SAIV brings together industry leaders to discuss ESG within Valuations

16 November 2022. The South African Institute of Valuers (SAIV) hosted the Berg Seminar at the Cathedral Peak Hotel on 28 – 29 October 2022. The place was abuzz as the delegates arrived in anticipation of a great speaker line-up and an exciting programme outlined with presentations, panel discussions, entertainment and engaging networking sessions amongst peers and industry leaders alike.

Taking place over 2-days in the beautiful and serene mountains of the Drakensberg, day one of the seminar featured knowledgeable speakers who provided valuable information around the theme of Environment, Social, and Governance (ESG).

Georgina Smit, Head of Technical at the Green Building Council South Africa (GBCSA), kicked off with her presentation on ‘The Race to Net Zero’ where she spoke to the risk that climate change has on the property sector and the benefits of having net zero carbon buildings.  In her follow-up presentation “The role of GBCSA in Coordinating Compliance Across Sectors”, Smit continued to detail some of the building certifications required such as the Energy Performance Certificate (EPC).

Vice President at MSCI Inc, Eileen Andrew, discussed her topic ‘Commercial Property: Performance Metrics (as they relate to ESG) and highlighted some of the methodologies used to measure returns, noting that we can better understand the potential financial impact of climate risk when we measure it consistently using tools like climate value-at-risk

There was a panel discussion on ‘Sustainability Regulations & Standards: Their Effects on Asset Values’ led by SAIV’s Past President and Spectrum Valuations and Asset Solutions’ CEO Patrick O’Connell. Panellists included SAIV President Malusi Mthuli, Georgina Smit, Eileen Andrew and Clive Munien from eThekwini Municipality. Here, the panellists delved further into a robust discussion about the cost-benefit analysis and some of the legislative frameworks that might result in punitive measures being taken for non-compliance with EPC requirements.

After the panel discussion, the “Cost of Green Building Initiatives” was presented by Danie Hoffman, Senior Lecturer & Programme Leader of Quantity Surveying at the University of Pretoria’s Faculty of Engineering, Built Environment and Information Technology. Hoffman elaborated on the different costings of a green building compared to a conventional one. He also posits that a developer potentially achieves more returns by developing a green-rated building based on the building achieving lower vacancies and higher rental premiums.

As a Professional Valuer himself, Laurie Pool of Suid-Kaap Waardeerders spoke directly to the audience as he wrapped up the 1st day with his topic “Valuation of solar and wind farms – A valuer’s perspective. Pool explained that when valuing solar and wind farms, you are valuing a lease, and in South Africa, leases are valued on an income approach. However, the challenge remains data availability, as most lease information is confidential.

The seminar’s second day kicked off with Eileen Andrew’s presentation discussing ‘Market Trends in the Listed Property Sector’.  This fascinating presentation demonstrated the depth of market information that MSCI gathers and analyses across market sectors and geographical areas.

Danie Hoffman delivered a presentation highlighting the differences between a conventional commercial building and a “Green” building regarding cost-to-build, running costs, net profit, and capitalisation rates. Using available and current market information (including that from MSCI), Hoffman demonstrated that “Green” buildings consistently provided greater returns on investment.

The final presentation had the topic ‘Land without Good Grass is Worth Nothing’ presented by Dr Francois Deacon, Senior lecturer at the University of the Free State’s Department of Animal, Wildlife and Grassland Sciences. Deacon stressed the importance of being knowledgeable about a farm’s plants and species composition as this ultimately influences the value of the property.  Deacon also shared his knowledge and experience of the research he has conducted in Africa and across the globe into natural habitats and their importance in preserving wildlife. The picture he painted was definitely not pretty, and it highlighted the severe issues being faced by the wholesale destruction of these irreplaceable assets by the human race’s lack of foresight.

2030 is fast approaching, and the requirements state that a building cannot be designed if it is not net zero. Therefore, property valuers need to keep ESG/EPCs top of their minds for the medium to long term, as these aspects are of paramount importance for the property industry. After all, net zero is the bridge in the journey to transforming the built environment.