1. Current Attitudes Towards Sustainability
and its Potential to Impact upon Property
Portfolio Values Within the UK
SID- Removed – BSc (Hons) Building Surveying

2. Acknowledgements
The author of this research work would like to thank the following for their
assistance and input towards the completion of this work:
John Bennett BSc (Hons), FRICS – Head of Business Planning
and Resources with the Valuation Office Agency
Tatiana Bosteels Head of Responsible Property Investment with
Hermes Real Estate Investment Management Ltd.
James Clifton-Brown Chief Investment Officer UK with
CB Richard Ellis Investors
Donna Harris Director of Legal Services (Property) with AVIVA
Syed Jamalullail Sustainable Investment Team Analyst with
F&C Investments
Karina Litvack BA (Hons), MBA – Head of Governance and
Sustainable Investment with F&C Investments
Esme Lowe Partner: Property Fund Team with
Climate Change Capital
Lord Mandelson and Claire Brialey (Sustainable Buildings Division)
Department Communities and Local Government
for provision of Government documentation
relating to Commercial Property
Paul McNamara BSc (Hons) PhD, ASIP, FRSA, OBE – Director and
Head of Research with PRUPIM
Professor Gary Pivo BA, MSc, PhD – Senior Fellow,
University of Arizona
Jonathan Tillson Head of Sustainable Development at DEFRA
HRH Prince of Wales and Claudia Holloway of Clarence House, for
providing information regarding The Prince’s
Charities – Accounting for Sustainability Project
Finally my thanks to Mr. Stephen Fenton, BSc, FRICS, PGCE, FHEA, for his
continued guidance and supervision throughout this dissertation project.

3. Abstract
Responsible Property Investment is simply one area of sustainability that is
present within the built environment. Sustainability as a whole is fast
becoming one of the main concerns within industry, with those managing
property portfolios equally susceptible to its effects as those on the
construction side. This report focuses on current opinions and attitudes
towards the field, and how these can have a knock-on effect to property
values.
Initially the question was do investors care? - If an asset was capable of
generating favourable returns, then what did it matter if it was highly inefficient
or only useable over a short term? The purpose was then to ascertain
whether a change in overall opinion and the “valuing” of sustainability
amongst the industry would change investment trends.
This paper then looks at the existing considerations given to sustainability
within real estate investment, whilst looking ahead to what is being done to
incentivise further action within the area. In order to do this, current industry
professionals were approached with questionnaires and for formal interview,
in order to provide data giving a qualitative overview of current practice and
opinion.
The findings of the research suggest that, although initially there was little or
no interest, sustainability as a consideration during property investment is
growing. A small number of dedicated funds are emerging specifically
targeting carbon reduction within assets, whilst owners and occupiers are
increasingly looking to reduce costs associated with energy efficiency. This
has resulted in premiums being attached to sustainable property, both as
additions to a portfolio and commanding higher rent values.

4. Contents
ACKNOWLEDGEMENTS ........................................................................................2
ABSTRACT..................................................................................................................3
CONTENTS..................................................................................................................4
1. INTRODUCTION....................................................................................................6
1.1 AIMS AND OBJECTIVES. ........................................................................................8
1.2 LIMITATIONS TO THE RESEARCH ...........................................................................9
2. CURRENT LITERATURE. .................................................................................10
2.1 OPPORTUNITY AND NEED....................................................................................10
2.2 RESPONSIBLE PROPERTY INVESTMENT (RPI)......................................................10
2.3 VARYING APPROACHES TO RPI...........................................................................11
2.4 INVESTMENT DRIVERS ........................................................................................12
2.5 SUSTAINABILITY DURING ASSET ACQUISITION ...................................................13
2.6 GOVERNMENT STANCE .......................................................................................15
3. METHODOLOGY ................................................................................................16
3.1 AIM .....................................................................................................................16
3.2 PROJECT LAYOUT................................................................................................16
3.3 LITERATURE REVIEW. .........................................................................................16
3.4 PILOT STUDY ......................................................................................................17
3.5 MAIN SURVEY.....................................................................................................18
3.6 FORMAL INTERVIEWS..........................................................................................18
4. ETHICS STATEMENT ........................................................................................19
4.1 PROJECT TITLE:...................................................................................................19
4.2 RESEARCH OVERVIEW: .......................................................................................19
4.3 PARTICIPANTS:....................................................................................................19
4.3.1 - Who will they be and how are they selected?...........................................19
4.3.2 - Participants right to withdraw: ................................................................20
4.3.3 - Participant Consent:.................................................................................20
4.4 INCONVENIENCES AND POSSIBLE NEGATIVE OUTCOMES:.....................................20
4.5 INFORMATION SOURCES AND HELP PROVIDED FOR PARTICIPANTS:....................21
4.6 FEEDBACK: .........................................................................................................21
4.7 INTERVIEW GUIDE: .............................................................................................22
4.8 OVERVIEW OF DATA ANALYSIS: .........................................................................22
5. ANALYSIS OF ACQUIRED DATA....................................................................26
6. FORMAL INTERVIEW RESPONSES...............................................................41

5. 7. CONCLUSIONS ....................................................................................................49
8. FURTHER RESEARCH.......................................................................................53
REFERENCES...........................................................................................................55
BIBLIOGRAPHY ......................................................................................................58
APPENDIX A .............................................................................................................63
APPENDIX B .............................................................................................................69
APPENDIX C .............................................................................................................70
APPENDIX D .............................................................................................................71
APPENDIX E .............................................................................................................72
APPENDIX F .............................................................................................................73

6. 1. Introduction
“Only business can build a low-carbon economy. Business is all about seeing ideas
and growing them. Businesses have the resources, the people, the technical skills to
make things happen…”
- Tom Delay, Chief Executive, The Carbon Trust (reported in The Times, 25 March 2008)
Climate change is big business. Around the globe, new legislation has been
introduced, targets set and plans initiated to react to the changes being seen
within the environment.
The built environment accounts for over 8% of the UK’s GDP. This figure is
only the direct relation between construction and wealth produced. All manner
of assets, including property, from a range of international institutions and
corporations’ portfolios create wealth for their respective owners. In fact, only
49 of the top 100 largest global economies are countries; the other 51 are all
multinational corporations.
(Crossley, 2000)
When this is considered alongside the knowledge that 50% of our carbon
emissions come from the construction and operation of the built environment,
it becomes clear as to how much of a relationship there is between business
and efforts to lower and indeed erase our, “Carbon footprint, “ including the
amendments to the Climate Change levy in April of this year.
(Carbon Trust, 2009)
This is where the notion of sustainability being combined with the responsible
management of assets, can be used to generate and improve value of
property portfolios whilst making a difference to the environment.
(Sustainable Development Commission, 2009)

7. Two of the main driving forces of corporate organisations are to achieve
success through profiting in their business, and encouraging a positive public
perception of that business. The advent of Corporate Social Responsibility
(CSR as it is commonly referred to) means that these can be accomplished
simultaneously. By creating a positive public perception and therefore
encouraging further investment from outside sources, companies can be seen
to be adhering to their socially pressurized responsibilities, whilst generating
revenue and succeeding in their business.
In 2007 a study was undertaken in the United States where executives within
property investment were surveyed to comment on their attitudes towards
Responsible Property Investment (RPI.) Unsurprisingly, their concerns were
that by selecting responsible investments, their overall financial performance
and fiduciary obligation would be affected.
Having shown this reluctance to, in their minds at least, put performance
levels in jeopardy in exchange for dealing with the “bigger issue”, it therefore
needs to be shown that the “risk” is not as is initially perceived. Of those
executives surveyed in the US, 85% agreed that if their risk and return criteria
could be met, then they would increase their level of involvement within the
arena of RPI.
(Pivo, McNamara 2007)
In order to provide a tangible basis for the argument that incorporating
sustainability in asset management can provide profitable results,
assessments of industry wide accepted benchmarks need to be made.
In terms of indicators for sustainability, research has been conducted and an
initial list of such indicators has been produced. However, these have not yet
been accepted into wider use within industry, and as such, companies have
not been able to apply them to their assets in order to determine performance
comparatively to those more or less sustainable than their own.
(Sayce, S, Ellison, L, 2003) (Eichholtz, P, Kok, N, Quigley, J, 2009)

8. The literature review that follows has been compiled from current research
within the area of sustainability and what impact this is having thus far on
asset values. The common perception of the industry however is that there is
not yet sufficient data available for property stock to enable an accurate
analysis of different elements of sustainability on its value.
(RICS, 2009)
Many of the largest companies and corporations in the world have
Sustainability Reports and Corporate Governance Policies that are freely
available to view and show their stance on climate change and how they are
acting accordingly. The question being addressed therefore is: What are the
actual attitudes of the individuals within these companies and those they act
on behalf of every day, and what impact does this have upon investment
trends, property values and overall business performance?
1.1 Aims and Objectives.
The aim is to establish whether the increase in sustainability as an issue
within the built environment has made an impact on investment trends and
corporate behaviour, therefore affecting portfolio values and profit returns.
In order to ascertain this, there are the following objectives: -
1) Determine any current company policies on sustainability.
2) Investigate relationship between clients’ business needs and asset
management strategy.
3) Establish motivation for investing in sustainable assets when adding to
a portfolio.

