CEE Summit: more investors taking on the ESG challenge

In the CEE region more and more investors are being proactive and taking on the ESG challenge, experts agreed at the 8th CEE Summit in Warsaw, which was organised by Real Asset Media and Poland Today.

We decided to publish an ESG report this year even if it is not mandatory, and make it available on our website in Polish and English,” said Marcin Juszczyk, member of the management board, CFO / CIO, Capital Park. “It is definitely worth it.”

Joanna Plaisant, Strategic Partnership and Sustainability Associate, Arcadis

Forward-looking companies want to be ready because they know that investors regularly ask for an asset’s sustainability credentials and want to see the relevant certification before they make a decision.

“Many investors are not waiting for regulations,” said Joanna Plaisant, strategic partnership and sustainability associate director, Arcadis. “There is a big push from the investor side because they see the push from clients. The results of carbon due diligence can be a real dealbreaker in an office transaction.”

Being proactive pays off, said Juszczyk: “Back in 2006 we bought some offices and redesigned them to  make greener and were one of the first in Poland to achieve a platinum certification. In 2019 we sold the building, which was 100% leased, and the buyer paid us a 20% premium on the book value because they could issue a green bond to finance the acquisition on the back of that certification.”

ESG is so much more than certifications, but it starts from there.

“Upgrading a building to net zero can be costly, it requires a big commitment and investment,” said Plaisant. “We were doing an assessment for some logistics assets and a BREEAM certificate would cost €100,000, while a net zero pathway would cost €10 million.”

A challenge for smaller companies

The costs can be prohibitive for smaller companies, but what matters is having a strategy in place and improving one step at a time.

“The focus on the E in ESG is a challenge for a business like ours that is not big, but the main driver for us is self-motivation,” said Christopher Zeuner, member of the board and chief investment officer, 7R. “Our strategy has three elements: solar, water management and insulation. All three are doable. As a logistics developer, it’s the easiest wins we’ve been able to get.”

Marcin Juszczyk, Member of the Management Board, CFO / CIO, Capital Park

The positive aspect of a shared challenge is that companies in the sector share information and help each other.

“The big logistics competitors share best practice, especially GLP and Prologis, because they know that it takes a lot of knowledge and resources to address all the issues,” said Zeuner. “What we need is a single set of rules, like there are for accounting, so that it’s a level playing field.”

CEE, and indeed the whole of Europe, could look to Australia for inspiration on that score.

The government there set up The National Australian Built Environment Rating System (NABERS) back in 1998 to provide simple, reliable and – crucially – comparable sustainability measurement across sectors.

It started with offices but it has since expanded its reach and has a growing range of building efficiency rating tools, said Zoe Baker, Sector Lead, NABERS: “We cover shopping centres, hotels,  retirement living, data centres and hospitals and we are now working on warehouses, where there is a massive opportunity for improvement.”

Investors and potential tenants can use that benchmark to work out which buildings perform better. “Having a rating system brings clarity and creates market demand,” said Baker. “It means being able to compare apples with apples.”