In brief: Real estate lenders build ESG valuation framework

While the majority of Europe’s real estate property requires upgrading to the latest environmental standards, least of all to avoid obsolescence, there is not yet an industry-wide approach to valuing assets in relation to how fit-for-purpose they are in this context, report our colleagues on Real Estate Capital Europe.

However, a group of large UK commercial lenders has attempted to build one with the publication of a draft ESG framework, designed to help valuers and lenders fulfil their sustainability obligations.

The guidance, which was released on 3 July in collaboration with the UK professional standards association, the Royal Institute of Chartered Surveyors, is a list of what RICS calls the “key considerations” valuers should consider in a valuation report, and includes factors such as green certification and leases, flood risk and an energy-inefficient property’s suitability for secured lending. Describing this as a “useful starting point”, RICS wants feedback from lenders and valuers on how to further develop its ideas.

Earlier this month, the ULI published guidelines on how to incorporate the costs of transitioning assets into property valuations, having warned of a “carbon bubble” in pricing.