9. 1.2 Limitations to the Research
This report does not seek to evaluate sustainability benchmarks for property,
neither does it look to show a unique data example of the difference between
a sustainable and non-sustainable property portfolio. Both of these require
separate study, industry involvement backing and a far-extended research
time.
For a real comparison to be made regarding value of sustainable buildings
would require a long-term project such as has been carried out in the US. Two
portfolios would have to be created, consisting of like-for-like investment
properties, with sustainability as the variable. The investments would then
have to be monitored over a period of years in order to ascertain the effect of
this on the return to investors. Such an undertaking is outside the scope of
this report.
It does, however, look at current opinion of sustainability within property
investment, what impact this could have on future investment and current
portfolio values and how incentives can be introduced to increase participation
from institutional and private investors alike.

10. 2. Current Literature.
2.1 Opportunity and Need
The word, “need” when referring to sustainability can be taken in two ways:
The first, being that every leading and developing country around the globe is
having to account for its carbon emissions to combat rising temperatures and
sea levels, and the second way in so far as no major business can be seen to
be being left behind in this emerging area. As such, there is a, “need,” to
make things sustainable.
There are also however opportunities to be had in terms of investment. A
research project by the RICS and the Universities of Maastricht and California
in 2009, comprising of “green” office buildings in the United States, showed
that higher returns are to be made from those buildings that have high energy
ratings and are considered sustainable. The results showed a premium of 3%
per square foot for the whole sample stock, 6% higher effective rent returns
adjusted for occupancy levels and a significant 16% premium when selling a
green building.
(Eichholtz, P, Kok, N, Quigley, J, 2009)
2.2 Responsible Property Investment (RPI)
The market for Socially Responsible Investments (SRI) has been continually
growing over the last decade, with more institutions and individuals
developing portfolios with social and environmental considerations. Whilst the
UK is currently highly involved in this arena, including working with emerging
economies such as those in China and India, it is the US that has lead the
drive and research in sustainability and investments.

11. According to the Social Investment Forum (SIF) in 2003, there was 2.16
trillion dollars in SRI’s of all descriptions, including pension funds, mutual
funds and community development financial institutions. These funds were all
in investments that are deemed to follow the, “Triple Bottom Line,” which
takes into consideration their financial, social and ecological impacts.
(SIF, 2003)
Real estate is a major asset for all investors, whether institutional, individual
or occupiers who own their own properties. The advent of RPI means that
investors are able to show significant consideration for their social and
environmental impacts, whilst managing their assets effectively to obtain the
required financial reward.
(CFAUK, 2008)
2.3 Varying Approaches to RPI
Different approaches are being taken towards RPI. For example, Sarasin, the
Swiss Private Bank, has set up a new property fund that uses the strategy of
buying shares in property companies most active in CO2 reduction. The
theory here is that shares are quicker to sell than buildings, therefore allowing
investors to get their money out quicker.
Climate Change Capital (CCC) is a London-based fund that aims to have
raised £120m within six years, on top of the £70m they already have. Part of
their strategy is they purchase poorly performing buildings and refurbish them
to high standards of energy efficiency.
The results for these two different approaches is that Sarasin Sustainable
outperformed Standard & Poor’s property index by 2% in its first six weeks
and CCC are looking for a 10% higher return on their properties.
(Jansen, 2009)

12. 2.4 Investment Drivers
Interest regarding sustainability within real estate investors has been growing
since the turn of the millennium. In research by Keeping (2000) it was noted
that investors would sometimes require “Green” features of a building, but not
sustainable properties themselves. This was deemed to be due to an initial
confusion in the terms that are now commonly used, and that they had a lack
of knowledge over any benefits to sustainable real estate.
A review has recently been undertaken of current publications regarding
investments in sustainable buildings (Schleich, 2009,) which identified the
drivers of investment and their classifications. The research found there to be
three levels regarding these drivers:
• Property Level – Affecting individual assets and investments
• Corporate Level – A collective impact for institutions
• External – Legislative, financial and legal implications
(Schleich et al, 2009)

13. The identification of these drivers had further implications for the methodology
of this research project, due to their perceived implications being integral to
the outcome of the aims and objectives for this study. This is because those
investors that are involved directly in managing their portfolio will need to take
into account these drivers, thus reflecting their current attitudes towards
sustainability and it’s ability to impact on portfolio value, such as those drivers
identified at the property level.
2.5 Sustainability during Asset Acquisition
As was found in the section regarding the varying approaches to RPI, retro-
fitting poorly performing buildings is one method of approaching sustainability
within real estate. However, for some it seems that this method is considered
far more costly and creates further challenges.
(Tillson, 2009)
This difficulty in justifying expenses regarding property deemed as obsolete
has created the necessity for sustainability to be a consideration during the
acquisition stages of investments for a portfolio. The British Land Company
PLC (2008) produced a Sustainability Guide for Property Acquisitions
detailing the need for this issue to be addressed prior to the board approving
a new acquisition.
Studies by Pivo and McNamara (2007) highlighted the concern of investors
regarding their fiduciary obligations, which is another element during
acquisition stages relating to due diligence. When undertaking investment
management responsibilities, due diligence must be shown in order to avoid
legal repercussion, such as in the case of REIT’s (Real Estate Investment
Trusts) pension funds etc… This is especially the case when justifying new
and sustainable investments as an “added-value” class asset to a portfolio.
(McMahan, 2006)

14. This flow chart was taken from the Sustainability Guide for Property
Acquisitions by The British Land Company PLC. It’s significance is in the
detailing of sustainability as a consideration before the acquisition of an asset
is completed, therefore demonstrating due diligence with concern to
sustainable investment and intention to add value through portfolio
diversification.
(British Land PLC, 2008)

15. 2.6 Government Stance
The UK Government is taking its commitment to sustainability very seriously
and is attempting to incorporate it as an issue in all of its undertakings.
“Securing the Future” is the name given to the development strategy, which
makes up part of a shared framework including all four nations of the United
Kingdom.
The Sustainable Development Programme crosses all government
departments as well as other public bodies such as the Sustainable
Development Commission. This includes targets set out by the government
including the sustainable management of its estate in order to reduce energy
consumption, waste and water use. It also produced a Sustainable
Procurement Action Plan, which aims to improve standards and market
engagement.
(Crown, 2009)
The recent meeting in Copenhagen on climate change further demonstrates
where the UK government intends to make its commitments further from
2009. In a telephone interview with Jonathan Tillson, Head of Sustainable
Development for the government body DEFRA, he made clear that the
intention is for the UK and its government to lead by example to further
encourage developments in sustainability, and that from this point in 2009/10,
there is more yet to be done in the coming years.
Paul Morrell, former senior partner with Davis Langdon, was made the first
Chief Construction Advisor to the Government in November last year. He
makes a point that the industry’s carbon reduction commitments would be his
“immediate priority” and that, “We’re going to need to start counting carbon as
seriously as we count money, and accepting that a building is not of value if
the pound sign looks ok, but the carbon count does not.”
(Building, 2009)

16. 3. Methodology
3.1 Aim
In keeping with the title of this project, the aim is to use suitable methods of
data and information gathering in order to create and present a paper on the
current state and opinion of sustainability within the built environment and its
potential to impact upon property investment values.
This methodology section details how the research was carried out, the
justification for these actions, initial intended structure of the report and the
rationale for the project as a whole.
3.2 Project Layout
The information in the report will follow in these chapters: -
• Abstract/Introduction.
• Literature Review
• Research Design and Methodology.
• Analysis and Discussion of Report Material.
• Conclusion and Evaluation.
• Suggested further research.
• References and Bibliography.
3.3 Literature Review.
Initial study has shown that work has already been undertaken on the
individual aspects that make up this report, such as investment practice,
sustainability and asset management strategies. However, the foundation of
this work was to analyse the amalgamation of these areas as a whole unit, by
how they relate to each other to form a single purpose within the industry.

