KSN Horizon EU Taxonomy Regulation Update – 1st January 2022

The first section of the mandatory EU Taxonomy Regulation came into force on the 1st of January this year.

The new regulation sets out various screening criteria for financial investments to be regarded as green or sustainable. This will shift investment towards projects that are socially acceptable, economically vibrant, and environmentally secure. This will increase the resilience of investments and real-estate portfolios against the various climate risks like flooding, rising temperatures, and extreme weather events.

The delegated Regulation, released earlier this year, provides investors with clear criteria to assess whether an economic activity contributes to climate change mitigation or adaptation. Most notably, this will affect the construction and acquisition of new buildings and the real estate activities of investors. In summary, it requires buildings to ‘do no significant harm’ (DNSH) to the climate or environmental activities.

Construction of new builds:

The delegated Regulation requires new builds to operate at least 10% below the standard required by Nearly-Zero Energy Building (NZEB), to be regarded as ‘green’. Also, buildings larger than 5,000 m2 must disclose to investors, any deviations from the performance set out in the design phase regarding airtightness and thermal control. The life-cycle Global Warming Potential (GWP) of construction must be conducted for buildings larger than 5,000 m2 and it must be disclosed to clients and investors upon demand.

Building acquisition/ownership:

To be regarded as a sustainable investment, non-residential buildings must be monitored and assessed in relation to their energy performance. Buildings constructed before the 31st of December 2020 must have an Energy Performance Rating (EPR) of Class A, or they must be in the top 15% of the regional or national building stock for energy performance. Additionally, those built after the 31st of December 2020 must meet the screening criteria set out in the construction of new builds, such as operating at 10% below NZEB, conducting a GWP, and ensuring airtightness and thermal control.

KSN Horizon can help our clients manage their real estate portfolios through our sustainability services. Contact info@ksnhorizon.com to learn more.