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Leaders' Forum 2nd October 2023

As Workman approaches its 40th anniversary, leaders of the firm share their plans and vision for the future, within the UK’s rapidly evolving property industry.

Here, Vicky Cotton, ESG Director, and Chair of the Better Building’s Partnership’s Managing Agents Partnership, outlines the sustainability challenges and opportunities presented by today’s commercial real estate market, and how the Workman ESG team is supporting clients in their quest for Net Zero.

What are today’s foremost market factors regarding ESG in the commercial property industry? 

Over the past few years, as the entire industry has become more and more conscious of the need to stamp out greenwashing, there’s been a massive shift towards rigorously evidenced ESG impact. Increasingly now, we have been working closely with clients to capture actual building performance data and energy intensity measurement rather than merely obtaining ESG certifications, which don’t always reflect the actual performance of buildings.

This has proven especially effective with the help of our proprietary building technology, IBOS (Intelligent Building Operating System), which is now installed across more than 4 million sq. ft of commercial space. Results have proven the power of smart tech to immediately improve building performance, with Workman clients cumulatively saving more than £2m in energy bills in the past year alone.

Of course, energy efficiency became a key driver for our clients as energy prices spiralled over the past year, but IBOS delivers the twin effect of delivering both cost and carbon savings, with 3,000 tonnes of carbon savings over the past year across the sites where IBOS is installed. To offset this amount of carbon, 138,000 trees would need to be planted.

This tech has empowered our clients and occupiers to make strides in meeting Net Zero carbon targets, while also delivering wellbeing benefits for occupants including enhanced air quality, thermal comfort, and lighting.

Talking of energy efficiency, is the UK’s EPC system fit for purpose?

While still based on modelled energy, rather than actual consumption data, EPCs have attracted criticism. But they remain the only widely used comparative benchmark available to fund managers and the current Government’s principal method of bringing the built environment in line with the UK’s statutory commitment to reach Net Zero by 2050.

With the recently extended MEES regime relying on defined improvement dates, based on quantifiable and comparable data points, we are seeing the drive to improve EPCs acting as a catalyst for long-term Net Zero planning and investment. Landlords are encouraged to commit to larger, more effective interventions in the future, rather than minor adjustments now solely for the benefit of an EPC rating. EPC improvements are often exercises in long-term business planning and strategic asset management, rather than a short-term tick in the EPC box. Therefore, while EPCs may not be perfect, they are drivers on the road to Net Zero.

Would it help to move to a system that accounts for occupier energy data?

While we’re advising our clients on energy efficiency and Net Zero Asset Plans, we make sure that we don’t miss a single opportunity within planned maintenance programmes or refurbishments to introduce measures that will deliver the best carbon savings. As part of this, we strive to understand our clients’ asset strategy for each building.

The biggest challenge is that occupiers are in control of this in a number of instances because they’re often managing their own fit-outs, and they are not obliged to share energy data. In this respect, building relationships with occupiers is a priority for our team. We are on a mission to establish better ESG contact with occupiers, and to increase their understanding around the reasons we need this insight.

Only by working together can we guarantee the achievement of Net Zero goals. This is a particular challenge on single-let assets, and we are currently piloting a metering solution which will facilitate the sharing of occupier consumption data to inform future sustainability improvements.

How relevant are green building certifications in today’s real estate industry?

As we push towards Net Zero, many of our clients are looking for real action and results, going further than the badge alone. Achieving the best green building certification for a property portfolio helps drive asset value, but the appetite for badging sustainability achievements means benchmarks and certifications for ESG reporting is a crowded marketplace.

Among these, perhaps the most widely adhered to benchmark is the GRESB rating, which is designed to provide a rating and comparative score for financial markets across all aspects of ESG for real estate. The benchmark is aligned with international financial reporting frameworks, including the DJSI (Dow Jones Sustainability Indices) and TCFD (Task Force on Climate Related Disclosures), as well as goals set out by the Paris Climate Agreement, and the UN’s Sustainable Development Goals.

Our team of ESG experts regularly guides our clients through the benefits and pitfalls of the most-commonly used ESG certifications, such as BREEAM or Fitwel and demonstrates how multiple certifications can intersect, and how each can be achieved.

What are your hopes for the UK’s first Net Zero Carbon Buildings Standard?

My biggest hope is that it makes greenwashing impossible, by introducing a system that will enable our industry to robustly prove built assets are Net Zero carbon and in line with our nation’s climate targets.

It’s being developed by leading industry organisations including the BBP, LETI, RIBA, RICS, and UKGBC. The aim of the new standard isn’t to reinvent the wheel, but to draw together lots of existing measures and guidance into one coherent framework.

Outputs from the development of the UK Net Zero Carbon Buildings Standard are due to be released in late 2023.

How is Workman driving social value for its clients?

Across our portfolio, we are engaging with local schools, charities, and clubs, inviting them to join us in building communities that are based around the properties within their neighbourhoods. Our definition of social value goes way beyond fair procurement and a local supply chain, and we are incredibly proud of the far-reaching impact our social value schemes have.

Successful social impact from commercial space lies in creating mixed-use destinations that meet community needs and aspirations, by talking with and listening to local people. Our skilled and experienced onsite property management teams create close links with local councils, schools, and social enterprises to commercial property in the local area, helping buildings contribute to vibrant communities.

How will the new rules around biodiversity affect Workman and its clients?

Biodiversity net gain (BNG) is a new mandatory condition attached to all planning permissions from November 2023 in England. It requires developers to demonstrate that they will deliver a minimum 10% net gain of biodiversity units for ‘area-based’ habitats and any relevant linear habitats, such as hedgerows, lines of trees, and watercourses. The new requirement, which initially applies to new developments only, is intended to counteract any loss or degradation of habitat caused by the proposed development.

Perhaps more significant for Workman’s institutional investor clients is the incoming Taskforce on Nature-related Financial Disclosures (TNFD), a global market-led initiative that aims to provide financial institutions with a framework for assessing and reporting on their dependencies and impacts on nature. While not yet mandatory, it is expected that the TNFD will help financial institutions to better understand their dependencies and impacts on nature, and to identify opportunities for investment in nature-based solutions. Institutions will be expected to set themselves targets to build in biodiversity. This will include measures such as using responsible landscapers, ensuring that the correct pollinating plants are used, and assessing the impact on overall biodiversity. As property managers we are very much focused on initiatives to help our clients build biodiversity at their properties, and have recently developed a Biodiversity Toolkit, alongside our sponsorship of the Natural History Museum’s Urban Nature Project.  

What are your future plans for the ever-expanding Workman ESG team?

As leading investors recognise the need for specialised expertise in ESG, with separate service specifications and fee arrangements, our most enlightened clients are committing to specialist ESG expertise. The BBP’s MAP and Core Provisions also highlight the requirement for additional expertise in property managers’ ESG responsibilities.

This expertise bolsters property management teams, which means that we have a steady influx of ESG specialists joining the team, including experts in whole-life carbon-modelling, and energy efficiency auditing. This is in addition to our ESG account managers, who are charged with taking an overview of an investor’s ESG needs for any particular asset or portfolio.

How are ESG skills being developed within Workman and across the industry?

The Workman ESG training module supports our employees undertaking the APC, and ensures that all 800 Workman employees have a grasp of the current ESG picture.

What’s more, as part of my role within the BBP’s MAP, I am contributing to a dedicated ESG property management training tool. In the meantime, the BBP ESG Toolkit provides the best foundation. However, there’s no substitute for on-the-job training, and the ESG team welcomes team members from across the firm who would like to learn more about the issues around ESG in the world of commercial property.

Find out more about Workman’s ESG Services here.