Carbon Value Analyser

19 May, 2020

Your expert for questions

Dr. Nicole Röttmer

Dr. Nicole Röttmer
Partner in Sustainability Services at PwC Germany
Tel.: +49 40 6378-1490
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Are climate change regulations threatening property performance?

A property valuation tool from PwC, the German Industry Initiative for Energy Efficiency (DENEFF) and the Buildings Performance Institute Europe

Buildings are becoming a focal point in the fight against climate change

The Paris Climate Agreement features binding commitments to reduce greenhouse gas emissions, and buildings are a key focus for achieving these reductions. Across the world, buildings are responsible for around a third of all CO2 emissions. If climate change is to be brought under control, significant reductions in emissions and energy use in buildings are essential.

In line with the EU’s climate goals, the German Federal Government wants both cities and smaller communities to be “virtually carbon neutral” by 2050. This means that buildings are becoming a major focal point, due to their emissions and the effects these have on the climate: targets demand that emissions from buildings by 2030 should only be around 35% of what they were in 1990, and just 5–15% of 1990 levels by 2050. This transformation will require drastic changes in how buildings are supplied with energy.

Our property valuation tool offers a way of quantifying the benefits of energy-efficient buildings

It’s clear that energy efficiency and climate performance have so far been almost totally neglected in property valuation. Properties which already meet the energy efficiency and emissions targets for 2050 will probably be more valuable in the future than those which don’t. But how much more valuable? Carbon Value Analyser offers a way of financially quantifying a property’s potential risks relating to climate policy.

“A property’s carbon footprint plays a vital role in achieving the EU’s climate goals, but nobody has really been sure how to integrate the effects of energy efficiency and climate performance into the valuation process – until now. Our Carbon Value Analyser is designed to do just that.”

Dr. Nicole Röttmer, Partner in Sustainability Services at PwC Germany

Carbon Value Analyser paves the way for integrating climate policy risks into the property valuation process

The Carbon Value Analyser property valuation tool has been developed by us at PwC, together with DENEFF and the Buildings Performance Institute Europe (BPIE). The project was promoted by the Redevco Foundation and the German Federal Environment Foundation (Deutsche Bundesstiftung Umwelt).

During the development process, we and our project partners held more than 40 interviews with property valuers, property surveyors, asset managers and other experts from industry associations and leading companies. We then held a number of workshops, where more property experts were able to help us analyse the results of these interviews and validate the tool. Carbon Value Analyser is the end result.

Carbon Value Analyser calculates changes in the market value of a property, based on a standard discounted cash flow model. This means that anyone can apply the tool and make use of the results, irrespective of the approach they use for valuation. Thanks to our work with a panel of experts in the field, the approach to property valuation that we have chosen for the tool is easily compatible with all common valuation methods used throughout the world.

Comprehensive practical testing in major companies

Once we had refined our valuation methodology, we subjected it to thorough practical testing, in cooperation with major companies. This process involved calculating the effect that climate policy could have on the market values of more than 200 properties owned by Union Investment, TLG Immobilien, BerlinHyp and Redevco.

Our test produced a number of key findings:

  • Energy-efficient buildings have huge market potential because they present fewer financial risks related to climate policy.
  • Systematic reviews of entire portfolios or individual buildings can enable property owners to identify major risks relating to climate policy at an early stage and take targeted measures to manage these risks.
  • If the necessary investments in energy efficiency are to be made at the right time, property owners need long-term strategies for renovating their properties and financing this work.

Carbon Value Analyser gives companies the opportunity to calculate how the value of their properties may change in the future, using precise analyses and working under the assumption of certain climate change regulations. This means that the tool provides example results which reflect the specific regulatory risks used for the analysis. We’re currently developing ways of comprehensively analysing risks related to technology and the market in our Climate Excellence tool.

Using Carbon Value Analyser

To calculate possible regulatory risks for a particular building using the tool, all you need is some key information about the building in question. The most important pieces of information are the building’s current value, its size and its energy consumption. The results can be put to various uses; for example, for developing long-term energy saving or CO2 reduction strategies. Carbon Value Analyser also enables you to determine threshold values that a property needs to meet before purchase – and it’s available free of charge.

“The idea behind Carbon Value Analyser was to develop approaches that would allow quantitative assessment of the effects of climate change policy on property value, instead of just qualitative assessment. Based on the results that the tool has produced for part of our portfolio, we’ve now started inter-disciplinary discussions on how we can systematically integrate these aspects into portfolio management strategy.”

Clemens BrenninkmeijerHead of Sustainable Business Operations and Managing Director, Redevco

Contact us

Dr. Nicole Röttmer

Dr. Nicole Röttmer

Partner, Climate Leader, PwC Germany

Tel: +49 40 6378-1191

Dr. Anne Michaels

Dr. Anne Michaels

Manager, Sustainability Services, PwC Germany

Tel: +49 40 6378-2599

Fritz Fromageot

Fritz Fromageot

Associate, Sustainability Services, PwC Germany

Tel: +49 40 6378-1490

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