The take-off of green leases
19.09.2023
According to the United Nations Environment Programme, real estate accounts for almost 40% of total carbon emissions and 36% of global energy end-use. Given that the activity of the occupants of real estate assets is a key determinant of their environmental impact, and the growing market pressure to integrate sustainability policies into investment strategies, green leases, which encourage both landlords and tenants to improve the energy efficiency of buildings by setting sustainability targets, establishing processes to monitor their achievement and allocating obligations between the parties, are becoming increasingly common.
The main motivation for landlords to address the cost overruns involved in constructing or retrofitting buildings is the improved access to finance. The incentive for tenants to take on part of this investment through higher rents is the reduction in utility bills and the increase in the quality of the space, as well as the reputational benefits of both owning and occupying sustainable properties.
It is important to note that there are no standard green contracts or clauses, but that there are numerous ways to promote the green management of non-housing properties. As they are governed by party autonomy, they can be non-binding agreements and best efforts to implement sustainable practices, performance obligations for which non-compliance leads to penalties, or incentives such as rent rebates applicable if specific targets are achieved.
Targets often include efficient energy and water consumption, e.g. using grey water for cleaning or irrigation, electrical appliances with specific energy labels, cloud-based servers, or motion detectors for switching on lighting equipment. As part of the promotion of renewable energy use, many landlords and tenants have opted to install photovoltaic panels on the roofs of buildings for self-consumption with or without surplus.
Waste reduction and recycling are also being pursued, such as eliminating the use of paper; reducing pollution by promoting environmentally friendly mobility alternatives or the use of environmentally friendly cleaning products; and reducing noise pollution.
Another key factor is the use of environmentally friendly materials in construction and renovation works, the implementation of sustainable air-conditioning systems, the reinforcement of insulation and the reuse of furniture and IT equipment.
As an additional differentiating element, there are landlords and tenants who choose to regulate social responsibility and corporate governance commitments in contracts, such as, for example, the hiring of people with special abilities or other inclusive behaviours. In any case, it is essential to provide for regular meetings to analyse the evolution of the plans in place and to identify new opportunities for optimising resources, energy savings and responsible initiatives.
The real estate market players will certainly progressively reduce their exposure to energy inefficient assets, driving the modernisation of buildings, reducing the carbon footprint and bringing benefits to society as a whole. In the coming years we will see the emergence of innovative mechanisms to achieve this and we will need to keep abreast of trends in order to adapt leases to our clients’ ambitions while contributing in some way to the protection of natural resources.
By 5D Diario.
