Simon Wyatt from Cundall on staying ahead of green regulation

Simon Wyatt

The EU Taxonomy requires companies to prove their sustainability credentials, while doing no significant harm across six environmental objectives, with minimum safeguarding for social and labour rights. The objectives are: climate change mitigation; adaptation; sustainable use and protection of water and marine resources; transition to a circular economy; pollution prevention and control; and protection and restoration of biodiversity and ecosystems.

New buildings, renovations and standing assets all have their own requirements. By complying with these, developers can prove to potential investors that their projects meet financial disclosure requirements and can be classified as sustainable, attracting higher premiums for their buildings.
Anyone requiring EU finance will need to understand the EU Taxonomy. Even if a developer plans to build an office in Bristol, if it requires European investment, it will need to comply. The regulation comes from the EU, but its application is global and it has been extended to other geographies as other regions have shown increasing interest in it.

The government has run a consultation on a UK Green Taxonomy as part of its financial sustainability disclosure requirements. EU and UK regulations will differ, but are expected to be aligned closely enough to be used as a proxy while we wait for the UK Taxonomy to be finalised.

This is even more important when we consider that a site’s development cycle typically takes five to 10 years. So, projects in planning now will not be completed until 2030 at the earliest, when UK disclosure regulations and taxonomy will be a legal requirement. By not considering them now, developers risk devaluing their asset on completion.

There are other ways to make assets more attractive to investors, by taking a more rigorous approach to align them with the likely direction of future regulations.

The EU Taxonomy is likely to become more stringent. For example, present requirements to report greenhouse gas emissions call for the use of whole-life carbon assessments, but set no limits for the amount of carbon, which are likely to come into force later. Building a robust framework now gets people to start following the process, so they are ready to meet targets in the future.

Green credentials: Eden in Salford complies with the EU Taxonomy sustainability rules

Having worked with several funds including Royal London and Legal & General, we know they wish to see the way things are heading for a multitude of taxonomy and disclosure regulations now and in the future. Using industry trends, we can future-proof a developer’s or fund’s sustainable development briefs to align with these trends. This retains the asset’s value and maximises the investment opportunity as it meets all requirements, now and in future.

For example, Eden at New Bailey, a speculative office building in Salford designed in 2019 before any UK or global definition for net zero carbon building or taxonomy or disclosure requirements, was fully compliant with all EU Taxonomy, Sustainable Finance Disclosure Regulation and Carbon Risk Real Estate Monitor 2050 targets and the UKGBC Net Zero Carbon definition when completed in December, making it attractive to international investors.

As an industry, we don’t have to wait for legislation to drive change. We know what the challenges are and already have most of the solutions. So let’s get on with it.

Simon Wyatt is sustainability partner at Cundall