials used in construction and do not reflect how a property is used. Investors are also concerned the systems do not let investors compare the sustainability of properties across countries.

Green gauge

A group of property companies is looking to change this. Earlier this month, AXA Real Estate Investment Management and ING Real Estate set up a rival rating system in the UK called Green Rating (see below).

Last month it was launched in Spain, and next month will be launched in France, Italy, the Netherlands and Germany. In 2010, it is expected to be launched in the US and Japan.

Around 120 buildings will be audited in Europe in 2009.

AEW Europe, GE Real Estate, Bureau Veritas and Investment Property Databank were also involved in developing the system. They claim it is useful for property owners because it gives hard data on energy use, carbon, water, waste, health and transport.

The group said investors would benefit because they would be able to compare environmental performance between the different countries.

Steve Smith, global head of asset management at Axa REIM, says the Green Rating system has been in development for more than a year and has been tested for the last six months. He says property owners with properties in different countries need a standard that allows them to compare portfolios across countries.

‘BREEAM is a very specific standard in the specific country you want to measure. You need something more general,’ he says.

The system has been welcomed by those involved in sustainability. David Leedham, partner at law firm Speechly Bircham, says he believes other parties will take it up.

‘It’s measures like that where, if you have recognised names behind it, then it’s going to get used,’ he says.

Anthony Hyde, managing director in health, safety and environment at Bureau Veritas, says it will help it to manage property portfolios for its clients. These assessments would also provide owners with advice on how they could improve the energy rating of their properties. There are 50 pilot projects in France, Germany and the UK.

In February, a report by the Institutional Investors Group on Climate Change warned that buildings with higher sustainability ratings would maintain their value better than those that are unsustainable.

The body’s Property Working Group, which represents a combined value of £3.78bn of property globally under management, says occupiers would increasingly reject properties they see as socially or environmentally unacceptable.

Accurate data about energy use is not just useful for investors. It could also help property owners to identify the key areas in which their properties can be improved.

The government is driving sustainability through legislation such as energy performance certificates, display energy certificates and the Carbon Reduction Commitment.

Richard Burge, director at environmental consultancy Beyond Carbon, has seen other problems with BREEAM and LEED. He claims they are difficult to translate into the sustainability commitments and obligations to be placed on occupiers.

For example, the system of placing properties in rating bands with other buildings – BREEAM ‘excellent’, for example – made it difficult for property owners to see where they could improve schemes.

‘Comparative, value-based banding is less useful to occupiers than hard measurements. The developer is torn between two imperfect and rather inflexible tools – and we have to hope the initiatives of the UK Green Business Council and others will result in a more universal single standard.’

Burge says a survey released in the US in March by the RICS, ‘Doing well by doing good’ – an analysis of financial performance of green office buildings in the US – has shown clear evidence office buildings with significant eco-credentials are attracting better yields.

This applies equally to the UK.

Sustainability professionals hope new methods of rating will help property owners to respond to this better.

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