17. The Government Department of the Environment published a work on
indicators of sustainable development in 1996, and Sayce, S and Ellison, L
later developed this work initially in 2003. Research has also been done on
best practice within asset management and how property forms part of
businesses investment considerations. This also forms part of the study, as it
is the basis for how decisions within the investment sector are made.
The literature review has the purpose of outlining initial works within the area
of sustainability and RPI, whilst demonstrating that the requirement of this
report is to asses current opinion in order to establish a motivation for
investors, as described in the aims and objectives.
3.4 Pilot Study
The pilot study consisted of an initial questionnaire, vetted by industry
professionals, in order to ascertain its relevance and validity. The importance
of piloting the study was to ensure that the main questionnaire contained
relevant subject matter to those professionals that would be receiving it in
order to contribute to this research.
The questionnaire remained unchanged, due to positive confirmation and
feedback from those who responded to the pilot. The main element of
feedback regarded the combination of having both multiple choice and open-
ended questions. The reason for this was to allow for both a greater depth of
detail in respondents answers, as well as to gain a wider range of answers to
be analysed, depending on each participant’s individual impression of the
question.

18. 3.5 Main Survey
Each question in the survey has its relevance stated individually in the
analysis section of the study. The questionnaire as a whole was designed to
allow for a wider range of data from a large base of professional opinion. As
this is a qualitative study, it was important to ensure that opinion was sought
from a variety of practitioners in order to get the most relevant data for
pertinent analysis towards the central question of this project.
The survey questionnaire sent to 183 people over a variety of professions
received 42 responses and can be viewed in Appendix A, along with the
original proposal for this dissertation.
3.6 Formal Interviews
The inclusion of formal interviews was an important part of this research, with
it being a qualitative study. The professionals selected for interview were
chosen due to their high levels of experience, variation in business/career
areas and overall relevance to the central question and research topic. Three
participants were selected for comparative viewpoints from a global insurance
and investment provider, a British Government body and an Investment Bank
that specialises in carbon offsetting and cutting ventures.
Those contributors to the research from the above institutions are:-
• Paul McNamara. PRUPIM Director: Head of Research,
BSc (Hons) PhD ASIP FRSA OBE
• Jonathan Tillson. Head of Sustainable Development at
DEFRA
• Esme Lowe Partner: Property Fund Team
Climate Change Capital (CCC)

19. 4. Ethics Statement
4.1 Project Title:
“Current attitudes towards sustainability and its potential to impact upon
property portfolio values within the UK”
4.2 Research Overview:
This research project involves the gathering of data and studying current
practice and opinion on matters regarding sustainability. The methods that will
be used for this will be in the form of accessing both publicly available
information/reports, sending out a piloted questionnaire and conducting face-
to-face interviews.
Sustainability is of growing importance within the built environment, with more
and more companies creating Sustainability Profiles as evidence of their
Corporate Responsibility. This research intends to discover the actual extent
of interest and involvement within the industry and how value and profitability
is affected as a result. It is therefore the intention of the aforementioned data
gathering methods to be implemented in order to ascertain this.
4.3 Participants:
4.3.1 - Who will they be and how are they selected?
The participants will be from a mixture of professions and business areas
within the construction/property industry. These include institutional investors,
property agents, occupiers, acquisition managers etc… The nature of these
positions within their respective companies means that the collection of data
will not involve either minors or those considered to be lacking in mental
capacity as outlined in the Mental Capacity Act 2005 and a CRB check is not
required.

20. 4.3.2 - Participants right to withdraw:
Those who are approached for interview will be informed of their right to
withdraw from the research at first communication when being asked to
participate. They will also be presented with a “Participant Information Sheet”
which details their ability to withdraw at any point from the research along with
the option to have any of their information omitted from the report by
contacting the main researcher.
4.3.3 - Participant Consent:
Along with the Participant Information Sheet, a Consent Form will also be
attached and will be required to be read and signed in order to agree to taking
part in the interview and resulting dissertation paper. A withdrawal form is
included with this, which can be filled in at any point and sent to the
researcher requesting removal of their contribution.
Consent will also be sought for use of a dictation/recording device during the
interview. As part of the consent to this, participants will be ensured that the
recording will remain private, securely stored and then destroyed upon
research completion in keeping with Data Protection Act 1998. It will be made
clear that any and all contributions made can be made anonymous for the
individual concerned and their respective company if required.
4.4 Inconveniences and possible negative outcomes:
The sharing of private/sensitive material is purely at the participant’s
discretion. All material is provided under the understanding that it will not be
published or circulated further by the researcher forming the report and is only
for initial informative purposes. No hard copies are made or kept and received
files will be destroyed.

21. The questionnaires are only completed voluntarily. There is no obligation to
complete or answer at all, and particular questions can be ignored at the
receiver’s judgement. The questionnaire states at the outset that all replies
will be dealt with confidentially and anonymously.
The inclusion of the fields, “Job Title” and “Area of Business” within the
questionnaire are purely to enable the researcher to group respondents
during the analysis stage of the work. The individuals’ names and that of their
company/institution will not be divulged at any point unless requested or
permitted directly.
The time, date, venue and duration for the interviews will be determined by
the consenting interviewee in order to minimise any disruption or
inconveniences. Any perceived negative outcomes from the participant will be
dealt with at their request, such as remaining as an anonymous contributor, or
by their insisting to withdraw completely from the research.
4.5 Information Sources and Help Provided for Participants:
The researchers contact details will be provided to all participants in the
project. This will allow for ease of contact should they have any further
questions or requests relating to their withdrawal from the research. Details of
the researchers’ University will also be provided to participants so that contact
can be made with senior faculty members supervising the dissertation project
if they deem this necessary.
4.6 Feedback:
All participants will have their contributions acknowledged to confirm the
intended researcher has received it. They can be provided with further
information if requested, but only relating to their own contribution or the
report as a whole, not of other respondents or interviewees.

22. 4.7 Interview Guide:
A semi-structured interview process will be undertaken, based on previous
literature in the area and specific experience of the individual interviewee.
Initially open-ended questions will be used intending to facilitate rapport and
create a relaxed atmosphere. This will be followed by more specific closed
questions to directly deal with the aims and objectives of the research.
4.8 Overview of Data Analysis:
Information and opinions collected as part of this qualitative research project
will be analysed in order to meet the aims and objectives outlined at the start
of this dissertation paper.
Comparisons will look to be drawn between the different business areas of
those professionals responding to the questionnaire. Conclusions will then be
made from an interpretation of the responses for each individual question
included, intending to suggest an indication of current opinion and practice
regarding sustainability.
Any discrepancies between conflicting answers to questions will be
highlighted and comment provided based on further analysis and reference to
the literature review. In line with guidance set out by Patton (2002), all raw
data themes will be validated and agreed upon throughout the analysis
process, in order to produce a valid and accurate representation of emerging
themes.
Analysis of interview material will include obtaining consent and confirmation
at the time of interview as to whether the information discussed is
representative of their individual views or company policy. It will then be
subjected to analytical methodology including coding of open-ended questions
such as is outlined in Naoum (2007)

