Following the continued development and growth of our Environmental, Social, and Governance (ESG) services lines during the past few years, we are pleased to announce that our company Delta-Simons Ltd has been shortlisted for the Second Annual Global Sustainability Consulting Awards by Environment Analyst.

Environment Analyst, specialist intelligence and market data on the environmental and sustainability/ESG consulting sector, stated that entries for the 2023 Sustainability Consulting Awards had been overwhelming with high-quality submissions coming from around the globe. As one of only three shortlisted for the ESG Innovation Award - SME, this award signifies to our clients and the industry, our commitment to the development of trusted, innovative products and services designed to protect people and the planet.

The ESG Innovation Award showcases a key new service offering we have brought to the market - our ESG Benchmarking Assessment tool. 

Sustainability Unit Director, Rob Molyneux, Client Services Director, Graham Duffield and Associate Water Services Consultant, Alex Perryman provided a detailed insight into our ESG Benchmarking Assessment tool development process and why this unique assessment is essential for developing accountable, realistic ESG and Science-Based KPIs.

 

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Environmental, Social, and Governance (ESG) is taking on an increasing significance with the growing alertness and demand for action amongst consumers; highlighting the responsibility, commitment and action needed to accomplish positive climate action and build a sustainable, resilient future. For the real estate sector, the ESG agenda is being driven by investors and tenants in tandem with the continual development of regional and global ESG standards and frameworks. 

 

The Risk Of Stranded Assets

ESG, along with EDD (Environmental Due Diligence), can be used by building owners to showcase their assets' credentials to potential purchasers. Investors can use the knowledge gained through ESG activities to maximise their assets' value in line with changing legislation and market expectations, and to ensure that their assets do not become a ‘stranded asset’. 

It is widely accepted that real estate assets with better ESG credentials command more value in the marketplace. In research conducted by Knight Frank, London offices with a BREEAM “outstanding rating” had a 12.3% stepped-in increase. On the other side of this performance, a Deepki survey found that 66% of real estate investors had seen a decrease in the capital and rental value of their portfolios based on poor sustainability performance.  

 

“Boreal was delighted to work with Delta-Simons on our recent UK transactions. The team supported us with environmental phase 1 studies and peer reviews, flood risk assessments and ESG benchmark assessments. In a fast-paced market, where transactions typically close within 15 days, the Delta-Simons team have proved they are able to produce thorough, bespoke analysis under significant time pressure. As an ESG-focused investment manager, Boreal highly values Delta-Simons’ input to inform both our acquisitions and ongoing asset management. We look forward to continuing our work with them.” 

 - Emma Waterhouse, Associate, Boreal 

What Is ESG?

ESG refers to how businesses operate within and towards the environment and people they interact with, recognising both negative and positive impacts and seeking ways to improve. It involves incorporating environmentally conscious business practices, robust social responsibility, and corporate governance commitments into a company's operations. The term is broken down into its three main components: Environment, Social, and Governance.

 

'E' - Environment - This component focuses on a company's impact on the physical environment, including its use of natural resources, how its operations affect the environment, and how it influences consumers' behaviour towards the natural world. 

'S' - Social - This component involves considering and managing a business's impact on people, including relationships with employees, suppliers, consumers, communities, and other stakeholder groups. 

 'G' - Governance - This component involves the framework for decision-making and accountability, including the creation of company policies and the distribution of rights and responsibilities among different stakeholder groups.

 

ESG provides a framework for businesses to approach sustainable and socially responsible practices, focusing on what is most material to themselves and their stakeholders without overselling their progress. As ESG issues increasingly play a role in business decisions around mergers, acquisitions, and development, companies must provide an overview of their ESG risks and opportunities, along with their approach to mitigating or adapting to these risks and their financial implications. Transparency on sustainable and socially responsible practices is critical for the survival of companies as external audiences, key stakeholders, and financial communities focus on their progress towards ESG goals.

