“A good ESG policy pays off”

PropertyNL published an interview with Alexandra A. Jurgens-Boot in the September issue of its magazine. PropertyNL is the magazine for independent research for professionals in real estate and is synonymous with sound knowledge in the field of real estate. Below is an unaltered reproduction of the original interview.

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IN SHORT

SFDR regulation also impacts real estate parties

Greenwashing will damage your reputation

Change in focus from the Environmental to the Social aspect


A good ESG policy is becoming crucial to attract funding as well as good employees. Greenwashing is being tackled.


Just outside of the Zuidas you’ll find the beating heart of Alexandra Boot’s legal boutique. One of the focal points of this niche firm is the sustainability of real estate. Boot Advocaten now has a long track record in this area, as the firm has been focused on the sectors of renewable energy and health in relation to real estate since 2002.


TRANSPARENCY

According to Boot, the new European regulations about sustainability, one of which being the Sustainable Finance Disclosure Regulation (SFDR), also impact real estate parties. They have to be transparent about risks regarding the sustainability of their investments to fight greenwashing. The European investors (Vereniging van Effectenbezitters) warns that, within this context, the SFDR is really about transparency and is not meant as a ranking for buildings in the area of sustainability. This objective of transparency is often forgotten by companies. Previous research by the French bank BNP Paribas showed that half of the European institutional asset managers do not understand the new European regulations. This could have disastrous results for those companies. Boot points out that when the SFDR is not followed, meaning the mandatory transparency is missing, heavy sanctions can follow. These are sanctions such as the freezing of assets and the prohibition of providing services. “We are now at a point in time when there is a lot of doubt surrounding the current classifications in the area of sustainability. The AFM has recently taken a closer look at about 1250 investment funds with a total of 1 trillion euros of invested capital. Out of them, 40% claim to be sustainable while the regulator questions that claim. Legal procedures await parties that claim to be green but are found not to be.


DAMAGED REPUTATION

Boot Advocaten responds to this by calling for companies to start taking action now and to keep watching laws and regulations that will punish greenwashing. According to the real estate lawyer, companies and institutions should not wait for possible sanctions from the AFM. “The risk of a damaged reputation is too great if companies are careless about the rules,” according to Boot. This opinion is shared by Iris van Looy from the association for asset management. In the FD, Van Looy warns that steps have to be taken now because not enough progress is visible. “As such, the recommendation would be to already use the draft version of the templates made by the European supervisory authorities. In other words, comply with the SFDR by making all the requested information public.” According to Boot, this draft version will almost certainly become final in the foreseeable future.


TILT

According to Boot, there is a huge change in the area of ESG. She says, “Companies are not only reporting based on the SFDR but are also making more use of ESG reports. There is pressure coming from the market to have a solid ESG policy. Investors are increasingly using these reports to better back their investments. Thus, a good ESG policy is becoming crucial in attracting funding, as well as attracting good employees. Because of this, I expect that ESG will eventually be regulated.”

To sum up, developing an ESG policy pays off. This increases the need to do this for real estate parties. Boot Advocaten can play a role in this. “Our services provide a systematic approach for real estate companies. Banks, real estate investors, and advisors are already unnecessarily losing time answering technical questions about the condition of their properties and the implementation of policy issues. The ESG and SFDR report only add to this,” according to Boot. “Various data companies and consultant firms are arising that usually can only answer part of the questions and definitely not the legal questions. We help companies gain an overview regarding what they have to and are allowed to do as well as looking at those issues through portfolios instead of incidentally per property. Companies should also not be too dependent on one party for data management. Herein lies a great assignment regarding IP rights.


HEAD START

A different trend that Boot identifies in the real estate market, is that after corona the focus will shift from CO2 reduction and energy-efficiency (the E-aspect of ESG) to health (the Social aspect of ESG). “Internationally, we are noticing that the WELL certifications are being used to fill in the S of Social. Because I already founded the Blue Building Institute in 2015, we have a head start in knowledge about WELL certifications aimed at health within the built environment. Health aspects play a bigger role in WELL certification than in, for example, Breeam certification,” according to Boot. “In the end, certifications are not more than a foothold,” the real estate lawyer says. “Internationally, the Blue Lease we designed is a first. Real estate owners and investors as well as renters have an interest in making sure the investments they made in sustainability do not go lost after a certain time. To safeguard mutual interests and to simplify certification and re-certification we have developed formats that help parties with this. This is also a part of the systematic approach towards sustainable real estate that Boot Advocaten has.”


Provada: Insight in sustainability requirements Boot Advocaten, together with a couple of other organizations, is organizing a meeting at the Provada-stand of PropertyNL where stakeholders such as appraisers and financiers can gain an insight into how sustainability requirements should be reported on and implemented. At this meeting, we will look at the return on investment in terms of energy transition and social effects and at what way the value of buildings can be influenced by investing in health. On November 4, a unique international BLUE Day network event about these subjects will follow. It will be led by Alexandra Boot in Museum Voorlinden in Wassenaar. Details will follow soon in the PropertyNL newsletter.