23. ANGLIA RUSKIN UNIVERSITY
ETHICS REVIEW CHECKLIST FOR RESEARCH WITH HUMAN
PARTICIPANTS
Date 10.3.09 V1.0
Name: SID:
Title of Current Attitudes Towards Sustainability and its Potential to Impact upon
Research Property Portfolio Values.
Project:
Faculty: Science and Technology Supervisor(s): Steve Fenton
Type of research: Undergraduate Taught postgraduate Research degree
Tick all that apply
Member of staff Other
If you require this checklist or any of the documentation in an alternative
format (e.g. Braille, large print, audio or electronically) please contact
Julie.Scott@anglia.ac.uk
You need to consider ethics for all research studies. Research is defined in the UREC
(Research Ethics Sub Committee) Policy and Code of Practice for the Conduct of Research
with Human Participants on Page 5. Please refer to:
http://www.anglia.ac.uk/ruskin/en/home/central/rds/services/research_office/research_d
egrees/ethics.html
Please complete this mandatory Ethics Review Checklist for all research applications. This is
to ensure that you are complying with Anglia Ruskin University Policy and Code of Practice
for the Conduct of Research with Human Participants.
All research applications are dealt with in the same way. There is no distinction
between undergraduate, taught Masters, research degree students and staff research.
For research involving animals, please complete the Animal Ethics Review Checklist to
determine your course of action.
This checklist should be completed by the Principal Investigator or the student in consultation
with his/her supervisor.

24. YES NO
1. Does your research involve human participants?
(including observation only)
2. Does your research involve accessing personal, sensitive or
confidential data?
3. Does your research involve ‘relevant material’ as defined by the
Human Tissue Act (2004)?
4. Does your research involve participants who are 16 years and
over who lack capacity to consent and therefore fall under the
Mental Capacity Act (2005)?
5. Will the study involve NHS patients, staff or premises or Social
Services users, staff or premises?
If you have answered NO to all the above questions, you do not need formal ethics
approval. You do, however, need to submit this checklist signed and dated to the
relevant Faculty Research Ethics Panel (FREP) Administrator prior to starting your
research.
If you have answered YES to either or both Questions 1 and 2, you need to submit
an application, including this checklist, to your FREP.
If you have answered YES to Question 3, you need either to submit your application
to your FREP or an NHS Research Ethics Committee (REC), even if the study does
not involve the NHS. Please seek further advice if you are unsure about which
committee it needs to be submitted to.
If you have answered YES to Question 4, you need to seek approval from an NHS
REC, even if your study does not involve the NHS.
If you have answered YES to Question 5, you need to obtain approval from:
a. Both an NHS REC and the NHS Trust(s) where you are carrying the research
out (R&D Management Approval) or
b. The Local Research Governance Group (Social Services).
Please note that you must send a copy of the final approval letter(s) to:
Beverley Pascoe, RESC Secretary, Research, Development and Commercial
Services.
Additional information:
Applicant’s signature: Date:
Supervisor’s signature: Date:

25. (Axa-IM, 2009)

26. 5. Analysis of Acquired Data
Each question included that was sent out to obtain data for this research will
initially be dealt with separately, followed by an analysis with reference to how
it relates to others within the questionnaire and the opinions expressed during
the formal interviews.
The sample of data comes from 42 respondents of 183 initially contacted via
e-mail or telephone. The response rate reflects that no obligation was placed
on those contacted to reply, conforming to the ethical requirements of this
work.
The demographic and number of those respondents is as follows. They
consist of both public and private sector individuals:
• Fund Manager 5
• Investment Analyst 14
• Property Agent 7
• Surveyor 4
• Company Director 7
• Acquisitions Manager 5

27. Q1. How relevant is sustainability to your companies core business?
a) Essential
b) Highly
c) Moderately
d) Partially
e) Not at All.
This question was included in order to establish a benchmark for the
remaining answers supplied by that individual, closely linked to the following
question relating to client interest. It allows for an initial indication of a
discrepancy between their own perceived level of relevance to sustainability,
compared to that of their clients.
On an individual basis there were occasions where respondents indicated
sustainability had a low level of relevance to them or their business ( i.e
“partially” or “moderately”) yet stated in the very next question that between
75-100% of their clients expressed interests in the area. These anomalies
were few however, and the majority of those confirmed sustainability as an
issue affecting their business to some significant degree.
How Relevant is Sustainability to your Core Business?
0
Not at All
1
Partially
7
Moderately
23
Highly
11
Essential
0 5 10 15 20 25
Respondents

28. Q2. What % of your clients express an interest in sustainability?
a) 0-10%
b) 10-25%
c) 25-50%
d) 50-75%
e) 75-100%
As mentioned on the previous page, this question allowed for both an
individual impression from the respondents, as well as a rudimentary way of
gauging a wider opinion base; that of the respective clients of each business
of those who replied. The graph shows the anticipated reflection of the
previous question; that is, respondents who previously indicated sustainability
being of high significance to their business, demonstrated a consistency
through the interests of their wider client base.
A point of interest includes the four participants who answered a 0-10% range
of their clients showing interest in sustainability. The level of comment on the
area in professional journals and publications suggests that there is, or at
least is expected to be, enough interest from client bases for business to be
active and able to respond to sustainable demands.
What % of your Clients Express an Interest in Sustainability?
7
75-100%
17
50-75%
14
25-50%
0
10-25%
4
0-10%
0 2 4 6 8 10 12 14 16 18
Respondents

29. Q3. What areas are of most concern to your clients? Please could you
place a number next to the answers to indicate the top three, 1 being the
most important.
a) Energy efficiency / Performance Rating
b) Waste / Water Consumption
c) Building Functionality / Flexibility
d) Location / Transport Ease
e) Rent Value / Void Period
This question demonstrated which areas were of greatest importance to each
of the respondents. Participants were asked to number from 1 to 3, in order
of priority, those areas that are of greatest concern to their clients. The
significance of this is that, due to the nature of sustainability regarding energy
efficiency, one would expect a higher number of “votes” for this aspect, but
this was not to be the case.
Whilst building functionality and location/transport ease are factors in
sustainability and RPI, (as highlighted in Prof. Pivo’s and Jeffery Fisher’s
study, “Effects of Walkability on Property Values and Investment Returns”,
2009) energy efficiency is still the most widely understood aspect of
sustainability. Therefore, it was expected for those contributing to this study to
have placed more emphasis on this area.
The fields highlighted in bold below, show the most consistently voted areas.
83% (35 of 42) placed rent value and void period as the most important, 76%
put location/ transport at second highest (32 of 42) and building functionality
of third most concern to their clients, with 90% (38 of 42) positioning it there.
Energy efficiency / Performance rating and Waste Water Consumption were
the least concern of respondents clients, with only 9.4% of the total vote.
Attributes Respondents' Voted Importance Level (1 High, 3 Low)
1 2 3
Energy Efficiency / Performance Rating 7.1% 0 0
Waste / Water Consumption 0 2.3% 0
Building Functionality / Flexibility 4.7% 4.7% 90.4%
Location / Transport Ease 16.6% 76.1% 7.1%
Rent Value / Void Period 83.3% 4.7% 2.3%

30. Q4. Are your clients prepared to pay a premium for sustainable assets,
either to purchase, invest or occupy, or do higher prices make this
inhibitive.
a) Yes, they are prepared to pay more.
b) No, higher prices are preventative.
c) Other (Please Comment)
The next element to the questionnaire was intended to assess current
demand from investors and occupiers regarding sustainable real estate.
Interestingly, the previous questions responses would indicate that profit takes
precedence over other sustainable considerations, yet the findings for this
question suggest that many are willing to accept a greater initial expense in
order to acquire a sustainable asset.
The significance of the 45% positive response to paying a premium indicates
that those involved with the acquisition, investment and management of real
estate assets, see a positive economic impact from climate change adaptive
property sufficient to their respective portfolios to warrant higher purchase
price.
Are Your Clients Prepared to Pay a Premium for Sustainable
Assets?
8
Other
15
No
19
Yes
0 5 10 15 20
Respondents

