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ESG compliance in the real estate industry: The new sustainability reporting standard
Date
27.12.23
The implementation of environmental, social and governance (ESG) guidelines continues to grow in the real estate industry. Driven by growing environmental awareness and the potential to secure long-term value as well as new regulations, the sector is experiencing a shift towards responsible real estate development and management. The European Union's Corporate Sustainability Reporting Directive (CSRD) is leading the way. The CSRD is a key regulatory initiative that underlines the EU's commitment to sustainability.
The new standard: The Corporate Sustainability Reporting Directive (CSRD)
The adoption of the Corporate Sustainability Reporting Directive (CSRD) in January 2023 was a turning point in corporate sustainability in the EU. With its expanded scope, the CSRD now affects over 50,000 companies, including the real estate sector. Building on the foundation of the previous Non-Financial Reporting Directive (NFRD), the CSRD introduces a comprehensive framework that requires detailed disclosure of ESG (ESG) practices. As part of the Green Deal, the CSRD redefines transparency and corporate sustainability standards and requires companies to improve their ESG strategies and publish ESG reports. It aligns corporate reporting with the EU's ambitious climate and environmental targets.
Adjustmentsto the CSRD thresholds in 2023
In 2023, the European Commission amended the thresholds of the CSRD and significantly expanded its scope. These adjustments will oblige a broader range of companies in the real estate sector to comply with stricter sustainability reporting standards.
From January 2025 , it will apply for the 2024 financial year for large companies that meet the following criteria More than 250 employees and a balance sheet total of more than 25 million euros or a net turnover of more than 50 million euros.
Thereporting requirements of the CSRD will also be extended to capital market-oriented small and medium-sized enterprises (SMEs) for the 2026 financial year from January 2027 , unless they make use of the option to defer until 2028 and meet two of the following three criteria: 10 employees, total assets of more than 350,000 euros or net sales of more than 700,000 euros.
Real estate companies should see ESG regulations not only as legal obligations, but rather as an opportunity to innovate, improve market positioning and realize environmental and social responsibility.
The importance of ESG in real estate investment and development
- Pressure to meet energy and CO2 targets: Real estate companies and owners are facing increased pressure to reduce the carbon footprint of the real estate industry in order to meet climate targets. Both investors and regulatory requirements play an important role in this.
- Investment in sustainable infrastructure: Investors, tenants and buyers are expecting an increased commitment to investment in sustainable infrastructure such as solar panels and electric vehicle charging stations. Such measures can reduce CO2 emissions and at the same time increase the attractiveness of real estate on the market.
- Focus on energy and water efficiency: The focus is on reducing operating costs and carbon emissions as well as increasing rental income, occupancy rates and property value through environmentally friendly construction and refurbishment. Green buildings have higher occupancy rates, rental income and sales premiums than traditional properties without sustainability features.
- Social impact and governance factors: Social aspects such as consumer well-being and governance aspects such as the proper performance of due diligence checks on building contractors are becoming increasingly important. Certifications such as the so-called WELL standard for Buildings for Wellbeing can improve the health and well-being of consumers and offer added value for tenants and owners.
- Financial aspects and ESG: The real estate market faces similar challenges and opportunities to other sectors in terms of ESG investments. There is a growing demand for green bonds and sustainable forms of investment, with EU regulation playing an increasingly important role
Counteracting challenges in ESG compliance
It is clear that the implementation of ESG standards in the real estate industry is complex. Particularly challenging is detailed ESG data collection and reporting, which requires comprehensive internal systems and expertise in the face of changing regulations such as the CSRD. The need to balance costs and long-term sustainability goals adds to these challenges.
A forward-looking and strategic approach to sustainability is crucial. Real estate companies should therefore see ESG regulations not only as legal obligations, but rather as an opportunity to innovate, improve market positioning and realize environmental and social responsibility.
Predium is the platform for sustainable and profitable real estate management and helps you to address these challenges. By providing an all-in-one software solution for data analysis and in-depth knowledge of ESG regulations, Predium helps real estate companies to effectively integrate sustainable practices and achieve ESG compliance.
Take the first step towards a sustainable future for your real estate. Contact us today for a free consultation and find out how we can work together to achieve your ESG goals.
Book a demo.
Date
12.27.23
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