Traditionally at the BBP we’ve always focused on direct investment in real estate, working with property companies, REITS and fund managers, providing them with practical tools to improve the sustainability performance of their assets.

Given that commercial real estate is one of the sectors where the greatest (and most cost effective) carbon emissions savings can be made, policy instruments and market drivers have typically focused on property owners and developers.

Over the past 5 years we’ve seen a proliferation of environmental policy which directly impacts property ownership e.g. Part L of Building Regulations, Energy Performance Certificates, the CRC Energy Efficiency Scheme, the Energy Savings Opportunity Scheme and most recently Minimum Energy Efficiency Standards.

Coupled with regulatory drivers, we’ve also seen a growth in voluntary market tools and standards which measure and benchmark the environmental performance of commercial real estate.

At an asset level there are certification systems such as BREEAM and Ska, and benchmarks to compare performance such as our own Real Estate Environmental Benchmark.

Then as you move up the investment hierarchy to a company or fund level, initiatives such as GRI, EPRA, INREV, PRI and GRESB are having a transformational impact in how commercial property owners report environmental performance to their investors.

It’s fair to say that those making direct investments in real estate have gone through a metamorphosis in relation to their understanding of and approach to sustainability. Leading players are now managing the associated risks to their investments as well as starting to realise value creation opportunities.

However, this is only part of the story…

Debt finance, those that provide loans secured against real estate (put simply, just think mortgages for commercial property), represents over 50% of invested commercial real estate across Europe. It is a hugely popular form of investment with real estate lending now back to pre-Financial Crisis levels and continuing to grow.

In 2014, we saw a 55% increase in lending origination across Europe, comprised of new investment lending, new development lending and refinance lending and 45% of that originating in the UK.

This trend looks set to continue into 2015, particularly given the general lack of confidence in the strength of Eurozone economy throughout 2014, so we can expect lending to play an even greater role in how real estate is financed over the coming years.

Now given the important role lending plays, and linking back to my earlier points regarding the rapid changes we’ve seen in direct property investment, how long will it be before environmental policy instruments and market drivers shift their focus towards commercial real estate lending?

And, more importantly, how well prepared are lenders in understanding and managing the sustainability risks associated with their investments – both in terms of their existing loan book as well as the new lending decisions they make?

To address this issue, during 2014, we established our Commercial Real Estate Lending Working Group which aims to share and develop best-practise around sustainability considerations for commercial real estate lending.

With the support of our Members as well as industry experts Commercial Real Estate Finance Council Europe, RBS, RICS and the Loan Market Association, over the course of 2015 we will be sharing our experience to help lenders understand how sustainability may impact the value of their investment decisions and what actions we feel would be prudent to take to manage those risks.

Firstly, this will focus on risk management practises by exploring sustainability due diligence items a lender might want to undertake in relation to a new lending decision secured against commercial real estate, as well as assessing the risks associated with your current loan book.

Before then moving beyond risk management and looking at the opportunities to drive market transformation as a lender.