With the cost of energy rising, and energy performance increasingly prominent in UK government policy, the debate on carbon-neutrality will soon be reignited.

On 1 April 2018 it will be unlawful to let a UK commercial property with an Energy Performance Certificate rating of F or G. That, with few exceptions, is a simple fact. As an industry, we have less than six years to confront the issue and achieve widespread compliance.

t is important to understand the requirements of the 2011 Energy Act. The legislation is clear. It places the onus upon the landlord to have the rating of their buildings assessed, and to ensure that remedial action is undertaken and completed before the 2018 deadline. Forward thinking investors are already reviewing their portfolios.

More ambitious targets to follow

However, there is more to this challenge than disposing of the asset or doing the minimum required to achieve compliance. Recent UK governments have set our economy on a path towards 80% carbon reduction by 2050. This is an enormous undertaking, considering that commercial property produces an estimated 18% of the UK’s carbon emissions. The April 2018 deadline for the eradication from rental stock of F and G certificated buildings is just one stepping stone towards achieving that long-term goal. There will certainly be others.

The question for property owners is whether to react to compliance criteria on a short-term, piecemeal basis, or treat carbon-neutrality as a strategic portfolio goal. Anecdotal evidence continues to suggest that the early adopters of carbon-neutral building performance enhancement technologies will often fail to achieve a noticeable return on their green investments. The implication is that occupiers and prospective purchasers still view green credentials as more ‘nice to have’ than ‘need to have’. It follows that investment in sustainable development has, so far, failed to deliver an acceptable return.

It will not always be so. With the effect of the Energy Act taking hold, the term ‘prime asset’ will increasingly imply ‘sustainable asset’.

Changing times

Not only is certification being written into the statute books by governments around the world, but our understanding of the carbon embodiment of construction materials is growing and we have rudimentary tools for measuring in-use carbon emissions. Increasingly respected institutions such as the Carbon Trust’s Low Carbon Workplace Partnership are also now developing standards for low-carbon construction.

However, most importantly, attitudes are changing. Each new generation furthers society’s understanding of the frailty of the ecosystem and strengthens our commitment to sustainability and carbon-neutrality. At the last general election, the mainstream political parties embraced environmentalism as more than just a crowd-pleaser, bringing forth an appetite for localism and sustainability which is now enshrined in an Act of Parliament.

The market is making its intentions clear. It is time for our industry to listen and act for the long-term.

This article is part of Asset Class autumn 2012