Sustainability and Value Creation Business Drivers for Green Buildings Niall Enright © 2012 ERM / Niall Enright. Sustainability and Value Creation

Credentials Associate at ERM – World’s leading independent Sustainability and Environmental Consultancy Director of Sustainability Peel Holdings for over 4 years – €8bn commercial, retail, leisure, industrial and infrastructure assets 25 years’ experience in sustainability and energy efficiency – Strategic programs: BP, Ford, Unilever, Hilton, Skoda, Walmart/ASDA – Primarily focusing on the alignment of sustainability to value i.e. with FD

Asset Developers / Creators Rarely operate assets thus driven by CAPEX not OPEX Industry skills and expertise weak (e.g. Architects, QS, M&E) Conservative attitudes and regulations deter innovation Low penetration of sustainability rating systems Valuation profession doesn’t assess sustainability Tenants rarely pay a premium (want cost-neutral/negative outcome) Landlord/Tenant divide impedes investment and sust. Operation Yield driven by market supply rather than asset attribute The challenging state of affairs Asset owners / operators © 2012 ERM / Niall Enright. Sustainability and Value Creation

Does this feel familiar? To clearly demonstrate that sustainability delivers increased asset value. To move this understanding from the “early adopters” to mass market. Why act and why now? Our core challenges as a conference © 2012 ERM / Niall Enright. Sustainability and Value Creation

External Factors Regulations driving us to “zero carbon” assets – game changer EU electricity costs projected to rise by 22% by 2020 (vs. 2010). Rapid rate of technology innovation will make sust. options cheaper Public and policymaker sentiment continue to harden Accelerated depreciation & shorter more costly refurbishment cycles Stranded assets – leading to longer voids or decreased rents Investor become selective – particularly for longer-term portfolios Yields decline at faster rate than originally envisaged. The “train” that is bearing down on our industry Implications for asset owners © 2012 ERM / Niall Enright. Sustainability and Value Creation

There are many sources of value from a sustainable property. © 2012 ERM / Niall Enright. Sustainability and Value Creation Quantifying the sources of value

This simple example demonstrates how a sustainability effects can lead to a large impact on value. © 2012 ERM / Niall Enright. Sustainability and Value Creation A simple worked example

© 2012 ERM / Niall Enright. Sustainability and Value Creation Conclusion: Sustainability aligns with value creation Sustainability is material – The impacts on value are considerable The skills we need are primarily financial, not technical – We need to understand whole-life costs, IRR, NPV, marginal costs, yield etc. – The language of persuasion is in €. $ or ¥ - we need to become fluent We need to challenge our industry’s conservatism – Otherwise we won’t get off the track on time! Above all we need a mind-set that this is an opportunity – All change creates winners and losers – by understanding that change we can succeed