Review of the 92nd Swiss Real Estate Forum

Clarity for a buzzword
The term "impact investments" is not entirely new, but it is on everyone's lips and, like all buzzwords, is in danger of acquiring the connotation of a marketing phrase. That would be unfortunate, especially in the real estate sector. In hardly any other sector of the economy is the causal effect of entrepreneurial action on the environment and society as clear as in the building sector. This point was made by moderator Christian Kraft. The scientist from the Lucerne University of Applied Sciences and Arts began by providing conceptual clarity by introducing the event with a relevant definition from the specialist literature. According to Kraft, an "impact investment" is more than just a sustainable investment and must fulfill three criteria: The intention of a positive eco-social impact, a positive return on investment and a measurable impact of the effect on the real economy.

"Where do I stand?"
The last of the three points mentioned is often overlooked, but it can be crucial. Without information and data, it becomes difficult, as Stefan Fahrländer made clear in the first presentation of the evening. The founder of the real estate data and analysis company Fahrländer Partner argued that it is not only about using data to determine the success of the impact, but also about making it possible in the first place. "In order to be able to monitor the impact," said Fahrländer, "I first need to know where I stand". This is where the REMMS association comes into play, which was the subject of his presentation. REMMS is a non-profit joint project initiated by Fahrländer and now supported by over 70 companies. It is intended to help investors to determine their own location in terms of sustainability. Many lack the necessary data to assess their own properties, and there is a fundamental lack of comparison with the market. Fahrländer calculates that of the two million Swiss buildings, just 60,000 are Minergie-certified. A further 100,000 buildings have a GEAK energy certificate, and a further 50,000 are each covered by the GRESB or SSREI rating systems. This means that most buildings cannot be assessed. REMMS aims to remedy this situation without competing with existing rating formats. The idea is that users provide the information they have and the system should help to supplement or model any missing information. Assessment, benchmarking and monitoring are machine-supported and therefore cost-effective; the output includes a rating of the macro situation, micro situation and the property as well as fields of action and possible measures. REMMS therefore sees itself as a tool that is intended to underpin decisions with information. Of course, it is up to the player to decide which measures to take. However, analyst Fahrländer warns against an overly one-sided focus: "If you concentrate solely on the issue of emissions in operations, this could lead to misallocations. Last but not least, the gray energy that flows into new construction must also be taken into account.

"More good instead of less bad!"
The emissions generated during the construction of buildings were also discussed by the next speaker. As Head of Real Estate Development Switzerland at Implenia, Marc Lyon is responsible for one of the largest development pipelines in Switzerland. He put the CO² leverage offered by gray energy at three times what is generated during operation. Based on its own projects, Lyon's department has determined where the greatest opportunities to influence emissions exist - both in terms of operation and construction. At the top of the list in both cases is the choice of location. However, planning decisions relating to the supporting structure and the compactness of the building also play an important role. Using the example of the "Rocket" timber high-rise project in Winterthur, Lyon demonstrated how CO² aspects can determine decision-making processes at an early planning stage. Four different load-bearing structures with three different building materials were available for selection, and the implications for emissions were calculated as precisely as possible. The selected timber composite variant promised emission savings of 50% compared to a conventional reinforced concrete construction - also thanks to the prefabrication of elements. Of course, the issue of construction emissions not only plays a role in new builds, but also in renovation projects. Marc Lyon illustrated this with the "Rue du Valais" project in Geneva, where an office building, a "stranded asset", is being transformed into a residential property. Even at the acquisition stage, it was calculated that a core refurbishment with a new thermal envelope and additional storeys would avoid 30% of emissions compared to demolition and new construction. In addition, there are considerable savings of 82% in the operation of building technology.
These are impressive figures that cannot always be achieved. But Lyon sets the bar high: "Impact investment" only starts where the "mainstream" ends, he said. He puts it this way: a traditional investment becomes "less bad" at best through ESG screening or implementation. But the goal must be: "more good". Lyon can quantify the difference: As long as a decarbonization strategy is only concerned with "net zero", the bad is minimized at best. A positive impact can only really be said to exist when the property produces more energy than it consumes. And that is where Implenia wants to go with its developments in the medium term. The decarbonization target along the entire value chain, i.e. including emissions from suppliers and customers ("Scope 3"), is 2040 for its own new residential construction projects, by which time net zero, the "break-even" so to speak, should be achieved. In the case of operating emissions from new buildings, this target should already be achieved by 2030.

Transparency, trust, participation
The desired "impact" is not always as clearly quantifiable as in the case of the developer Implenia, and it does not always consist of a reduction in emissions. This was demonstrated by the last speaker of the evening. Daniel Kusio focused on an aspect that is often only marginally addressed in the real estate debate, namely social impact. He is the managing director of Impact Immobilien AG, which was founded ten years ago, at a time when the topic of ESG was not yet on the agenda. The company invests - quite unglamorously - in real estate that offers disadvantaged people space to live and work. Social benefit is created here through affordability; the maxim is "design to cost". From the outset, planning focuses on the financial possibilities of the institution to which the property is rented. This is often only possible if the municipalities play along. Kusio reports that it is always favorable building rights agreements that make his projects possible - for example with a care hotel in Sutz-Lattringen, or with a facility for assisted living in Aarau. The prerequisite for this, however, is the trust of the municipalities; the transparency factor is essential. "Impact discloses the return on investment to the institutions," explains Kusio. "Transparent models lead to trust and fairness." Participation is another element; future users should not have the feeling that the investor alone decides. "What is the stakeholder group, who lives there, what does the property do?". This is the consideration that guides you - and ultimately this is also the measure of "impact". "We want to get away from: here the bad investors and the bad real estate industry, there the good cooperatives," said Kusio. And it is not the case that no returns can be achieved in this way. The value of the share has increased by as much as 60% since it was founded. Kusio is convinced that projects like his company's would also fit into the portfolios of many other companies and look good there.

Kusio's presentation underpinned an insight that was also echoed in the other presentations: there is no one way to make positive contributions with real estate. Kusio pointed out: "Especially for him as an 'impact' investor, there is sometimes no way around buying a house with oil heating that is difficult to renovate." This does not diminish the importance of decarbonization. But it is also clear that the "impact" for the big picture can take many forms.

The 93rd real estate discussion will take place on June 29, 2023 in Sulgen.