The IPF has commissioned IPD to produce a financial performance index of the more sustainable properties in the market by developing a system to identify and then track the investment performance of the more sustainable commercial buildings in the UK on a quarterly basis.
To identify the more sustainable properties in the market, ISPI asks landlords 20 or so questions, easily answerable, based on the 6 categories of:
Building quality Building accessibility
Energy efficiency Water efficiency
Waste management Flood risk.
To see these questions, click here.
As at Summer 2009, almost 1000 properties from 39 separate portfolios and 14 different management houses have supplied answers to these questions. Participants include (in order of contribution, largest first):
ING Real Estate Investment Management Henderson Global Investors
Legal & General Investment Management UBS Global Asset Management (UK) Ltd
Blackrock Quintain Estates & Development plc
Schroder Property Investment Management Ltd Hermes Property Asset Management Ltd
Pollen Estate Trustee Company Ltd Royal London Asset Management Ltd
Church Commissioners Scottish Widows Investment Partnership
Prudential Property Investment Managers Aberdeen Property Investors
Of these properties, almost 10% were considered “more sustainable” than the rest; that is to say that they passed the supra category of building quality (e.g. were rated BREEAM “very good” or “excellent”) or they passed 4 of the remaining 5 categories. Passing categories is ascertained using a weighting framework which is necessarily sector specific.
As at December 2008, the total returns recorded by the more sustainable properties do not out perform the less sustainable properties or the IPD All Property UK properties. Indeed, given that environmental features such as energy efficiency have not been priced into the market, anything IPD finds in these results would not be linked to sustainability, but to other factors that are priced in.
The first step of getting the ISPI methodology in place has been completed, and now we can start to see the relationship between environmental performance and financial returns developing. Sustainability is not yet priced into commercial property valuations in the UK, but when it is, this index should show sustainability impacts on returns.
ISPI was launched in London on 30 June 2009. The Q3 2009 results were released in November 2009. The next release will be based on a larger sample of properties as yet more funds have kindly provided data to IPD.
Download press release
Download launch presentation slides
Download Q3 results slides
For more information contact:
Christina Cudworth, Global Head of Sustainability
christina.cudworth@ipd.com