31. Of those who chose “Other” in response to this question, there were two
themes in the comments provided. The first was that it related to the risk of
the asset. It is common understanding that once money is invested, it is then
at risk, whereas if it is not invested then it remains safe. The elements of risk
within sustainable real estate forms a dichotomy in the view that it is either of
less risk, as it is adaptive regarding climate change and future legislation, or
that it is of higher risk due to little empirical evidence to suggest a greater
investment yield after initial premium purchase cost.
With this in mind, some respondents indicated that it was their practice to
require a discount on an, “at-risk” asset, rather than paying a premium for
those that are already deemed and being marketed to be sustainable.
The second theme amongst the comments concerned the individual SRI
(Sustainable and Responsible Investment) Policy of each respondent’s client
base. As highlighted in the literature review of this study, different
organisations within the area of RPI have differing approaches towards it and
the management of their portfolios.
Q5. Are you involved with "Green Leases" and if so, how?
This open ended question was included at this point in order to determine an
idea at the level of use and understanding regarding this recent undertaking.
7 people commented on this question relating to a non-direct involvement, i.e.
that (depending on their core business) they did not have requirements
themselves for green leases, yet client companies did have involvement from
their investors or occupying clients.
Hermes, Aviva and Land Securities are a few of the companies directly
involved in specifying sustainable commitments and requirements as part of
the lease contract to the tenants.

32. Q6. Are shareholders consulted or directly informed of matters
regarding sustainability?
a) Yes
b) No
c) Don't know
Sustainability as a general issue, particularly in terms of real estate portfolio
investments, is very much the domain of the larger international companies in
the current climate. As such, the majority of these produce CSR (Corporate
Social Responsibility) Reports and publish continually on Governance issues.
If sustainability is to get into the wider knowledge from those outside these
companies, and seen as an ever-increasingly important consideration, it has
been noted that shareholders need to be informed of a companies efforts in
this arena (BRE, 2000.)
The results show that a large portion of those questioned are following this
and do indeed consult and inform their shareholders regarding sustainability.
The two, “No” responses came from public sector individuals, therefore not
having shareholders.
Are Shareholders Consulted or Informed of Matters
Regarding Sustainability?
12
Don't Know
2
No
28
Yes
0 5 10 15 20 25 30
Respondents

33. Q7. Is your company eligible or a member of the FTSE4Good or DJGSI
Indexes?
a) Yes
b) No
c) Don't know
The Financial Times Stock Exchanges FTSE4GOOD and Dow Jones
Sustainability Index (DJSI) indexes are specific only to those companies that
are eligible through sufficient performance in sustainability matters.
The importance of this question was to ascertain the awareness of these
indexes and their level of involvement within the relevant real estate
companies. A high positive response would indicate commitment within
property related sectors, with the option of then analysing the performance of
those within the index against those who don’t qualify to highlight any
improvement.
Is Your Company Eligible or a Member of the FTSE4GOOD or
DJSI Indexes?
36
Don't Know
4
No
2
Yes
0 5 10 15 20 25 30 35 40
Respondents

34. Part of the reason for the creation of the FTSE4GOOD index was in order to
incentivise larger companies to become more involved with sustainability
issues in order to qualify for the index.
The results show that there is a sizeable lack in knowledge regarding these
two particular indexes. The six companies that are aware of their position (2
are members/eligible, 4 are not) are almost negligible when compared to the
fact that 85% of those that responded were unaware if they were suitable for
inclusion, or indeed a member of the index.

35. 8. How would you consider an investors attitude to be affected by a
portfolio of sustainable assets?
a) Considerably Positive
b) Marginally Positive
c) No difference
d) Marginally negative
e) Considerably Negative
From the thirteen questions sent out for this report, this is the most directly
related to opinion towards sustainability having an affect on property portfolio
values.
All the participants answered this question, with 100% positive results towards
sustainable assets, with 60% of those (25 respondents) indicating investors’
attitudes to be “Considerably Positive” with regards to sustainable real estate
investments.
Although this may appear to be the natural reaction, some investors, echoing
the opinion of Valuers, subscribe to the notion that sustainable real estate is a
liability that does not necessarily reflect the money put into it. (RICS, 2008)
Respondents Perceived Attitudes of Investors Towards
Sustainable Assets
0
Considerably Negative
0
Marginally Negative
0
No Difference
17
Marginally Positive
25
Considerably Positive
0 5 10 15 20 25
Respondents

36. Q9. Would you be in favour of a government tax incentive regarding
sustainability?
a) Yes
b) No
c) No Preference.
Although not all participants completed this question (31 answered out of 42)
it produced an unexpected result nonetheless.
With sustainability being a major issue within the built environment at present,
and it generally being viewed as a positive aspect, it was expected that the
stand-out answer would be in favour of a Government-led incentive towards
sustainability. However, only a quarter were found to be in favour of such a
move and 48% were against.
This finding would suggest that although many of the respondents were
actively involved with sustainability relating to their assets and property
investments, both directly and through their clients, they would prefer to retain
individual control over their involvement and requirements imposed.
Would you be in Favour of a Government Tax Incentive Regarding
Sustainability? (From sample of 31 who answered)
8
No Preference
15
No
8
Yes
0 2 4 6 8 10 12 14 16
Respondents

37. Q10. What strategies do you have in place to attract sustainable
investment?
As stated in the aims and objectives section and when outlining the purpose
of this work, it was stated the intention to establish motivation and any
incentives for investment in sustainable funds and property assets, as well as
investigate the current practice by firms involved in the area.
This question was therefore included in order to obtain a variety of responses
from those participating in the study, and as such was deliberately left open.
However, only 7 of the 42 respondents completed this question. The reason
for this could be attributed to the general aversion to open questions due to
their perceived requirement of additional time to complete, or other factors
including the respondent not being in a position to be aware of their company
strategy, it being a confidential matter, or simply that there was no specific
strategy attached to obtaining further sustainable investment.
Among those who did complete this question, the responses covered the
same areas. There was not a sufficient volume to warrant coding in order to
demonstrate significance. The strategies highlighted in the responses were:
1. Direct contact and advisory reports on Governance.
2. Client-led and 3rd party funds.
3. Separate Sustainable-Specific Funds.
4. Presentations on Corporate Level Drivers.
Despite the response to this individual question being a small section of those
who participated overall, it provided for a critical addition to the analyses for
this report. The lack of responses demonstrates, as could also be deduced
from the obtained replies, that there appears to be a lack of a strongly defined
strategic approach to attract potential clients towards sustainable investments.

38. The first area, direct contact of clients and provision of reports pertaining to
Governance, could be considered a mandatory undertaking for the
transparency of the client and as such is not a direct strategy for attracting
investment. It may encourage clients to invest in sustainable assets, but only
through insinuation that it’s necessary rather than beneficial in its own right.
Client-led funds can attract investment in so far as the investors have greater
control over the equity placed into the fund. However, the initial investment
still has to be the decision of the client rather than the organization actively
drawing in the investors. It is clearly the case that investment managers would
look to encourage investors to use such a fund, but this was not
communicated through the response to the questionnaire and so could be put
down to one of the reasons mentioned above.
A similar case can be applied to the third area, that of separate and dedicated
sustainable-specific funds. The availability of such a fund to invest in does not
however necessarily constitute a strategy for investing. Whilst it is clear that
you cannot gain sustainable investment without a relevant fund, the lack of
empirical evidence relating to higher yields on sustainable property means
that greater work needs to be done to acquire further investment. As such,
simply having provision of such a fund cannot guarantee investment in it.
The fourth point relates to the drivers for sustainable investment on a
corporate level. As previously demonstrated earlier in this report, it was
identified (Schleich, 2009) that “Image” was the sole driver at corporate level.
Whilst personal presentations, going out and meeting potential investors, can
be considered a strategy for attracting sustainable investment, it is basic and
not descriptive as to the methods used. In fact, as an illustration, a response
to this question consisted of:
“We convince our clients that on the long run, it is a good idea to invest in
sustainable buildings.”

