More work needed if values are to reflect the transition burden

The EPRA Sustainability Summit highlighted that valuation is a major topic that the real estate business needs to address, according to Lisette van Doorn, chief executive officer, ULI Europe.

“The way we currently value buildings doesn’t include the cost of decarbonisation or the cost of emissions,” she said.

“As a result of that the cost of doing nothing is not included, only to the extent that regulation is in place now which, in many countries, only focuses on energy performance certificates which might help us get in the right direction but by no means get us to the target set in the Paris agreement by 2050,” van Doorn told Real Asset Insight’s Richard Betts.

“We really need to look industry-wide at how to do this,” she added.

The ULI has assessed the relevant transition risks should be included in real estate valuations so that managers or investors can make their own assessment, van Doorn explained. That enables them to make an adjusted valuation and helps provide the comparables needed to make real estate valuations.

“The topic is bigger than decarbonisation risk, only because we face the same problem for physical climate risk and the impact of extreme weather events and also social impact,” she said.