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Buildings account for 40 percent of energy consumption overall in the EU, with 36 percent of the greenhouse gases generated within the EU attributable to this sector. Therefore, it is crystal clear: if the EU is serious about achieving these ambitious targets, including a reduction in emissions of 55 percent by 2030 in comparison with the levels of 1990, then buildings simply have to be made more energy-efficient. And with speed. What’s more, all stakeholders must be able to plan for this – and Spain is no exception.
Spain and the energy transition is essentially a history of superlatives when it comes to expanding renewable energies. After all, there is an embarrassment of riches in southern Europe when it comes to sunshine, meaning that solar energy is available practically all year round – something that other countries in central and northern Europe can only dream of. It was only in 2020 that the record-breaking Núñez de Balboa PV power plant in Extremadura went into operation. This has an installed capacity of 500 MWp, which can supply 250,000 people with clean energy. Further mega plants are already under construction or in the planning phase.
Last year Spain took a vital, albeit long overdue, step forward in terms of climate protection after the Spanish parliament voted to adopt a new climate protection law. This commits Spain to cutting CO2 emissions by 23 percent by 2030 compared with 1990 levels.
CO2 reductions across all sectors
The energy industry is expected to bear the initial brunt of efforts aimed at cutting carbon emissions. For example, the new climate protection law bans all new permits for the exploration and production of coal, gas and oil with immediate effect. In addition, 74 percent of the country's electricity is to be generated from renewable sources by 2030, while transport and mobility are additional factors taken into account by the new legislation. For example, the new law prohibits the sale of vehicles that run on fossil fuels from 2040 onwards. In addition, there are ambitious targets in the area of energy efficiency, with the new law envisaging an improvement of nearly 40 percent here by 2030. In terms of energy-efficiency measures in the building sector, the national climate protection plan also stipulates numerous measures that will impact the public, commercial and private sectors alike.
For example, the plans include:
- The use of biomass energy for heating
- Geothermal and thermal solar panels for air conditioning in new buildings
- Educating the public about the ways in which they can change behaviours at home to help save energy
- Distribution of heating costs with thermostatic valves
- Conversion of individual boilers to condensing boiler technology
Experts are in agreement that the Spanish building sector has huge potential for energy savings that would have a highly positive impact on Spain’s carbon footprint in the medium to long term. Overall, residential buildings account for 30 percent of final energy consumption in Spain. The housing stock comprises 25 million housing units, around 60 percent of which were built in the absence of any energy efficiency regulations. In the current period from 2021 through to 2030, the Spanish legislature is therefore planning considerable renovation works, which will primarily be focused on building envelopes, with thermal systems forming another focal point of these efforts.
Comprehensive renovation measures conceivable
Therefore, future investors in particular may be responsible for carrying out extensive refurbishment measures that have a significant impact on the property valuation or which have to be priced in by the future investor in advance.
Properties that do not conform with the EU Taxonomy will, over the medium term, be less in demand, although it is not beyond the realms of possibility that the market for such properties could even disappear entirely. As such, the asset value of a property will in future depend to a significant extent on ESG (Environmental, Social and Governance) criteria. In other words, ESG-compliant properties increase the expected return on investment, for example through lower operating costs and longer useful lives, helping them to remain competitive over the medium to long term in the process. The horror scenario of stranded assets can be avoided through ESG compatibility. There is therefore a lot of work to get through for all Spanish companies that will have to deal with disclosure and transparency obligations in connection with their portfolios due to the introduction of Europe-wide ESG rules. In this context, data availability and congruence are becoming the crux of the issue for real estate investors.
The central challenge is that climate and environmental risks have to be documented, meaning that companies are forced to deal with huge data volumes. The relevant information has to be collected, updated and structured continuously and stored in a database. This requires the development of a standardised data framework, which forms the basis for meaningful ESG reporting and the associated valuation of the property.
A uniform database is above all required to make transaction process data transparent and to ensure compliance with the necessary documentation obligations – all stakeholders involved in an investment process need the same access to all data. The development of a standardised data framework represents the basis of meaningful ESG reporting and can help to ensure a resilient property valuation. Evidence such as sustainability risk assessments, environmental reports, certifications and expert assessments are essential for both investors and the due diligence process. While this might sound like a time-consuming, expensive process, this data framework can ultimately help to make sustainability aspects in real estate portfolios transparent, measurable and comparable. And this is crucial.
Integrate smart, digital platforms from the start
However, to achieve this it is necessary to create what is known as a “Single Source of Truth” that can be accessed from anywhere at any time. Because contrary to popular opinion, it is not data availability that is the major obstacle to digitalisation and ESG reporting, but rather the simple fact that data cannot be accessed from a central location and divergent data blurs the picture within the data structure.
These days, digital platforms are so advanced and intelligent that they have become the standard, also in the area of ESG reporting, in the face of an increasing wave of fresh requirements and transparency regulations. There is no doubt that, in an increasingly data-driven world, digitisation is becoming an essential feature of future-oriented corporate governance for ever more companies.
With its technology, Drooms supports not only the implementation of ESG strategies, but also lives out these principles as a business. For example, the company is leading the way when it comes to cutting carbon emissions, with all Drooms servers 100% powered by energy obtained from renewable sources. In this way, Drooms is seeking to play its part in increasing sustainability and climate protection.