39. Following a letter sent to Lord Mandelson for this dissertation in connection
with his involvement with sustainability and setting up the Low Carbon
Construction Innovation and Growth Team, the reply from the Department for
Communities and Local Government also could not indicate clear and
effective incentives (See Appendix B)
In response to the enquiry about incentives for commercial property owners
and large corporations, among the measures that were quoted to, “encourage
companies and investors to be sustainable” included: -
• Building Regulations
• Planning Policy
• EPC’s (Energy Performance Certificates)
• DEC’s (Display Energy Certificates)
• The Code for Sustainable Homes
The inclusion of building regulations and planning policy cannot be considered
incentives, as these are mandatory and therefore are upheld regardless of the
intention of those involved. The Code for Sustainable Homes is also not
relevant to the type of real estate and portfolio asset considered in this work.
As for energy certification, many within industry only find DEC’s to be a valid
element. This view is echoed by an interviewee for this project, Mr Esme
Lowe of Climate Change Capital who says, “many in the industry consider
EPC’s to be de-merited tool, because it’s based on theoretical consumption of
energy as opposed to focusing on absolute operational consumption over a
period of time. As a result, given a choice over an EPC and a Display Energy
Certificate, the DEC should win every day and that’s the one that should be
made mandatory in the UK market. “

40. Q11. In the last financial year, what percentage of your transactions
involved sustainable properties?
Not all of the respondents were able to provide comment on this and so the
sample for this question consists of 24 participants.
The question was included in order to provide an idea of the current market
for climate change adaptive real estate and to give an indication of the
amount of sustainable properties moving within portfolios.
All of the replies to this question quoted figures of either 5% or 10% exactly.
The question was deliberately open and non-specific in order to encourage
this type of response. The reason for this was that many of the respondents
may not have exact numbers available to them, or if they did may not be
inclined to find the details for provision in this questionnaire. As such, the
broad and basic answers better reflected the percentage proportions of these
transactions.
The low number of 5-10% was expected, but for different reasons. The first of
these is that this sort of fund and asset portfolio is still relatively new, indeed
some of the respondents cited in their answers that they were unable to
provide details as their portfolio or fund specific to sustainability was not set
up in the previous year.
The second potential reason for this reflects the reluctance in investors to
commit to property assets that may initially command a higher price yet do not
have sufficient evidence to suggest a greater return will be gained yet. This in
turn links in with the possibility that many of the companies that claim to be
involved with sustainability are only doing so on a small scale in order to fulfill
any perceived social pressure to be showing environmental awareness.

41. 6. Formal Interview Responses
The interviews for this paper were undertaken to supplement to the
questionnaire above, with the participants being chosen for their in-depth
knowledge of the subject matter, being members of varying organizations with
different approaches to sustainability and working at the top of their respective
professions.
The interviews were semi-structured, that is, there were certain subject areas
that were intended to be explored and were common to all interviewees,
whilst allowing for open discussion and opinion to be expressed based on
each individual area of expertise and knowledge within their own fields.
6.1 Paul McNamara: BSc (Hons) PhD ASIP FRSA OBE
PRUPIM – Prudential Property Investment Managers.
Director: Head of Research.
Mr McNamara chairs the Institutional Investors Group on Climate Change
(property) and co-chairs the United Nations Environment Programme Finance
Initiative (UNEP FI.)
PRUPIM’s involvement in sustainability came about as a result of Prudential
Portfolio Managers Worldwide (a predecessor to M&G investments) launching
green equity funds, as well as development surveyors and fund managers
within PRUPIM reacting to activity from property companies involving
corporate responsibility reports.
As lead author of the first sustainability report, gathering data and researching
developments in the area of sustainability, it was found that there were
implications relating to investment. Mr McNamara commented, “…if this new
phenomenon was going to impact value, and asset performance, we needed
to understand it…by understanding it you should be able to exploit that
knowledge.”

42. The awareness of sustainability as an impact on investment returns is not
simply a method to ensure profitable yields. As highlighted in a report to
church investors, he goes on to say that, “understanding that does not make
you a responsible investor, it makes you an intelligent investor, because you
know that accelerated depreciation, increased risk premium leads you to a
higher capitalization rate and to a lower value.” (See Appendix C)
PRUPIM have introduced compulsory initiatives in order to embed the
practice and understanding of sustainability within their company and
outwards to their clients. They currently have around £14bn in assets, of
which those stakeholders and clients involved are required to respond to a set
of questions in order for PRUPIM to, “… assess the extent to which the assets
are “future-proofed” against a changing environmental context, with the
understanding that a property may suffer increased risk or accelerated
depreciation.”
When questioned about the change in attitudes towards sustainability,
particularly from a business perspective, Mr McNamara is confident that it is
becoming an increasing consideration. He says, “My observation of how the
industry has responded to this issue over the [past] 10 years is that they have
as a generality gone from not believing that there is an issue at all to…
realising the regulatory structure policies are coming in, a risk of raising
minimum standards and some investors and tenants prefer greener
buildings.”
Another important role is that of the client seeking sustainable options from
providers such as PRUPIM. This brought up the impact of the FTSE4GOOD /
GJSI Indices, as well as client organisations and watchdogs surveying those
established in the industry. Initially when results were being published, large
organisations were finding themselves left out completely or low down in the
tables. This effect on corporate level drivers (i.e. Image) for these companies
produced an important reaction.

43. Mr McNamara commented, “Nothing exercises the board of a major
responsible company [more than] to find yourself in the bottom quartile of
anything… If you can start getting potential sources of capital saying, ‘Where
did you come in the survey?’… then that really starts to have an impact.”
The area of sustainability has been developing in understanding in varying
professions within the industry. Fund managers did not initially see the
relevance of it to themselves, considering it to be an area specific to the
construction side. However, as Mr McNamara points out, only 2% is new-
build, the other 98% is existing stock, which is why the implications of climate
change adaptive property affects current portfolio values.
A pertinent point raised during the interview related to incentives to act and
invest in a sustainable manner. Known as the “Split incentives issue, “ it
presents a practical barrier to both investor and occupier. The example given
was a shopping centre, where some parts are common, others individually
occupied:-
“If PRUPIM goes in and does some work to the common parts, that’s cost us
money; where do we get the return back? It might be electricity usage is
reduced, so the service charge is lower, can we convert that reduction in
service charge to an increase in rent if the occupiers have a certain amount
available for occupation costs?”
“The tenant has exactly the same problem; [if they spend money on the
improvements] then at the end of the lease that benefit reverts to the landlord,
so what’s their incentive? There’s some really creative thinking that needs to
go on somehow about how to holistically manage buildings in a way that
brings those interests together.”

44. 6.2 Jonathan Tillson:
DEFRA – Department for the Environment, Food and Rural Affairs.
Head of Sustainable Development.
As head of the Sustainable Development Unit at DEFRA, Mr Tillson is
responsible for the UK’s Sustainable Development Strategy and overseeing of
its domestic implementation. This includes helping to achieve sustainable
communities, building and construction.
With DEFRA being part of Government, Mr Tillson was keen to demonstrate
both innovation and agreement with the private sector. In terms of how they
incentivise sustainable behaviour, he replied, “Leading by example… It’s no
good for Government to preach at people about becoming sustainable if we
don’t try to do it ourselves.”
In contrast to the average questionnaire results which indicated rent value /
void period and building location as the most important aspects, Mr Tillson
was adamant that energy efficiency, waste and water were of top priority. This
was because he saw these as the areas of, “…Most opportunity, but also
most need.”
He went further, adding, “There are good business reasons for it. We’ve
saved quite a bit of money through installing efficient ways of regulating
electricity. There are strong business reasons, [it’s] not just to show strong
leadership.” This view is echoed by those in the private sector, including those
of the other interviewee’s for this report, indicating that despite an overall lack
of availability of empirical evidence, there is money to be saved, and made,
from acting sustainably.
In terms of sustainable construction, DEFRA hold to their intention to lead by
example: Nobel House is their flagship office and was redeveloped with a
purposefully sustainable focus.

