Insights 28th March 2023 esg

This spring heralds a steady stream of higher regulatory burdens, and associated financial impacts, constraining our sector. The underlying cause of these constraints – the UK’s EPC system – has attracted much criticism. European markets, such as France with its OPERAT system, take into account tenant data. However, the UK’s EPC system is based on modelled energy, rather than actual consumption. Only a property’s base energy is covered and excluding key elements of tenant usage.

And yet, the UK system – which remains 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 – is to be extended rather than overhauled.

On April 1st, MEES will impose further restrictions on commercial landlords, and agents. Leasing of properties with a sub-standard EPC (rating ‘F’ or ‘G’) becomes unlawful, and landlords must commit to improvement works. Beyond April 1st, regulations have been amended to require an EPC of ‘B’ by 2030. An interim target is set to reach an EPC of ‘C’ suggested at 2027.

“A series of mile markers along the UK’s journey to net zero.”

Nevertheless, solely discussing the granular failures of the EPC system fails to appreciate its value. This is both as the only widely used comparative benchmark available to fund managers and as a series of mile markers, along the UK’s journey to net zero.

With the 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.

For example, investment in smart building technology can have bigger and longer-term benefits than just affecting the EPC rating. At one 33,000 sq. ft London office, investment in Workman’s intelligent building operating system (IBOS) has delivered reduction in energy consumption of 31% within five months of installation. This is a saving of approximately £66,000 per annum. It equates to 51 tonnes of carbon per annum, or 6.2 million mobile phone charges.

These kinds of decisions are increasingly common. It demonstrates that EPC improvements are often exercises in long-term business planning and strategic asset management. They are not just a short-term tick in the EPC box. It’s proof that while EPCs may not be perfect, they are drivers on the road to Net Zero. That has to be a positive.

This article originally appeared in React News