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by Stefan Rullktter, Euro on Sunday
Nsustainability has become a key concept of social change, which is linked to a wide variety of objectives. Bundled in the terms environmental, social and governance, or ESG for short, the topic is now at the top of the agenda for many companies. This development does not stop at the real estate industry either.
But how can ESG compliance and the real estate industry come together? And how can the necessary digitalization help the concrete gold industry so that the sustainability criteria are actually met?
In order to find answers to these questions, Sonja Wrntges, CEO of the real estate group DIC Asset, has the CO2 status of her existing portfolio and all new construction projects worked out. From this she wants to develop a system in terms of sustainability.
A process that is making good progress but is not yet complete. When it comes to implementation, however, it helps that the modernity and environmental compatibility of buildings for the attractiveness of jobs and the reputation in the public are increasingly recognized.
In an interview with uro am Sonntag, Wrntges explains what changes are coming to the building sector with the urgently needed ESG conformity – and how she is strategically aligning her company against this background.
uro on Sunday: Climate crisis, Ukraine conflict, high inflation rates – how should company leaders react to the current challenges?
Sonja Wrntges: What distinguishes entrepreneurs is that they analyze every situation and look for, recognize and use perspectives. In our society we have the potential to master the current challenges.
How do you intend to put this claim into practice as CEO of DIC?
We are aware of this responsibility and want to create value for shareholders, tenants, employees – and for society. We design living and working spaces. This succeeds when you combine social trends, technical possibilities and the wishes of your customers into an overall concept with a coherent business model and a clear corporate strategy. And we also take responsibility when it comes to sustainability. The big goal is clear: CO2 neutrality.
What is in store for German companies in terms of ESG and taxonomy?
Climate protection and the fight against climate change are the mega-topics of mankind. You can approach them in many different ways. This often happens with a lot of emotion and passion. My passion, however, is more the facts.
Under what conditions does this change take place?
The Paris climate conference set the global goal almost seven years ago: limiting global warming to 1.5 degrees if possible. In this country, politics has issued: CO2 neutrality by 2045, i.e. in 23 years.
Is this target realistic at all?
There is no question that this goal is very ambitious. Germany has only a fairly small share of global CO2 emissions – around two percent – the entire European Union has a share of around eight percent and China 30 percent. This often leads to the conclusion that it is relatively irrelevant for the global climate how quickly we in Germany reduce emissions and limit the consumption of resources.
Do you have another perspective on this apparent dilemma?
Yes, based on a very fundamental consideration: If the entire world population lived like we do in Germany, we would need three earths to supply raw materials and energy. The answer is even more crass if you extrapolate the lifestyle and consumption of resources in the USA to the world: then you would break five earths. If the world population lived and consumed like the people in India today, it would currently only take up 0.7 times the earth. Countries like Germany are therefore particularly obliged to take resolute countermeasures, because we are currently consuming more than the earth can provide for mankind.
And the former developing countries?
The effort to catch up in less developed countries, in which many times the population of the highly developed countries lives, means hundreds of millions more cars, a predicted doubling of the global building stock by 2050, correspondingly more use of raw materials, consumer and capital goods.
What conclusion do you draw from this?
Some have to stop being overexploited – from five earths or three earths back to a maximum of one, the others must not even get over one from the current low level.
Does the self-restraint also apply in particular to the building sector?
The useful life of a building is on average 80 to 100 years. The vast majority of objects that have to be climate-neutral in Germany in 2045 already exist and are not climate-neutral today. As of the end of 2020, there were around 21 million buildings in this country. The vast majority are residential buildings, around 19 million. The remaining part consists of public and commercial buildings: workshops and heated industrial buildings, office buildings, hotels, restaurants and shops, but also schools, cultural buildings and churches
How important is the renovation rate here?
This is a very crucial point. The refurbishment rate that has been customary up to now in existing buildings is currently only one percent per year. If it stays that way, we would miss the 2045 CO2 target in our sector by many decades.
What does this mean for homeowners?
There are around 16 million single- and two-family houses in Germany. Their ownership structure is very heterogeneous and, above all, the individual economic performance of the owners is very different. Some invest continuously in the maintenance and modernization of building fabric and building services. Others live off their property without making systematic investments in inventory and maintenance. The need for modernization is correspondingly high for this target group.
Demolition, renovation or new construction – what is the best solution for old buildings?
There is no patent recipe. For a holistic view, you have to look at the entire life cycle of a building, i.e. construction including production of building materials and their transport, use and demolition as well as recycling. That’s why you should never make hasty judgments, but carefully weigh up the alternatives.
What is important when it comes to energy consumption?
If one only concentrates on the operation of a property, then room heating accounts for by far the largest share of energy consumption. The energy consumption for air conditioning has been increasing for many years. In contrast, energy consumption for lighting has fallen since 2012 – the effect of replacing conventional light sources with LEDs can already be clearly seen here.
What can real estate owners do?
You should ask yourself three questions: First, what can you do in the property yourself – such as optimizing operations, replacing heating and lighting with more energy-efficient technology, generating energy in the building, for example using PV systems on roofs, renovating the building shell and replacement of windows. Secondly, they should examine what design options there are for gas, district heating and electricity, for example through additional tariffs. The third point is of a purely legal nature: what can I do as the owner, and where is my tenant’s sovereignty at stake – the owner has no direct influence on this, but tenant behavior is of course also highly relevant for the energetic optimization of a building.
This addresses you as a commercial landlord yourself …
From the point of view of a real estate company like DIC Asset AG, with 349 properties worth almost 14 billion assets under management, I could make things easy for myself when it comes to CO2 neutrality: In the coming years, we will consistently develop our own and third-party portfolios so that they are exclusively electrified Objects may still be available with a district heating supply and only use green electricity. Then the buck would no longer lie with us. The reality is more demanding. And our ambition too.
DIC Asset acquired around 60 percent of the shares in VIB assets at the beginning of this year. How do you currently rate this deal?
Exactly the right decision. Especially from today’s perspective. We acquired the majority interest in VIB-VermÃ¤nge at the beginning of April and will now fully consolidate this company with us. We have thus taken a major growth step in the logistics asset class and, in addition to our focus on office buildings, have excellently strengthened the second pillar, logistics. In our own portfolio, logistics now make up the largest part.
How do you assess the office real estate asset class in the long term?
I never gave up the belief that bros mattered again. However, the requirements for modern office workplaces and their surroundings are constantly evolving. So the topic remains full of dynamism. We advise our tenants, create showcases and design attractive buildings and rooms for tomorrow’s work.
Does digitization help?
It can make a major contribution through consistent data collection, collection and analysis, and then through continuous monitoring and control.
Is CO2 neutrality realistic for DIC in less than 25 years?
For us, this goal is achievable. For example, we intend to reduce the CO2 footprint in our own portfolio by 40 percent by 2030 compared to the 2018 baseline. And by the year 2023 we want to bring the proportion of green buildings in our existing portfolio to 20 percent.
Are customers and shareholders involved?
There is a rapidly growing number of investors and users joining our goal and acting accordingly. There are many challenges here: Suitable existing properties are rare and highly sought after. And for the training there is less a lack of capital than of material – and even more so of qualified specialists.
What is your general mission?
ESG management is a compelling and complex task, but one that is economically worthwhile – and that is also lived responsibility for the future.
Leverage must be between 2 and 20
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Image sources: Chris Tille/DIC Asset AG