45. The aim was to achieve a BREEAM
excellent rating. It went on to gain the
highest ever BREEAM rating for a
project of its type, was named
Sustainable Building of the Year by
the RICS in 2006 and achieved a
70% recycling waste level and 40%
higher water efficiency level than
normal. It was also a learning curve
for the department in terms of
realising the work needed to produce
such a building.
The undertaking of the refurbishment of this building allowed for a first-hand
understanding of the practices being done and issues regarding sustainable
construction. Mr Tillson added, “You can raise standards of new buildings
relatively easily, but when it comes to refurbishing or retro-fitting, it’s that
much more challenging.”
When questioned about the ability that government has to change opinion and
drive sustainability, Mr Tillson explained, “There are ways the Government
can help; by raising awareness, encouragement, exemplifying and sharing
practical experience and enabling others to make change. Possibly using
environmental controls or taxes.”
“There are a spectrum of controls but it’s important to try and understand the
motivations of those it’s trying to influence, and respond accordingly rather
than trying to adapt a, ‘One size fits all’ approach.”
This sentiment aptly demonstrates the recurring challenge that has emerged
in this area. That is, the scope of the issue is so vast, and affects such a
demographic, that it seems that at present there cannot be, or is not, a
consolidated action to the benefit of all those involved.

46. 6.3 Esme Lowe:
Climate Change Capital (CCC) Property Fund
Partner.
Mr Lowe is a founding partner (along with Tim Mockett) of Climate Change
Capital’s Property Fund, which raises and invests equity into sustainable real
estate. Prior to approaching CCC to start their property fund, Mr Lowe was
Head of European Real Estate with Capital Trust Ltd where he managed £300
million of funds and 1 million square feet of property assets.
The fund started by Mr Lowe is one of a handful of ventures (including others
by Sarasin and Credit Suisse) in “Green Equity” funds, with CCC’s being
launched in 2008. Climate Change Capital, the property fund included, were
responding to the movements in opinion within the markets, seeing an
opportunity in the low carbon economy.
Mr Lowe said, “It recognized the change from high energy - low carbon, to low
carbon high energy costs, i.e. the transition to low carbon will necessitate the
private sector to make it happen, therefore there is a unique opportunity and
role to build a business as part of that process.”
In accordance with typical portfolio management practice, CCC have a spread
risk over different asset classes, with 50% retro-fit, 25% pre-let development
and 25% “standing investments”, that is, existing energy compliant buildings.
The advantage and theory behind this method, as opposed to low carbon
company share buying, is that a discount can be sought on the initial property
acquisition before refurbishing for a higher additional value to the portfolio.
As Mr Lowe explained, “Putting it simply from our point of view, we might be
able to buy a very good refurbishment opportunity at 10% net initial yield, and
once we’ve done the work, made it a high C or B energy rating and it’s fully let
and mature, that might be worth 7% or 6.5%, so its an attractive area for
generating above average risk returns.”

47. When questioned about social pressure to act sustainably, and motivations for
a variety of organisations to behave the way they do within the arena of
sustainability, Mr Lowe acknowledged that there is no single, clearly defined
mindset between institutions. He commented; -
“There’s no black and white answer… Some market leading companies that
are focused on corporate social responsibility just think it’s the right thing to
do. At the other end of the spectrum there might be global financial
companies who will only do it if they believe that it’s the right thing to do
financially, because they have a lower operating cost and make more profits.”
He went on to add, “The regulatory framework is there… there are existing
European laws that require compliance to certain standards specifically within
the built environment, you’ve got shareholder and stakeholder demand, a HR
component and actually you can save operating costs and make money, so
when you put all those bits of the jigsaw together, ‘why wouldn’t you?’ would
be the question.”
Despite it being early days in terms of the property fund managed by Mr Lowe
at CCC, he is confident that there are already signs of a financial advantage
to the new portfolio… “…I don’t think we have any doubt about that at all. Both
our assets are in top quartile energy performance, we think that will make
them more attractive to potential occupiers and they should trade at a better
price. Our investment thesis is around collecting a number of assets that have
those features so we think we should get a portfolio premium in addition.”
What about the reaction from the occupiers? Do they think it’s worth it and
how have they responded to the sustainable property? “Very supportive, very
focused and willing. We’ve achieved significant improvements in the
building… They’ve been extremely focused on that we’ve been doing. We
managed to secure a £400,000 sterling rebate… and that’s put us in a very
good position with them to achieve objectives.” (Appendix D)

48. How do see property values being affected within the next 5 –10 years and
how do you feel the fund will perform?
“We will always aim to out-perform the market. In the medium to long term,
real estate will do reasonably well as an asset class… We think our
investment philosophy is the right one, because it’s based on working with
occupiers to produce a product that is future-proofed and will therefore, on a
balance of probability, outperform the market over a period of time.”
“…I think now most people understand that actually it would make sense that
you try and look after your resources better. The argument is not now about
the science, it’s about the mitigation and the adaptation. I think in the medium
to long-term I’m pretty encouraged by the focus and adoption of these issues.”
Shortly after the completion of this interview, Climate Change Capital Property
Fund made its close on the 8th February 2010 with £69 million in equity.
In a press release, Mr Lowe’s co-founding Partner, Mr Tim Mockett said,
“Investors are becoming increasingly aware of how the future regulatory
landscape will look and are acting accordingly. The trend to more energy
efficient buildings, driven by legislation and the wishes of occupiers and
investors, is irreversible."
(CCC ltd, 2010)

49. 7. Conclusions
The process of this dissertation was aimed at establishing whether the
increase in sustainability as an issue within the built environment has made
an impact on investment trends and corporate behaviour, therefore affecting
portfolio values and profit returns.
In order to ascertain this, there were the following objectives: -
• Determine any current company policies on sustainability.
• Investigate relationship between clients’ business needs and asset
management strategy.
• Establish motivation for investing in sustainable assets when adding
to a portfolio.
This investigation found that there are an increasing number of companies
and organisations that include sustainability within their policies, particularly in
the last two years. Corporate Social Responsibility is currently an important
area within larger companies, with sustainability gaining an increasing focus
and dedicated reports being produced on the subject.
Following a letter to HRH the Prince of Wales regarding his early and
continued involvement in the area of sustainability for this report, the
“Accounting for Sustainability” document and case study examples provided
by the Prince’s Charities show how policies and practices are being
implemented, which was the intention of the first objective. (Appendix E)
The “Connected Reporting Framework” (CRF) was developed to allow
companies to provide consistent and comparable information that is
strategically important to businesses. Aviva, Carillion, Generation Investment
Management LLP, HSBC, Marks and Spencer Plc and many other leading

50. names have been involved in the project and in producing reports using actual
data. The aim of the framework is to encourage further involvement in the
area, using existing participants to lead by example, and shows how
sustainability policies are becoming more commonplace.
Confidential information provided by other contributors to this paper also
demonstrates how company policies regarding sustainability are being
adhered to and impacting upon client organisations. This ranged from private
investors withdrawing from individual UK assets, to companies requesting
actions from high-awareness clients in global markets such as China and the
Far East.
Relating to the second objective, the practice of asset management has
begun to incorporate sustainability as part of its necessity to provide the best
service to and from the client through their assets. This would appear to be in
direct correlation with the current attitudes found in the questionnaire
responses to this report.
With sustainable assets being more desirable in a market where carbon costs,
portfolios are being adjusted accordingly. Across all fields, private and public
sector, sustainable assets are being acquired, and those less so are being
released, in order to lower operating costs, provide better transport options,
drive up overall portfolio values and improve corporate image.
As described in the interview with Paul McNamara, clients are now
approaching their providers, often with sustainability being the first question.
Companies providing funds like that of Esme Lowe’s at Climate Change
Capital exist because there is a market with investors aiming to be
responsible and see returns from that.
The link then between asset management and client requirements involving
sustainability, although a small part of a much larger field, is clear and
seemingly continuing to grow.

