ESG affects (also) the real estate industry

Where does ESG actually come from? The ESG regulation is based on the Paris climate agreement of 2015. The agreement aims to reduce global warming to below 2 °C, ideally to 1.5 °C. These values are compared to pre-industrial levels. The targets can only be met if total greenhouse gas emissions are reduced to zero between 2045 and 2060. Later, parts of the CO² emitted from the earth’s atmosphere are even to be bound. So much for the Paris Agreement. The recent Glasgow meeting did not bring any significant new insights.

In 2018, the European Union issued an action plan for sustainable finance. It defines, among other things, the term sustainability. The first step in the European solution, the Disclosure Regulation, has been in force since March 2021. Essentially, it is about sustainable real estate investments. As I said, these are EU regulations. As is well known, Switzerland has defined the climate targets for 2050. The long-term climate strategy formulated ten basic strategic principles that should shape Swiss climate policy in the coming years. Strategic goals have also been set for the building sector. The CO² law should have been the basis for the long-term climate strategy. As is well known, the national law was sunk at the ballot box. The cantonal implementation of a CO² law was recently adopted in the canton of Zurich.

ESG not only looks at the individual property, but also makes the investors responsible. Ecological sustainability (E) forms the basis with the reduction of CO² emissions during construction and operation of the property. In addition, the area of social compatibility (S) includes the well-being of the users, but also includes issues such as equality and human rights. The third area is called Governance (G). This considers the economic sustainability, i.e. the life cycle costs. Governance also considers management structures, employee relations or remuneration regulations. The greatest uncertainties are certainly in the areas of social and governance. How are the requirements to be implemented?

Excel is still a widely used tool in many companies. The spreadsheet can be used in many ways and can also be easily customized. The problems arise when large amounts of data are generated and need to be processed. Employees often spend a lot of time maintaining Excel spreadsheets and keeping track of the countless links. Here, digitization still lags far behind the possibilities offered by the market.

The Winterthur branch of readydata AG has existed since 2019. With Immoledo, PropTech provides the real estate industry with a tool that digitally maps the environmental sector. The basis of Immoledo is the condition detection, which can be done easily, quickly and intuitively on site. From this, status reports and reports can be generated with just a few clicks. Components are recorded in the tool and stored with an aging index. This aging index compares actual aging to expected aging. In this way, construction defects, insufficient maintenance or technical defects can be identified and remedied in good time. The risk analysis of the buildings already recorded in the system showed that almost 60% of the access areas are not barrier-free or that half of the facades show algae growth. Immoledo therefore provides a well-founded action and investment plan based on the recorded building data. How do the measures ultimately affect sustainability? Immoledo users get clarity about the CO² reduction.

Once maintenance and investments have been made in the building, the question of the increase in value is of interest. Here, too, Immoledo allows the building or the portfolio to be valued using the DCF method. In general, countless reports can be created from Immoledo. All information is also available on a well-structured dashboard.

The Immoledo team actively supports customers in data collection. If structured data is already available, eg in Excel spreadsheets, it can be imported via Excel/CSV import or via interfaces to ERP/CRM systems. According to CEO Christian Brunner, over 3,000 buildings are currently recorded on the Immoledo platform. Immoledo’s statements should get better with an increasing number of units on the platform. The PropTech also uses artificial intelligence (AI), which learns with the growing amount of data.

Visits takes a completely different approach. This is a joint venture between Wüest Partner (WP) and QualiCasa. Both participants, who have long been anchored in the market, contribute their strengths, ie Wüest Partner the assessment and QualiCasa the status analysis. Visits is a data collection app. The data generated in this way flows into Wüest Partner’s Dimensions. What used to be recorded by hand on paper can now be easily done via the app. According to Sibylle Huber from the Data Analytic Team WP, a building can be digitally recorded in 30 minutes thanks to visits.

The data runs via the data platform REDX from Wüest Dimensions to Visits or from Visits to SIDAC from QualiCasa. There is also an interface to GARAIO REM. This ensures that the current data is always saved in the base systems. If you use Visits, you start in Wüest Dimensions, for example. The building selected there is delivered via REDX to the Visits recording app. The components and states can now be recorded here. If a component is missing, this information can easily be added. Thanks to the camera in the smartphone, everything is easily documented. Once everything has been recorded, the data is synchronized back into the base system via REDX. Of course, various reports can be generated from the basic system, such as component life cycle, materialization or forecast of maintenance and renovation costs.

The two partners WP and QualiCasa want to expand the system further. There is a CO² calculator. However, this should only be integrated into the evaluation at WP in the next few months. According to Sibylle Huber, around 500 buildings have been recorded through visits today.

The Stratus software from Basler & Hofmann has been on the market for over 25 years. At that time, condition assessments were made using the Schröder method. Today, Stratus is an online tool which, according to Daniel Schrepfer and Severin Level, is constantly being further developed. The basis is the building, which is divided into a few components. The costs of the components are calculated as a percentage of the current value of the building, based on numerous construction accounts by building type. A service life is also stored for each component, which is decisive for the forecast of future renovation requirements. The condition of the component is recorded on site and leads to an assessment of the “remaining service life”. However, those who record data have the option of manually adjusting the values based on the visual impression.

With Stratus, real estate owners have a management tool for their portfolio that allows reliable statements about the portfolio based on a minimal number of entries. After the buildings and components have been recorded, the repair costs will be calculated. The result is shown on a timeline. With Stratus, the portfolio manager can define the strategy for each building on behalf of the steering committee and calculate the relevant key figures. With a strategic focus, Stratus enables you to act and make decisions about the “where, when and what” across the entire portfolio. A simple traffic light system shows where there is a need for action and shows the best times and synergies when the money is invested with the greatest effect (structural and energetic).

With the investment planner (IPL), this need for action can be planned in concrete terms by putting together structurally and strategically sensible packages of measures (projects). Stratus uses parameters to calculate the associated costs. All investments can be mapped as a multi-year multi-project plan. It also forecasts the long-term effects (such as follow-up costs, CO² emissions) of the planned measures. In this way, the financing feasibility of projects can be checked at an early stage.

According to Daniel Schrepfer, a prototype is first built with every further development in order to test the functionalities and the workflow with the customer. The new functionality will then be implemented and made available to users productively as quickly as possible. Basler & Hofmann has completely redeveloped the Stratus 7.x version, which has been in use since March 21. The migration of existing customers is to be initiated in 2022. With regard to ESG, Stratus can display the CO² emissions by object size or by condition. It is also possible to calculate how the CO² emissions will be reduced after renovation. In 2022, the ESG criteria should also be made visible at portfolio level. Step-by-step statements on building safety and quality as well as other strategically relevant aspects should also be added.

Heinz Schwyter