So what are EPCs measuring, and what can they tell you about an asset?
KMS: The important thing to bear in mind is that when you’re talking about energy performance, you’re not talking about fossil fuel related stranding: they don’t run in parallel. The best data we have around the world is EPCs, but it’s quantifying a slightly different problem.
This is because EPCs are designed to provide an indication of how efficiently your building uses energy, which is an important contributor to reducing overall emissions. What they do not necessarily measure is the reliance on fossil fuels in energy use.
KMS: Yes, you can have properties that are BREAAM excellent, and could be EPC rated between A and D, but they are still very fossil fuel reliant. For example, removing an air source heat pump and replacing it with a gas boiler can bring your EPC performance up because the underlying software tool recognises this as net benefit. But if you’re looking at climate-related stranded asset exposure – and want to reduce the carbon emissions associated with your asset, the performance rating should go down.
Some of my criticism of SBEM is unfair, as it was designed to be inherently simple and quick - in order for assessments to be conducted quickly. In doing so, it is reliant on the data available when the assessment takes place and when the data is not available, assumptions are made. SBEM has evolved during the lifetime of EPCs leading to considerable improvements. However, this reveals an additional problem: what happens to older EPCs when they are re-examined? EPCs in the UK need to be renewed every 10 years, and there can be significant volatility in the original assessments.
PG: There’s clearly an opportunity for RICS here, because a lot of its professionals are involved with doing EPC assessments. As a valuer, I know that it’s difficult to put a value on a property plus or minus five percent. You would have thought it would be easier to pin a certificate on a building, but the data would suggest its almost plus or minus a grade. The data needs to be more consistent, more rigorous and more comprehensive.
Martin Haran: One of the big challenges is having meaningful data around the levels of energy consumption, carbon consumption and the carbon intensity of building. This is where the CRREM  project can add value to the decarbonisation agenda. The CRREM risk assessment tool allows property owners or investors to plug in the data for their own property. Whether it’s an individual asset or a portfolio of assets, the tool facilitates the creation of a bespoke risk exposure framework that profiles when particular assets are likely to be exposed or susceptible to stranding.
The CRREM tool also enables companies to look at different intervention points in the timeline to conduct a green retrofit. From an operational point of view, if you initiate a green retrofit at year 15 or year 20, you want to understand what the clawback period is, what is being gained in terms of emissions reductions and how increased energy efficiency is impacting operational costs. Bringing that data together is key. The CRREM tool is free, and although the project has now officially ended, the tool can still be used as a starting point to enhance awareness and insight in the sector. Updates and ongoing maintenance of the datasets will be funded via the Laudes Foundation.