APC Series: Greening your professional knowledge

Sustainability is a level 1 mandatory competency, though it is also often pursued to levels 2 or 3 by candidates with relevant experience as a technical competency. Sustainable development was defined by the Brundtland Report in 1987 as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. This requires a focus on the triple bottom line, a concept created by John Elkington in 1994, encompassing social, environment and economic outcomes. In the UK, sustainability is being targeted through the net zero 2050 target. The government has also published the Sixth Carbon Budget, with the aim of reducing greenhouse gas emissions by 78% by 2035 compared to 1990 levels. This forms part of wider global targets, such as the legally binding Paris Agreement which is signed by 196 parties. Measurement and regulation There are various green rating systems used in the property and construction industries. These include: Building Research Establishment Environment Assessment Method (BREEAM): a certification system based on established benchmarks, with the highest rating being Outstanding (score of 85% and above). Energy Star: a US government certification using benchmarks for building energy and water usage. Leadership in Energy and Environmental Design (LEED): a US certification based on independent third-party verification. Passivhaus: a standard relating to thermal comfort and passive design. Pearl Rating for Estidama: a UAE green building rating system. SKA rating: a RICS environment assessment method and benchmark for commercial fit-out projects. WELL Building Standard – a performance-based standard and certification for measures affecting the wellbeing and health of occupiers. In the UK, an Energy Performance Certificate is required when a property is built, sold or rented. An EPC, valid for 10 years, includes an energy efficiency rating of A (most efficient) to G (least efficient), together with information about energy use, energy costs and recommendations to improve energy use and save money. There are certain circumstances where an EPC is not required, such as for places of worship, temporary buildings used for less than two years, industrial sites with low energy usage and residential buildings used for less than four months per year. EPCs are publicly available on the domestic or non-domestic registers. Top assessor tips Ensure you don’t exceed the word count for your submission Leave yourself enough time to prepare diligently for your final assessment Ensure that the pages are numbered in your case study The Minimum Energy Efficiency Standard came into force on 1 April 2018. It means that if a property has an EPC rating of F or G, it cannot be let or be subject to a lease renewal. For residential property, this also applies to existing leases, with this provision applying to existing commercial leases from 1 April 2023. MEES does not apply to leases with a term of six months or less or leases of more than 99 years. It also only applies where a valid EPC exists. The government is proposing to raise the minimum EPC rating for non-domestic properties to C by 1 April 2027 and to B by 1 April 2030. This will require planning by property owners, with diligent advice provided by their professional advisers. Schemes and grants Surveyors also need to be aware of various government schemes relating to sustainability. These include the Energy Savings Opportunity Scheme, a mandatory energy assessment scheme for large UK organisations. ESOS assessments must be carried out on a four-yearly rolling basis, with the outcome notified to the Environment Agency within set reporting deadlines. There is also Streamlined Energy and Carbon Reporting, which places a requirement on large UK companies to publicly report their UK energy use and carbon emissions within the Director’s Report. This applies to financial years beginning on or after 1 April 2019. These schemes closely link to environmental, social and governance criteria considered by investors when analysing company performance. This shows a growing importance of the triple bottom line to organisations, rather than just profitability. For example, Marks & Spencer’s plan A is to “build a sustainable future that enables our customers to have a positive impact on wellbeing, communities and the planet through all we do”. There are various government grants available for energy efficiency measures. The Green Deal provides loans for homeowners to pay for energy-saving improvements, such as insulation, draught-proofing and double glazing. There is also the Domestic Renewable Heat Incentive, which promotes the use of renewable heating. The Non-Domestic RHI closed to new applicants on 31 March 2021. Professional guidance The RICS provides professional guidance through several key documents (some of which are archived, see box), including: Guidance note: Lifecycle Costing (1st ed, 2016); Guidance note: Sustainability and Commercial Property Valuation (2nd ed, 2013); Information paper: Sustainability and Residential Property Valuation (1st ed, 2011); Professional statement: Whole Life Carbon Assessment for the Built Environment (1st ed, 2017). Candidates should be familiar with the various renewable energy sources, such as biomass, hydropower, geothermal, wind, photovoltaic panels and solar thermal, together with green design features such as green walls, geothermal piles, biophilic design and high-quality insulation. Some of these factors may be reflected in value, depending on the comparable evidence and market sentiment. They should also be aware of green leases and memorandum of understanding. The Better Buildings Partnership publishes a Green Lease Toolkit which can be used as a basis for green lease agreements, including data sharing between landlords and tenants, metering facilities and energy management strategies. Finally, the RICS World Built Environment Forum published its Sustainability Report in 2021, the overall conclusion of which is worth noting: “… results suggest that the industry is making progress, though not at the rate required to fully meet its climate obligations. At the aggregated global level, and across individual regional groupings, respondents consistently report ‘modest’, rather than ‘significant’, demand growth for green real estate assets, leases and construction materials. Nearly half of respondents see evidence of an emerging rent and price premium for green buildings, though a relatively small share report value uplifts exceeding 10%. Across the world, environmental regulations are deemed to exert only limited influence on day-to-day operations. “Much room for improvement remains. In the construction sector, for instance, a sizeable majority of respondents currently take no measurement of carbon emissions over expected project lifecycles. Of those who do, fewer than one in six use the measurements to guide their choice of materials and components. One corollary finding is the clearly stated need for a global standard on carbon measurement. In certain markets, one in three respondents identifies the absence of any such standard as a restricting factor.” The quick quiz (answers below) 1. Which ADR method is being considered in relation to Covid arrears disputes for commercial tenants? a) arbitration b) mediation c) adjudication 2. What was the average UK property price in August 2021? a) £201,050 b) £262,954 c) £350,102 3. What is the current rate of UK normal corporation tax? a) 10% b) 19% c) 21% Professional guidance alert RICS Strategic Public Sector Property Asset Management (3rd ed) Fire Safety Act 2021 Latest EWS1 guidance from RICS Further reading RICS World Built Environment Forum Sustainability Report 2021 Guidance Note Lifecycle Costing (1st ed, 2016) Guidance Note: Sustainability and Commercial Property Valuation (2nd ed, 2013) Professional Statement: Whole Life Carbon Assessment for the Built Environment (1st ed, 2017) Jen Lemen BSc (Hons) FRICS is a partner at Property Elite Quiz answers: 1. Arbitration  2. £262,954 3. 19% Image © Steven Pecoraro/Unsplash