EisnerAmper’s Danielle Barrs on how sustainability can be incorporated into value-added real estate

What factors contribute most to determining the capacity of incorporating sustainability in this strategy (geographical location, materials, research)?
The factors we often see include leadership buy-in, regulatory and legal interventions, and return on investment (ROI).

Leadership buy-in is essential to ensure all stakeholders are engaged and aligned, which includes both top-down and bottom-up approaches.

Companies can earn a variety of subsidies and government support for both energy efficiency and clean energy projects. The 2022 Inflation Reduction Act (IRA) has extended and/or expanded upon many existing tax provisions, including 179D (Energy-Efficient Commercial Buildings Tax Deduction) and 45L (Energy-Efficient Home Credit).

Investment costs around energy efficiency can be recouped through the increase in overall ROI and asset value. It is important that risk vs. return analysis, ensuring energy conservation, and emissions reduction models are considered just as diligently as financial forecasts. 

Are there any ‘best practices’ when it comes to incorporating sustainability into value-add projects?
There are three important steps organizations can take to incorporate sustainability into value-add projects:

  • Create cross-functional teams – starting with uniting all stakeholders, both internal and external. Decarbonization affects every area of the business, so siloed approaches won’t work.
  • Conduct decarbonization audits at your sites to evaluate space utilization within the portfolio, with the output being a comprehensive energy audit report that prioritizes energy conservation measures (ECMs).
  • Create a publicly available decarbonization action plan and roadmap that includes performance targets. Review your portfolio strategy and how it aligns with your overall sustainability objectives.

What challenges still exist in the way of sustainability for value-add vehicles?
It’s exciting to see the progress and increase of interest in this, but a few challenges still exist, including:

  • Effectively reducing energy consumption relies on the availability and integrity of data. In addition to carbon-related facility data, such as electricity consumption and stationary combustion, it’s important to consider the useful life of your assets and where your portfolio hotspots are.
  • Market volatility of natural gas. However, when combined with clean-energy solutions and upgrading equipment to more energy-efficient versions, companies can mitigate risks associated with these fluctuations.
  • Achieving adequate emissions reductions to reach the goals of the Paris Agreement, and continued integration of clean energy and carbon-free fuels into the electric power grid is paramount. Part of this also includes ensuring that renewable energy is generated as close to the point of consumption as possible.

Are there any sustainability initiatives that excite you? If so, what?
Smart buildings are exciting. Integrated smart systems, which pair the Internet of Things (IoT) with responsive energy management software, are paving the way for full-building automation systems. These platforms can pull precise amounts of electricity from the grid, reducing wasted energy, while also accurately monitoring consumption to switch on and off loads to limit usage and lower emissions overall.

 

About
Danielle Barrs is EisnerAmper’s Director of ESG and Sustainability Solutions with over 10 years’ experience in environmental management, sustainable business, corporate social responsibility, and ESG. She works with privately held and publicly traded organizations across various industries. Danielle also has experience serving Fortune 500 companies, NGOs, and governmental organizations. Prior to joining the firm, Danielle was the Head of Global Energy and GHG Strategy for a Fortune 200 manufacturing company.

By assessing her clients’ current state, developing a tailored, long-term sustainability roadmap, and guiding them through the implementation process, Danielle is able to provide clients with enterprise climate and sustainability objectives that solve key variables in the sustainability equation. Additionally, Danielle engages and trains executive leadership, managers and staff on energy and sustainability best practices for today’s market.

 

This article originally appeared in Real Estate in the US 2023: Preqin Territory Guide. The opinions and facts included in the above do not constitute investment advice. Professional advice should be sought before making any investment or other decisions. Preqin and EisnerAmper accept no liability for any decisions taken in relation to the above.