The future of real estate valuations: The impact of ESG
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15 February 2024
How can we truly embed ESG requirements into real estate valuations? Written by experts from the RICS Europe Leaders’ Forum, this paper and its accompanying data list examine the current legislative situation and market drivers around ESG and valuation in Europe.
Given the huge climate and social challenges we are facing globally, we need to move to a market where ESG is firmly embedded and reflected in valuations.
On 12 October 2023, RICS in Europe established a Leaders’ Forum, ‘Future of valuations: The impact of ESG’. It is chaired by Joël Scherrenberg MRICS, chair of the RICS Dutch Advisory Board, and led by RICS staff members Sander Scheurwater and Gina Ding.
The aim of the Leaders’ Forum is to ‘embed ESG requirements into valuations and the valuation process’. To help facilitate this, it is important to understand both the composition of the Leaders’ Forum and the workstreams. To truly embed ESG requirements into real estate valuations, both valuers and financial clients need to have an open discussion on progress, challenges and opportunities. This is why the Leaders’ Forum is composed of the main European actors, both at the corporate level and through their representative associations: valuation service providers, investors and banks, with the European Central Bank (ECB) and European Banking Authority (EBA) as observers.
“This thought leadership paper and the data list will help valuers to asses ESG as a new and significant risk & value driver in their professional judgement of any property. RICS, together with their stakeholders, sets the standard to enhance public trust.”
Joël Scherrenberg MRICS
Chair of European Leaders Forum Impact of ESG and Valuation; RICS Chair Benelux and European World Regional Board member
“I'm very pleased to have been able to contribute to this EU wide initiative to help valuers identify the ESG factors that are currently influencing asset pricing. It will be interesting to see how pricing considerations change over time as ESG metrics evolve.”
Gillian Bowman MRICS
Partner and Head of Sustainability, Valuation & Advisory, Cushman & Wakefield
RICS member-led thought leadership paper
To fully comprehend the steps still needed to ensure ESG requirements become embedded in valuations, we need to understand the current state of play. RICS members in the Netherlands have taken the lead by composing the expert group responsible for the thought leadership paper The future of real estate valuations: The impact of ESG. The content is based on the views of the expert group, combined with conversations held with RICS valuers across Europe. It does not intend to be a research paper, but rather a starting point for further debate. It is complemented by separate national appendices on the current legislative situation and market drivers in various European countries.
Published date: 15 February 2024
“Investors and valuers have long wondered how ESG indicators impact real estate values. The RICS European leader’s forum is investigating what elements should be considered and how to integrate ESG criteria into real estate valuations. The ESG data list a first important step forward in this journey.”
Giacomo Morri MRICS
Associate Professor of Practice in Corporate Finance & Real Estate at SDA Bocconi and a lecturer in Real Estate Finance at Bocconi University
“Embedding ESG in valuations requires forward-looking valuers. RICS valuers are futureproof.”
Martijn Onderstal MRICS
Head of Valuation, Savills
ESG and valuation data list
The Leaders’ Forum has worked on an ESG and valuation data list, containing core indicators that valuers can discuss with their financial clients and take up in their terms of reference and valuation report. The data list will not assume data availability, but is meant to raise awareness of ESG requirements and create consistency and transparency across Europe, following the ‘comply or explain’ principle. Alongside the core indicators will be a list of future potential indicators that the Leaders’ Forum members have reason to believe will become relevant in the near future, such as through future EU legislative developments. Valuers are not expected to discuss future potential indicators with their financial clients, but rather to familiarise themselves with them.
Published date: 15 February 2024
“The real estate industry has a significant role to play in the green transition. This ESG data list is an important step forward in assessing sustainability performance in property valuations. It promotes alignment with the INREV guidelines and the ESG SDDS reporting template, making it easier for valuers to exchange ESG information with their clients.”
Constantin Sorlescu MRICS
Director of Professional Standards, INREV
“The RICS ESG Data List is a fantastic resource and point of reference for all valuers when incorporating sustainability into valuations. As valuers, it is our role to move at pace with the market and match the level of sophistication of investors, occupiers and lenders. This document provides much needed clarity on a range of key and material ESG data points which influence market behaviour.”
David Marshall
ESG Associate, JLL
“This great initiative by the RICS in Europe Leader's Forum "The future of valuations: the Impact of ESG" aims to embed ESG requirements into valuations and the valuation process. RICS Greece supported this thought leadership paper by providing an appendix with relevant country specific legislation, and will follow up with a continuous professional development event aiming to further educate RICS professionals.”
Panos Charalambopoulos MRICS
Managing Director, Solum Property Solutions; RICS Greece Board Member; Chair of Valuation Forum of RICS in Greece;
For more information, please contact Gina Ding (gding@rics.org) and Sander Scheurwater (sscheurwater@rics.org)
