A 10-countries overview by the OID
Since 2021, the OID sponsored programme ESREI – European sustainable real estate initiative – brings together real estate stakeholders to discuss ESG issues and the situation regarding ESG regulations across Europe. This cross-country review aims to follow this line, by analysing how different countries manage ESG issues in real estate.
The country fact sheets give an overview for each country analysed
Given the current challenges of regulatory compliance, ESREI seeks to report on both national and European regulations in terms of ESG issues for the real estate sector. A technical and regulatory monitoring has been carried out for 10 countries. It is available on Taloen in the form of « Country Fact Sheets« , designed to lay out overviews of the sustainable real estate sector in each of the countries studied.
These country fact sheets present key figures and information on energy, carbon, biodiversity and physical risks. Renovation strategies, regulations regarding EPCs or buildings construction rules are also mentioned. Each fact sheet also includes a section on sustainable building certifications. The subject of pollution and waste, regarding soil, air quality and construction waste management as well as circular economy is also presented.
Through this work, published on a regular basis since November 2021, the OID seeks to offer a common framework at the European level to enable stakeholders to move forward on these essential issues. After 10 countries covered, it’s time for a first cross-country review.
The specific context regarding legislation in Europe
Member States must apply EU law, due to the primacy of European law. According to this principle, both primary European law (treaties and associated protocols) and secondary European law (regulations, directives and decisions) take precedence over the law of the Member States. However, the scope of European law is much narrower than that of national law. Therefore, in the country factsheets produced by ESREI, numerous European directives, strategies or laws, and their variations in national law, are highlighted. For example, this is the case for the following regulations: EU Emission Trading System, the EPBD – Energy Performance of Buildings Directive (Nearly Zero Energy Buildings standard, Energy Performance Certificates), Renewable Energy Directive, EU Water Framework Directive, EU Floods Directive …
Regulatory pressure on financial activities in Europe is also very strong, and many tools have emerged in recent years. The CSRD – Corporate Sustainability Reporting Directive – is an extra-financial reporting tool that improves the information provided by companies on ESG criteria. The SFDR – Sustainable Finance Disclosure Regulation – aims to provide more transparency in terms of environmental and social responsibility in the financial markets, including the provision of sustainability information on financial products. Above all, the EU Taxonomy aims to create a harmonized understanding of what actually constitutes sustainable activities across the European Union.
In addition, the Commission is at the origin of major orientations aiming to accelerate the environmental transition, such as the Fit For 55 or RePowerEU strategies, respectively on the general objectives on carbon and energy.
Thus, this global European impetus makes it all the more essential to have an overall vision and to make information available on all countries.
Key figures regarding specific issues in sustainable real estate
Energy & Carbon
Accounting for 40% of energy consumption and 36% of total greenhouse gases emissions, the building sector is the largest consumption item in the EU. Action on the building sector is therefore crucial to reach the climate goals.
Total primary energy supply (TPES) shows the overvall energy supply available for use in the country. It includes imported energy, exported energy (subtracted off) and energy extracted from natural resources (energy production). In the country factsheet, this issue is studied regarding the share of energy sources in the TPES. It gives an idea of the energy mix, which is the breakdown of the different primary energy sources required to satisfy the energy needs. The figure comparing the TPES shows that the share of carbon-intensive sources varies from one country to the other. For example, Denmark ranks first regarding low-carbon sources (especially renewables) with 40% of its TPES covered.
Figure: share of different energy sources in the TPES. Source : International Energy Agency
Carbon intensity measures the amount of greenhouse gases emitted per unit of electricity produced. Its variation is due to the multiple energy sources uses to produce electricity. Renewable sources of energy, or nuclear energy, are for example low-carbon. Other fossil fuel sources emit varying amounts of carbon to produce electricity, like gas-fired or coal-fired power plants. For example, the TPES of The Netherlands is supported mostly by natural gas and oil (82% of the TPES), hence its carbon intensity is the highest (0.388 kgCO2/kWh) of the sample of countries surveyed.
The overview also addresses key figures with charts regarding energy consumption, indicators of energy performance, GHG emissions for the residential sector, or primary energy conversion factor.
Biodiversity
The growth of the population since the 1950s and significant urban sprawl have led many countries to experience a decline in biodiversity. Indeed, human activities and urban sprawl constitute a threat for biodiversity. Although the countries appear to work in the same direction to tackle this issue, following the strategy lines provided by the EU Biodiversity Strategy for 2030, some differences remain in terms of means and ambitions.
Some initiatives intend to place specific zones and natural habitats out of reach of these threats through protection zone, and artificialisation control. As a comparison, the overview presents key figures regarding the rate of artificialisation land in each country.
Figure: Rate of artificialised land compared to the EU mean rate. Source : Insee, 2018
Water & Physical Risks
In the regulatory framework, the issue of water and natural risks is often addressed simultaneously. Indeed, flooding is the risk most covered by regulations in Europe. First of all, the EU has a lot of own water regulations directly linked to the issue of chemical and environmental quality of water, water resource management, or flood risk prevention. Furthermore, some countries Europe face climatic hazards such as drought and heat, and thus have specific challenges in their management of physical risks. However, these hazards are also related to the energy performance of buildings and the respect of thermal comfort for occupants and are therefore preferentially integrated into the regulations concerning construction and renovation.
Despite the numerous European regulatory initiatives on ESG issues, each country still displays its own features. For instance, some countries are focusing on the management of physical and water-related risks (Netherlands, Germany), while several have unique energy policies compared to their European neighbours (France, Luxembourg) or advanced positions regarding the construction waste (Denmark).
European countries will face greater or lesser challenges in achieving the objectives set both on energy and on decarbonisation at the European level depending on their actual position. In the coming months, country fact sheets will continue to be regularly released, covering additional European countries. By looking at what each country does best, and comparing best practices, we hope that this work will help and inspire professionals to go further!
The ESREI programme is sponsored by Advenis REIM, AEW, Allianz Real Estate, Amundi Asset Management, Aviva Investors France, BNP Paribas Real Estate, CBRE, Icade, La Française REM and PERIAL Asset Management. Contact the ESREI team if you are interested to join us !
