Environment, Social and Governance issues are intrinsically linked to the built environment and the real estate industry in many ways and on many levels.
The built environment is a significant contributor to climate change. In the UK, around 20% of carbon emissions emanate from buildings. Just under a third of this is due to the commercial real estate sector. This means that the push towards Net Zero will have a huge impact on the real estate industry at many levels throughout the lifecycle of each building; the planning stage at which there is an opportunity to mandate green requirements, the construction stage when many decisions are made about potential ways to limit environmental damage; the diligence process in which purchasers select which schemes best match their investment criteria; the duration of the term of a letting, during which time the investor landlord and the occupier tenant collaborate as to the most sustainable ways to operate the building; repairs, refurbishments and refits between lettings, which can be key opportunities to improve a building's energy efficiency; and finally the demolition of the building, at which stage there is a range of risks to mitigate including the release of embedded carbon. Businesses that can successfully navigate these issues can add value to their real estate portfolios.
Many real-estate related businesses involve a significant contribution towards social goals, including the provision of social housing, housing for the vulnerable and the development, sale and management of housing-with-care such as care homes and retirement housing. Portfolios of such properties can in some circumstances assist investors to meet their ESG investment criteria.
Recent years have seen governance requirements implicitly tied to real estate; the overseas entities regime and the MEES regime being the most prominent. The draft Levelling-Up and Regeneration Bill contains provisions regarding the introduction of a register for contractual controls over land, and the draft Renters' Bill will also introduce further governance requirements for residential landlords. The National Security and Investment Act 2021 also affects property in specific sectors.
Travers Smith's market-leading, multi-disciplinary team supports real estate developers, investors and occupiers to manage regulatory risks and to maximise sustainable opportunities in the real estate sector.
Our sustainable real estate work includes:
- Horizon scanning and advising on Government policy;
- Advising on the MEES regime;
- Advising on impact investment strategies;
- Drafting and negotiating green leases and how wider social and governance objectives can be supported through lease documents;
- Negotiating and advising on environmental aspects of planning applications; and
- Advising on the sustainability aspects of construction agreements.