Beyond risk management

SUMMARY

An estimated 47% of commercial real estate investment across Europe is in the form of debt finance1. Commercial real estate lenders are therefore pivotal in driving growth. They provide the foundations for the creation, preservation and continued regeneration of our building stock. However, a lesser discussed point is the important role they can play in driving market transformation towards a sustainable built environment. This paper explores why and how this is beginning to happen and challenges the industry to do more.

In November 2015, the Better Buildings Partnership (BBP) published its Industry Insight Sustainability Bites? The Impact of Minimum Energy Efficiency Standards for Commercial Real Estate Lending. The paper explored how the sustainability agenda was beginning to impact on UK commercial real estate lending practices, focusing on how banks and alternative lenders were addressing legislative requirements around Minimum Energy Efficiency Standards (MEES) in their due diligence, underwriting and risk management practices.

Since then, activity in this area has shifted dramatically, with commercial real estate lenders exploring new opportunities that go well beyond what would be considered pure risk management. Based on the work of the BBP Commercial Real Estate Lending Working Group, comprised of leading European banks and debt funds, this paper highlights some of the innovative ways in which lenders are incorporating sustainability into their core business activities.

The paper is divided into four sections. First, it sets out the main drivers for why lenders are moving beyond risk management. Second, it presents a number of market leading case studies demonstrating the opportunities available to lenders. Third, it highlights major industry collaboration projects active in this area. And finally, it issues a call to action to all lenders and their advisers.



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