Real Estate Taxonomy – a taxonomy app from Simonsen Vogt Wiig

The real estate sector has a major climate impact. A focus on sustainable construction and real estate management will be important in the period ahead, so that Norway may uphold its commitments in the field of sustainability. Many real estate operators already certify their real estate projects with schemes such as BREEAM and similar schemes, and several real estate operators have also signed the green immediate measures for the real estate sector.

But what exactly do the taxonomy rules mean – and how will they affect your real estate investment?

The taxonomy rules are EU rules that will contribute to a greater share of financial funds being routed to sustainable investments. The EU has established six specific environmental goals against which the investments and activities are to be measured. The environmental goals are relevant both in relation to the construction of new buildings, construction and rehabilitation activity in existing buildings, and with the purchase and ownership of real estate. The taxonomy system is the screening system that will be used to classify whether investments and activities are sustainable or not.

Banks and other financial institutions, as well as large companies, are required to conduct and document due diligence assessments and measures taken to ensure that their activities and investments are more sustainable. The same parties are moreover obliged to report to public authorities and to comply with information requests with regards to how the company is working to fulfil its obligations in this area.

There are several challenges following the new rules. The screening systems are still being developed. Furthermore, the screening criteria are numerous and technical – and it is easy to get lost in the details. The entire screening system is so far also only in English. The greatest impact of the new rules, is that the taxonomy rules have a built-in domino effect.

The real estate sector is one of the sectors where the taxonomy rules will play a very important role. This is due to the fact that real estate investments are largely financed through foreign capital. The bank must evaluate your real estate purchase or renovation project against the taxonomy rules when you request foreign capital financing. The same will also apply when responsible investors and major tenants make decisions on the purchase or lease of real estate. Sustainability is therefore able to influence on the attractiveness of your real estate in the period ahead – both as a rental object and in connection with sales.

To help our clients in the real estate sector navigate, we have developed Real EstateTaxonomy.

Real Estate Taxonomy is a taxonomy application for the real estate sector that gives you a first impression of what sustainability assessments you should undertake and what the taxonomy rules may mean for your real estate project and your real estate company. The app has been updated on the environmental goals and the technical screening requirements that apply to the real estate sector.

Real EstateTaxonomy can be used by companies that are required to report on sustainability goals under the taxonomy rules as a basis for their own reporting. It may also be used on a voluntary basis to test how the screening criteria work out for your business, individual real estate or real estate projects.

By answering a handful of questions, the application generates a report that provides you with an overall assessment of how your new building, renovation project, or your purchase/ownership scores in relation to the taxonomy rules, and where you may prioritise your efforts to achieve a better score.