Operators in CEE find ESG pays dividends

Investors and developers alike are adopting sustainable agendas without the stick of regulation.

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, 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,” says Marcin Juszczyk, member of the management board, CFO/CIO, at investment company Capital Park. “It is definitely worth it,” he adds.

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,” says Joanna Plaisant, strategic partnership and sustainability associate director at 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.”

‘Upgrading a building to net zero can be costly, it requires a big commitment and investment. A BREEAM certificate would cost €100,000, while a net-zero pathway would cost €10 million.’

Joanna Plaisant, Arcadis

Being proactive pays off, adds Juszczyk: “In 2006 we bought some offices and redesigned them to make them 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.”

Big commitment

ESG is 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,” says 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.”

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,” says Christopher Zeuner, member of the board and CIO of Polish warehouse developer 7R. “Our strategy has three elements: solar, water management and insulation. As a logistics developer, it’s the easiest wins we’ve been able to get.”

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,” says Zeuner. “What we need is a single set of rules, so that it’s a level playing field.”

CEE, and indeed the whole of Europe, could look to Australia as an example. In 1998 the government set up the National Australian Built Environment Rating System (NABERS) to provide simple, reliable and, crucially, comparable sustainability measurement across sectors.

‘The big logistics competitors share best practice, because they know that it takes a lot of knowledge and resources to address all the issues. What we need is a single set of rules, so that it’s a level playing field.’

Christopher Zeuner, 7R

It started with offices, but has expanded its reach and has a growing range of building efficiency rating tools, says Zoe Baker, sector lead at 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,” adds Baker. “It means being able to compare apples with apples.”