Poor ESG performance sees a decrease in commercial property value

Poor ESG performance in the commercial property sector has seen 66 per cent of investors suffer a decrease in both capital and rental value of portfolios.

Environmental, Social, and (Corporate) Governance (ESG) covers areas of interest for socially responsible investors who have an increasing focus on sustainability.

A new report highlights that the decline in ESG performance will continue if owners do not urgently make the transition to net zero carbon emissions.

Importance of sustainability

The study was conducted by data gathering firm Deepki, which shows that over three-quarters of the respondents predict income to depreciate by over 20 per cent if their ESG performance does not improve.

12 per cent of those questioned said that between five and 10 per cent of their portfolio has poor energy efficiency or a high carbon footprint.

A further 63 per cent said that this was the case for 10 and 20 per cent of their assets.

The vast majority said they would be undertaking action to remedy the situation, with another recent survey showing that landlords were turning to refurbishment or retrofitting older property, rather than demolition and new construction.

How poor ESG performance can be addressed

The research also asked what actions respondents would take and included:

Katie Whipp, Head of Deepki UK, said: “ESG performance is now fundamental to the financial performance of assets within the UK commercial real estate sector, affecting both capital value and rental income.

“Real estate investors and owners recognise that they will see the value of their assets decline if they do not make the transition to net zero. However, this path is often complex and requires data intelligence, analysis and the expertise to take the appropriate action.”

Founded in 2014, Deepki uses data intelligence to guide real estate players in their net-zero transition.

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