ESG – what does that mean for owners

The EU and the German government have also declared climate neutrality a particularly important goal for the real estate sector. Many older existing buildings in Germany have very poor energy efficiency and need to be retrofitted. ESG (Environmental, Social, Governance) describes various factors related to the sustainability of real estate. What does this mean for property owners?

ESG describes sustainable, social, and business criteria. These are primarily intended to be integrated into the projects of investors, project developers, and real estate companies. However, some ESG criteria are also very important for owner-occupiers.

First and foremost, sustainability (environmental) is paramount. Social aspects are important if, for example, the property is to be rented to a business. Even from a purely financial perspective, a sustainable concept and climate-friendly working methods can be worthwhile.

Sustainable new construction and legal retrofitting obligation

Resources like gas and oil are not only finite, but also becoming increasingly expensive. For this reason, sustainable new construction and energy-efficient renovations are gaining in importance. Buyers of older, energy-inefficient properties are therefore legally obligated to renovate and modernize them under the Building Energy Act (GEG).

Owners and buyers should have their property's technical and financial feasibility and practicality assessed. While an energy expert can advise you on necessary and practical measures, a reputable local real estate agent can explain which measures will impact your property's value and how they will affect its value.

It should also be examined how and to what extent new construction and energy-efficient renovation are subsidized by the state and banks.

The entrepreneurial owner

Governance – in the sense of corporate management – ​​is primarily aimed at real estate entrepreneurs. However, market-oriented thinking can also be beneficial for owner-occupiers, for example, when the property is to be sold.

Property sellers should seek advice on whether energy-efficient renovations before the sale make financial sense. This is also a matter of timing and will be less of an issue if the property needs to be sold quickly.

However, those planning for the long term should consult energy and real estate experts to determine whether an energy-efficient renovation before selling is worthwhile.

Would you like to know how to retrofit or build your property to be climate-neutral and resource-efficient? Then contact us. We would be happy to advise you.

Notes

For the sake of readability, this text uses the generic masculine form. Female and other gender identities are explicitly included where relevant to the statement.

Legal notice: This article does not constitute tax or legal advice for any specific case. Please consult a lawyer and/or tax advisor to clarify the facts of your individual situation.

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