RICS Draft Guidance Note: Sustainability and ESG in commercial property valuation and strategic advice, 3rd edition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

7 Reporting

When reporting a valuation, the valuer should demonstrate how they have considered sustainability and ESG in their approach, calculations and commentary.

If sustainability and ESG factors are identified and recognised as having an impact on value, they should be reflected in valuation and reported. Red Book Global Standards VPS 3, section 2.2 (l) states that:

'wherever appropriate, the relevance and significance of sustainability and environmental, social and governance (ESG) matters should form an integral part of the valuation approach and reasoning supporting the reported figure.'

In order to comply with good practice in reporting valuers should, where appropriate, adhere to the following points taken from Red Book Global Standards VPGA 8:

- assess the extent to which the subject property currently meets the sustainability and environmental social and governance (ESG) criteria typically expected within the context of its market standing and arrive at an informed view on the likelihood of these impacting on value, i.e. how a well-informed purchaser would take account of them in making a decision as to offer price

- provide a description of the sustainability-related property characteristics and attributes that have been collected.

- provide a statement of their opinion on the relationship between sustainability factors and the resultant valuation, including a comment on the current benefits/risks that are associated with these sustainability characteristics, or the lack of risks and

- provide an opinion on the potential impact of these benefits and/or risks to relative property values over time.

Where there is an identified risk of material obsolescence, the valuer should provide appropriate explanations of the component elements of their valuation as well as specific commentary on the obsolescence impact. An example of this could be the case of an impending statutory date for a review of minimum energy efficiency standards or carbon emission requirements.

In respect of more subjective and intangible sustainability and ESG matters, which a valuer is unable to demonstrate with evidence quantitatively, appropriate commentary should still be included to provide a context and rationale for the valuer's opinion and judgement.