ESG and mandatory disclosure – What do these mean for the construction and real estate industries?

EU taxonomy: Sustainable business and ESG-compliant strategies

The 2015 Paris Agreement saw the EU establish strategies to protect the environment and promote sustainable business. Financial markets will now be required to ensure that capital is increasingly invested in sustainable, energy-saving projects. Sustainability criteria should also be accompanied by a focus on project transparency. One outcome of the Paris Agreement is the EU taxonomy, a key element of the European Green Deal. The EU taxonomy defines ESG-compliant guidelines regarding what a project should encompass. Only when a project maintains them is an investor permitted to receive capital for a new project. This will be verified via mandatory disclosure of respective project information.

What challenges will the construction and real estate industries face? The construction and real estate industries will be tackling these developments head-on, because only ESG-compliant projects will receive funding in the coming years. Real estate projects that are not in compliance will see their value decrease, or even be fined, endangering their profitability as a result.

It’s clear that the net worth of properties and their success will be impacted by ESG performance. This makes ESG a central investment parameter which will have to be properly adhered to and implemented by all project participants along the entire value chain.

ESG implementation unquestionably brings uncertainty to any project. And 78% of companies in the construction and real estate industries still feel uncertain about how to properly and effectively handle the EU taxonomy (EY Real Estate – ESG Snapshot). The primary challenges for those working as part of a real estate or construction project include:

ESG data: Properly capturing standardised, relevant ESG data to certify ESG conformity in construction projectsDecision making: Data-supported project decisions that are in compliance with ESG criteria and financial figuresStandards: The introduction of industry-wide standards to make project sustainability measurable and comparableMandatory documentation to verify ESG-compliant projects

The EU taxonomy requires full disclosure of all ESG data regarding construction and real estate projects. These industries will be required to document their ESG compliance in the future, regardless of whether a project involves new, groundbreaking construction, or the renovation of existing buildings. All data will need to be fully disclosed to document how sustainable and energy-efficient a building is, or which materials are used (e.g. wood instead of concrete).

Digitalisation and the new Alasco ESG documentation feature

Because ESG will have a direct impact on the success of future projects, now is the time to start taking a holistic perspective when it comes to their documentation. This means linking the ESG success factor to financial numbers such as cost and income to make the right strategic decisions.

For real estate companies, mandatory documentation will require the storage of all kinds of paperwork needed for ESG audit. Its sheer volume could be substantial during larger projects, which could potentially mean losing track of documentation. This can be avoided by centrally storing it, allowing quick and easy retrieval any time investors have a question, or when certification is due.

Make time-intensive digging around for documents and information a thing of the past. Alasco’s ESG documentation lets anyone in the real estate industry who’s working on a project digitally gather and store their ESG data in one place. It’s at-a-glance, and a great foundation for making the right decisions in future projects. Alasco delivers an ESG document checklist of key EU verification data in accordance with the EU taxonomy. Documents can be quickly and easily structured into selected categories, and retrieved during a project at any time. Alasco’s new ESG feature is an important first step towards a holistic understanding and intelligent linking of the elements that will make any future real estate project a success. Get the most out of Alasco’s integrated view of your costs and earnings, including how ESG factors impact your projects, as you use its all-in-one solution to actively manage each of these key elements towards success – today and in the future.

• 78% are unclear about the proper use of the EU taxonomy*
• 55% of those surveyed are currently working on implementing the reporting and disclosure requirements of the EU taxonomy*
• 100% of those surveyed believe that sustainability will be a key element of product supply and demand in the future*