 

ESG In The Investor Market

The current market is saturated with performance management metrics for live and operational buildings, such as the WELL™ Building Standard, BREEAM and GRESB. However, no such tools were available in the transactional due diligence market. This is a key stage in a building or asset’s lifecycle and one where ESG consideration is crucial to driving market change. 

Being at the forefront of sustainability consultancy in the real estate sector, we identified a need and created a solution, our bespoke ESG Benchmarking Assessment. A tool for driving ESG change in large-scale UK and European real estate transactions.  

 

ESG Benchmarking Assessment Tool

Our innovative ESG Benchmark Assessment provides a baseline of current performance for an asset and its future management. Many key investor clients have embedded “Due Diligence” for ESG into their corporate ESG Strategy, and this product has been welcomed by Clients as a way to meaningfully deliver on that commitment. We have included in our response a case study for one such multi-national real estate investment client.  

Through our ESG Benchmark assessment tool and consultancy service, clients receive a detailed interview with the tenant or property manager, with questions based on a range of global reporting frameworks, which create a set of criteria specifically applicable to real estate.  A data room review allows for performance to be summarised across the ESG themes to create bespoke and unique “Impact Dials”. Finally, an action plan is provided to identify mitigation and improve target scores on the impact dials for the asset. ​

The Benchmarking Assessment includes:

Once the asset is acquired, we then offer post-transaction support to add value and improve the service, which includes a 12-month post-transaction check-in, implementation of the ESG action plan, and report updates as the asset evolves and actions are undertaken. 

 

Developing An ESG Process 

In Spring 2021, we identified a growing focus from our clients in the real estate asset acquisition market, on environmental due diligence. Whilst our clients were expressing a key desire to implement considerations for ESG factors, there was a clear lack of clarity on any set regional or global regulations or guidance. This was leading to clients failing at the first hurdle.  

An existing common approach to ESG at this point in time was often a generic section within existing Transactional Due Diligence (TDD) reports, primarily focused on heating, ventilation, air conditioning (HVAC) and energy efficiency. These statements generally held no consideration for the Social or Governance aspects of ESG, and the Environmental factors fell short of considering the future impacts of the building.  

So, we started with the first principle; to define “ESG”. We took into account the wide range of existing and emerging standards, which included:  

• Global Reporting Initiative (GRI), 
• CDP, a global disclosure system for investors, companies, and governments 
• Sustainability Accounting Standards Board (SASB), 
• UN Sustainable Development Goals, 
• UN Global Compact, 
• B-Corp, 
• GRESB, Global benchmarking for real estate assets
• WELL Building Standard
• UK National TOMs, evidenced-based social value measurement (Themes, Outcomes, Measures)
• Social Value Portal, 
• and others 

 

We cross-referenced these key indicators of performance across the holistic ESG landscape, which allowed us to establish a consistent series of “themes” across the three pillars of Environment, Social and Governance. 

Taking these themes, we designed a process that could effectively evaluate holistic ESG performance based on defined performance indicators, and imperatively, do this within the constricted timeframe of transactional due diligence, where urgency is essential. 

 

Evolution of The ESG Benchmarking Assessment

Our product and the approach we take to assessment has evolved over 18 months. Clients have increased their understanding of what is most important to them in relation to ESG. For some, that is Climate Risk, for others, Net Zero transition & decarbonisation, and for others, it varies depending upon the scale of opportunity to enhance an asset, for example through the improvement of biodiversity.

Regulation has continued to evolve and develop in this time which has also influenced our development. Most notably:​

• Sustainable Finance Disclosure Regulation (SFDR) – which works to set definitions and metrics to define sustainability credentials for organisations and real assets across ESG themes including climate, GHG emissions, water, waste, social and employee matters, energy efficiency and exposure to fossil fuels; 
• EU Taxonomy – which defines “substantial contribution” and “do no significant harm” criteria for construction and real estate across the 6 Environmental Objectives
  • Climate change mitigation
  • Climate change adaptation
  • The sustainable use and protection of water and marine resources
  • The transition to a circular economy
  • Pollution prevention and control
  • The protection and restoration of biodiversity and ecosystems

 

The evolution of our service has gone on to include the development of tools to evaluate climate risks to best inform the due diligence process to meet the needs of our clients and the demands of regulations in a continually expanding and evolving landscape. 

