Banking and commercial property sectors will play a key role in the drive for ESG improvements

Banking and commercial property sectors will play a key role in the drive for ESG improvements

The drive towards emissions reduction and ESG improvement will be driven by collaboration, with the banking and commercial property sectors playing a key role, an event in Dublin heard today.

Bank of Ireland this morning hosted a seminar on commercial real estate and the green transition at the Clayton Hotel in Ballsbridge. Addressing 120 attendees from the commercial property sector, speakers included:

• Neil Bannon, Bannon Property Consultants
• Colin MacDonald, Fine Grain Property
• Sean Murphy, Channor Real Estate Group
• Jonathan McKeown, Davy Horizons
• John Feeney, Head of Property, Project and Asset Backed Finance, Bank of Ireland
• Conall MacCoille, Chief Economist, Bank of Ireland
• Michael Murray, Head of Commercial Real Estate, Bank of Ireland

John Feeney, Head of Property, Project and Asset Backed Finance, Bank of Ireland welcomed attendees and emphasised the need for strong retail, delivered at high quality. He said there is a lot of positivity within the commercial real estate sector and spoke about the need for strong office formats and how Bank of Ireland's mission is to support that. Conall MacCoille, Chief Economist, Bank of Ireland then opened the session with an overview on the economy, including EU and US economic outlooks.

Jonathan McKeown, Davy Horizons covered the main driving forces in the ESG landscape. He explored the European Green Deal and what it means in practice for businesses, including significant additional reporting obligations. He also discussed the importance of target setting in emission reduction, which should be "ambitious yet achievable" and aligned with global standards. He explored the business case for sustainability in real estate, including cost savings, investment returns, tenant demand and risk mitigation and emphasised that sustainability needs to be a standing item on Board's agendas.

A panel discussion, chaired by David Mountjoy, Director, Bank of Ireland Property Finance Group took place which included a number of industry experts.

Sean Murphy, Channor Real Estate Group said that the objective is to enhance capital values and produce greener buildings, which is better for tenants, yields and valuations. He said that they focus on a range of elements including heating, air units, lighting, performance of the buildings and how to incorporate renewable energy. His starting point is always to achieve the goal of a more sustainable building, but buildings will come with different challenges, so the journey can be different also.

Colin McDonald, Fine Grain Property said that they are always taking a future-looking perspective in how they curate the carbon in their buildings and assist clients with that. He discussed how they make enhancements while also retaining positive cash flow throughout the process, so the objective is to implement a rolling improvement in the carbon footprint of the building.

Neil Bannon, Bannon Property Consultants examined how retail ESG improvement can be more complex. Co-operation from occupiers is required, and there may be a variety of leases involved, and factors such as retailers being on site. While it is challenging, it can be done, he said, and it can be done while the business is still trading. He mentioned some examples where they have successfully implemented changes and made significant reductions in emissions while still remaining trading.

Michael Murray, Bank of Ireland said that banks have a vested interested in how real estate is managed and it is very encouraging to hear what customers are doing. "For our commercial real estate portfolio, we have set a target to reduce emissions by 56% by 2030 (from a 2020 baseline), aligned to the Paris Climate Agreement and Ireland's Climate Action Plan. To achieve this goal, we have pivoted our lending strategy in the last two years to increase our exposure to more energy efficient properties including newer builds and supporting our customers to invest in energy efficiency upgrades of existing properties. We are supporting businesses such as those we have heard from this morning." Michael said that the bank wants to engage with customers to get a full understanding of how they are going to manage the asset over time in the context of energy efficiency. He also explored how sustainability loans work and emphasised that Bank of Ireland can assist in the transition.

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