51. The final objective of establishing motivations for investing in sustainable
assets has proved the most complex. The apparent, “worth” of sustainability is
open to interpretation and varies tremendously depending on to whom you
are talking and their own individual outlook and involvement in the industry.
In relation to new builds, for those in a position to do so, the opinion very
much appears to be, “Why wouldn’t you make it sustainable?” As found by Mr
Tillson at DEFRA and Mr McNamara at PRUPIM, new constructions are much
easier than retro-fitting, and with 98% of the UK stock already in existence,
new builds are only a small part of a bigger problem in terms of sustainability.
There is the motivation in some cases, often by individuals but now appearing
in larger organizations, that it’s just, “the right thing to do.” This may well be
the case, and indeed is also enough of a motivation for people of this outlook
to get involved and commit to an investment. However, the difficulty lays in
how to incentivise the sceptics as opposed to the already converted.
For many, this is where the valuer plays a large role. Understandably, valuers
are not keen to put a higher price on a sustainable asset with the current lack
of empirical evidence and benchmarks to make comparisons. Although
studies such as those by Eichholtz et.al (2009) go some way to showing the
difference in values of sustainable real estate, some criticisms have been
made, suggesting that there were any number of variables that could have
improved individual asset values.
Because of this lack in definitive “evidence” as of yet, valuers generally
remain firm in predicting or making higher valuations. The problem is that as it
is still an emerging market, there exists the dichotomy between the valuers
who look retrospectively and the fund managers and investors who are
already looking forwards in hopeful anticipation of being proven correct.

52. Despite this need for a definitive answer on a macro scale, there are already
signs of clear incentives and motivation in sustainable assets. These include
the savings on occupying costs such as energy bills, as well as the overall
perception of sustainability and its positive impact on corporate image.
As indicated in question four of the survey for this paper, sustainable
properties already generally involve a premium over those that are not, a
premium which almost divides equally between those who are willing to pay it
and those who will not.
The issue is not whether they cost more, but if they are worth more, which
brings up further implications, or can be simply put down to the adage that
something is worth whatever someone is willing to pay for it. The markets will
dictate this fact at any given time, but for now at least, it seems that
sustainability commands a premium and demand is still on the up.

53. 8. Further Research
As stated during the limitations to this work, there is more that needs to be
done in this field that was not within the scope of this report and its time
constraints.
The paper, “Doing Well by Doing Good,” (Eichholtz et.al, 2009) was
instrumental in providing relevant data from a meaningful sample on the
difference in values of sustainable assets, despite the criticisms of it. A further
study of this kind on UK stock would provide for a useful benchmark for the
UK market.
Another area with relevance to the valuation of sustainable property would be
the agreement of an industry-wide set of indicators in order to form
meaningful comparisons between properties. With an agreed list of areas and
elements, complete with a form of pointing system, occupiers and investors
would be able to actively compare and consider each individual asset.
Further research in these areas would allow for a more comprehensive and
quantitative study to be completed. The Investment Property Databank (IPD)
already compiles and publishes performance analysis information for use by
professionals and stakeholders in real estate. As such, developments in the
suggested areas would be of great value to both a variety of industry areas
and academics alike.
Another area that would benefit from further research is creation of a method
for a holistic benefit to stakeholders of sustainable property. Any work done to
a property in order to make it more sustainable and efficient usually results in
a cost from one party, with the benefit shared by another, or undertaken
purely for self benefit with potential for conflict between landlords and tenants.

54. For example, the benefit of lower operational costs would initially benefit the
tenant, but should the landlord benefit from the changes, especially if they
paid for the alterations? Some may view it that by owning a building with lower
occupancy cost, they are already benefiting through potentially being able to
rent the property more easily. Landlords, however, may only view fiscal
reward as suitable benefit for improving the asset. This may not work though if
the tenants pay for the work in order to lower their occupancy costs.
As such, research undertaken to find common requirements from both the
landlord and tenant side would provide for a mutual beneficiary method. In
turn, the possibility is that more individuals, from both sides, would potentially
be more open to providing for or funding sustainable improvements to their
properties, which would not be unique or restricted to any one market or asset
class.
As highlighted by this work, there is also a need for clear, defined incentives
towards sustainable investment. The identification of mutual benefits (as
outlined above) would be an aspect of this, but there is also work required on
how to incentivise groups such as institutional investors across whole
portfolios, not just single assets. Research of this type would require a large
amount of co-operation from industry, with potential for a substantial test
period of any method agreed upon by contributors.
Future research of a quantitative nature would be highly beneficial. Although
this will require some time, particularly for figures to be comparable outside of
a recession period, the ability to source meaningful data for use in valuation,
acquisition, marketing and investing, would in itself be a valuable addition to
the current information pool available to those in the industry.

55. References
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The Business Case for Sustainability in the UK Property Sector, Watford, UK,
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Eichholtz, P, Kok, K, Quigley, J, 2009, Maastricht University and University of
California, Berkeley, RICS Research, Doing Well by Doing Good; An Analysis
of the Financial Performance of Green Office Buildings in the USA
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http://www.sd-commission.org.uk/pages/built-environment.html
[Accessed 17 October 2009]
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Management, Exploring Responsible Property Investing: a Survey of
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Property Occupiers and Investors, Kingston University Press, UK.
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56. Social Investment Forum, 2003, Report on Socially Responsible Investment
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Pivo, G, Fisher, D. J, 2009, Working Paper: Effects of Walkability on Property
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63. Appendix A
Questionnaire sent to Research Participants and
Original Dissertation Proposal
Your Job Title:
Area of Business:
1. How relevant is sustainability to your companies core business?
a) Essential
b) Highly
c) Moderately
d) Partially
e) Not at All.
2. What % of your clients express an interest in sustainability?
a) 0-10%
b) 10-25%
c) 25-50%
d) 50-75%
e) 75-100%
3. What areas are of most concern to your clients? Please could you
place a number next to the answers to indicate the top three, 1 being the
most important.
a) Energy efficiency / Performance Rating
b) Waste / Water Consumption
c) Building Functionality / Flexibility
d) Location / Transport Ease
e) Rent Value / Void Period
4. Are your clients prepared to pay a premium for sustainable assets,
either to purchase, invest or occupy, or do higher prices make this
inhibitive.
a) Yes, they are prepared to pay more.
b) No, higher prices are preventative.
c) Other (Please Comment)
5. Are you involved with "Green Leases" and if so, how?

64. 6. Are shareholders consulted or directly informed of matters regarding
sustainability?
a) Yes
b) No
c) Don't know
7. Is your company eligible or a member of the FTSE4Good or DJGSI
Indexes?
a) Yes
b) No
c) Don't know
8. How would you consider an investors attitude to be affected by a
portfolio of sustainable assets?
a) Considerably Positive
b) Marginally Positive
c) No difference
d) Marginally negative
e) Considerably Negative
9. Would you be in favour of a government tax incentive regarding
sustainability?
a) Yes
b) No
c) No Preference.
Please comment further:
10. What strategies do you have in place to attract sustainable
investment?
11. In the last financial year, what percentage of your transactions
involved sustainable properties?
12. In your opinion, what aspect/s of sustainability are most important?
13. On a scale of 1 - 10, ten being the most positive, how satisfied are
you with your own office building / workplace?

65. Original Proposal
Mode of Study: Full Time.
Day of Attendance: Monday & Thursday.
Course: BSc(Hons) Building Surveying.
Rationale.
Sustainability within the construction industry is not a new concept. The drive
and focus behind this subject however, is ever increasing alongside
government policies relating to climate change and reducing our carbon
footprint.
Commercial property within the UK accounts for around 50% of emissions,
which counts as a substantial portion of the reductions that are currently being
targeted. Despite these high levels of emissions, the “demand” side of this
stock, i.e. the investors and occupiers, have not changed their requirements
for the available space.
Asset management is also an established concept. Research carried out by
DTZ retail estate advisors, estimates that between 5% and 8% of institutional
assets are held as commercial property, which has created a market in which
to have these assets strategically managed in order to create profit and
support each institutions core business. The rationale therefore is to show
how creating a unified model between sustainability and responsible, strategic
asset management, can change investment behaviour and ultimately affect
the value of property portfolios.
Two of the main driving forces within corporate organisations are public
perception and success through profit in business. It is therefore theoretically
achievable to alter investment behaviour by appealing to both these aspects,
through suggesting that by taking a proactive approach to creating a
sustainable portfolio, more outside investors will be encouraged by the desire
to be associated with “green credentials,” thus increasing the value.