 

ESG Benchmarking Assessment - Case Study

Project Sky, a 27-site portfolio we completed for Oxford Properties, including the provision of Phase 1 Environmental Assessments and ESG Benchmark Assessment.  

The 223,800 sqm Danish portfolio comprises 27 urban logistics and light industrial assets in the Nordics. 50% of the portfolio is located in Greater Copenhagen with a further 22% in Denmark’s Triangle region, an established logistics location that serves all major Danish population centres and the German border. A diverse 75 tenants make up the occupiers, with the majority operating in the transport & distribution (3PL), e-commerce & retail and manufacturing sectors. 

For over 60 years, Oxford Properties has been connecting people to exceptional places, with environmental, social and governance (ESG) practices playing an important role in delivering on that vision. To support the commitments made at Board level, Oxford Properties prioritises  ESG in due diligence for every deal, and we provided the solution to do this, through assessments which benchmarked current ESG performance and identified potential material risks associated with the physical assets and management of the assets at all Sites.  

The scope of work included:​

• Provision of a Pre-Assessment Screening Form to establish key criteria for the assessment.
• Development of suitable questionnaires specific to the needs of the Client, based on the response to the above and in relation to the reporting categories (Environment, Social and Governance).
• Completion of an interview via telephone/video conferencing with a representative of the property management team for each site.
• Completion of desktop research specific to relevant criteria for each site.
• Production of an ESG Benchmark Assessment Report for each site and
• Production of a Portfolio ESG Benchmark Summary Report, summarising key findings across the portfolio of sites. 

 

“As an investor, Oxford Properties prides itself on conducting thorough transactional due diligence with a particular focus on ESG. When looking to acquire a portfolio of this scale and complexity (27 assets across Denmark, a new market entry for Oxford), it is important that we align ourselves with trusted advisors who have the same principles: work efficiently but take no shortcuts. Delta-Simons proved to be equal to the task, delivering meaningful ESG reports which helped drive Oxford’s path forward for these assets.” 

- Landon Schultz, Investment Director, Oxford Properties.

 

ESG Is Investment Critical

ESG has become an increasingly important area of focus for businesses, as investors, clients, employees, and consumers demand transparent disclosure of ESG performance metrics at all levels of the value chain. Although ESG is not a new concept, it is rapidly developing.

Investors are making business decisions based on ESG factors. Understanding the current benchmark assessment at the point of acquisition gives investors a clear understanding of the risks and opportunities associated with their investment.

 

Sustainability Consulting Awards 2023

Taking place on the evening of Tuesday 27th June at the Radisson Blu Aqua Hotel in Chicago, the Sustainability Consulting Awards recognise and celebrate industry excellence in the sector, and applaud consultancies who have made significant advances in ‘sustainable transformation’.

The evening Awards ceremony will be taking place alongside the Environment Analyst Global Business Summit, which will bring together environmental and sustainability consulting leaders, clients and stakeholders to explore how sustainability and ESG drivers are impacting the market. We are looking forward to the ceremony and have our fingers crossed for the win.

As a national provider with a regional presence, we work with clients from multiple sectors including; industrial, commercial and residential developers, retailers, industrial manufacturers, fund managers, institutional investors, hi-tech companies, the public sector and charitable organisations. For the past 30 years, our team at Delta-Simons Ltd has provided a holistic suite of trusted environmental services and advice, designed to mitigate risk to both people and the environment, whilst removing the pain from planning or maintaining developments, buildings and/or assets.

If you are looking to partner with an environmentally conscious, holistic environmental health and safety services supplier, get in touch with our team by emailing info@luciongroup.com.