RICS Draft Guidance Note: Sustainability and ESG in commercial property valuation and strategic advice, 3rd edition

Sustainability and ESG in commercial property valuation and strategic advice 3rd ed

2 Role of the valuer

RICS valuers are required under the RICS Rules of Conduct to adhere to a number of professional and social responsibilities, act in the public interest, take responsibility for their actions and act to prevent harm. Valuers are also required to follow the PS and VPS standards in RICS Valuation - Global Standards (Red Book Global Standards) and should also follow the good practice advice in the VPGAs. Specific extracts relevant to sustainability and ESG are set out throughout this guidance note.

The role of the valuer is to assess and report value in the light of evidence obtained. Red Book Global Standards VPGA 8 section 2.6 (c), 'Valuation of real property interests', also states that:

'While valuers should reflect markets, not lead them, they should be aware of sustainability features and the implications these could have on property values in the short, medium and longer term.'

Valuers should have a working knowledge of the various ways that sustainability and ESG can impact value. These may be physical, relate to policy or legislation, or reflect the views and needs of market participants. The valuer should look at evidence from current market analysis, but may also need to consider issues such as longer-term obsolescence and risk. This may include, for example, the capital expenditure required to maintain the utility of the asset.

There may be circumstances where valuers lack the necessary knowledge and skills for a particular valuation, such as providing detailed cost advice or a specialist environmental risk assessment. In such cases, a valuer must reflect these limitations in the terms of agreement or as part of the terms agreed to apply additional specialist expert advice. Red Book Global Standards requires valuers to always operate within their area of expertise.

Red Book Global Standards VPGA 8 section 2.6 also states that:

'Particular care should be taken when assessing or commenting on sustainability and environmental, social and governance (ESG) factors, as valuers may not have the specialist knowledge and experience required. In appropriate cases the valuer may recommend the making of further enquiries and/or the obtaining of further specialist or expert advice in respect of these matters.'