From 10 May this year property portfolio managers will be able to see how their investments rank in terms of actual environmental performance, by taking a look at the NABERS Sustainable Portfolios Index 2022.

This year the NABERS SPI has brought into its fold 53 building portfolios and funds across the country, a massive jump of 34.5 per cent on last year in the number of participating portfolios.

Australia’s commercial property industry is known for its outstanding ambitions on sustainability. Key to its achievements, which are now globally recognised, is transparency and a big dose of the competitive spirit. 

Much of this has been spurred by the widespread adoption of the NABERS environmental rating standard.

Now with the evolution of the rating into a portfolio-wide approach industry leaders are discovering a wealth of benefits, from the data driven frameworks that help them to measure and improve performance to the ability to use the results to access green finance or sustainability linked lending.

Now in its fourth edition, the NABERS SPI is Australia’s only publicly available index.

With unprecedented climate impacts starting to be felt in Australia and around the world, and property owners ever more conscious of the need for buildings to be resilient and sustainable, the value of the SPI is only set to grow.

The NABERS SPI is globally unique. It provides a transparent whole of portfolio view of actual performance in terms of energy emissions, water usage, waste and indoor environment quality for offices, as well as energy and water emissions for shopping centres.

It also tracks progress over time and allows invaluable business intelligence on where property portfolios stand against their peers. 

What’s new this year

New this year is a revamp of the Portfolio Profile section, with new graphs to help to display the information in a more clear, easy-to-navigate format.

According to Carlos Flores, director of NABERS & Building Sustainability, transparency is key but not always easy.

“We know this level of transparency can be a difficult step for many companies to take. That is why we are so proud of all the organisations participating in this year’s SPI,” Mr Flores said.

“This is perhaps the only place where property portfolios disclose their environmental performance so publicly, transparently and side-by-side against their competitors.

“Seeing so many portfolios taking this step is a powerful demonstration of their commitment to the environment, as well of how Australia leads the world in non-residential building sustainability.

“We had already seen record participation in the SPI last year. So, seeing a further 34.5 per cent increase in 2022 is incredible, and a sign of how important sustainability has become to investors and the finance sector at large.”

Mr Flores said the index welcomed seven new entrants this year.

“And for the first time in the SPI, two office portfolios are 100 per cent rated with energy, water, waste and indoor environment ratings. This is a fantastic example of industry leadership.

“We also saw a whopping 50 per cent increase in the number of portfolios disclosing NABERS Indoor Environment ratings. This reflects increasing interest from tenants in healthy and productive workspaces, and a powerful demonstration of the increased focus on occupant wellbeing since the start of the pandemic.”

Shopping centres have also pitched in with stronger commitment

“We have also seen 30 per cent more shopping centre portfolios included in the SPI this year. The index now includes most large shopping centre operators in Australia, which shows just how far retail has moved in the past decade.”

Mr Flores said the SPI was a platform to “showcase and celebrate portfolios that are truly committed to transparency in sustainability”.

“Our congratulations to all these portfolios, who continue to push the boundaries of what is possible in sustainability despite all the challenges of the past two years.”

Interest in sustainable finance has grown

Over the past two years, NABERS has been working with the property and financial industries to help unlock the potential of high-quality sustainable finance instruments in the Australian property sector.

The NABERS team is currently developing Sustainable Finance Criteria to help banks, non-bank lenders and investors to structure sustainable finance transactions using NABERS ratings.

National Manager ESG at Australia Unity Parag Shinde, said the decision for his company to join the SPI with its Australian Office Fund (AU AOF) for the first time, was an easy one to make.

“The SPI is a fabulous, no cost initiative by NABERS team, providing an independently verified and industry recognised platform to demonstrate and disclose property portfolio environmental performance,” Mr Shinde said.

“Participation in the NABERS SPI 2022 highlights AU AOF teams’ commitment to delivering a positive ESG impact and ongoing improvements across the portfolio.

“ESG is a major driver for our investors, stakeholders, employees, and customers with requirements to demonstrate leadership, commitment, and evidence-based outcomes.”

Sustainable finance is in high demand

The move will also help the company source sustainable finance, Mr Shinde said.

Another participant also focused on green finance demand and the opportunities offered by the data frameworks in the SPI.

Active Super head of property Scott Armstrong said: “NABERS provides a framework for Active Super’s property and facilities teams to manage our office and retail assets at the highest level by utilising data – not only across energy and water – but now also waste and indoor air quality.”

This allowed performance to be compared to the most sustainable portfolios in the country, he said. And clearly this was a benefit for tenants.

“We are finding that Active Super tenants are also very interested in sustainable buildings as this reflects positively on their own business, staff and shareholders.      

“NABERS ratings have been the foundation of Active Super’s sustainability journey and, more recently in 2019, helped us achieve carbon neutral certification across our office and retail portfolio.

“NABERS ratings are complementary to other sustainable rating systems, including Green Star and WELL, and have assisted us in obtaining sustainable finance via a green loan.”

New companies continue to jump on board

Another new participant in the latest SPI is Centuria Office REIT (ASX: COF). The real estate investment trust’s (REIT) head of office and fund manager, Grant Nichols, said the NABERS rating scheme was “an important part of demonstrating the REIT’s ongoing commitment to reducing its environmental impact.

“This aligns with Centuria’s wider sustainability approach, acknowledging our part in transforming the property industry. COF is providing office workers with sustainable and healthy work environments and, by working with NABERS, we are committed to limiting our carbon footprint and climate change,” Mr Nicols said.

Shopping centres

There has also been a 30 per cent increase in the number of shopping centre portfolios included in the SPI in 2022.

This follows a long-established trend of increased sustainability action in the retail sector.

Today, most major shopping centre portfolios use NABERS to set ambitious sustainability targets and track progress at an asset level as well as across their portfolios.

This year, several shopping centre portfolios have decided to take the next big step in their sustainability journey and disclose their performance in the SPI.

Nabers’ Sustainability Portfolio Index energy ranking for shopping centres 2022

QIC is one of the shopping centres operators that have joined the SPI this year, providing data for two of their shopping centre portfolios.

QIC Real Estate’s general manager of sustainability, Melissa Schulz, said: “NABERS is a great tool for comparing our approach and performance across our assets. Being involved in the SPI this year means we can more easily benchmark portfolio-wide strategies and outcomes against our peers.

“This is useful for investors and other interested stakeholders, as well as for developing our own future plans to drive continuous improvements in performance across the asset portfolio.”

More about NABERS ratings

NABERS ratings are used to measure a building’s energy efficiency, carbon emissions, water consumed, waste produced and indoor environment quality, and compare it to similar buildings.

NABERS ratings give a building a rating from one to six stars – 1 Star being “making a start” and 6 Stars being “market leading”. 

Average star ratings by sector

NABERS 6 star rating scale

When the NABERS ratings system was first developed, 3 Stars was the average rating for the sector. As a market matures the star rating results are not adjusted. This means that buildings can continue to measure their sustainability progress compared to the year before. As a result, some of the more mature sectors have improved to have a higher star rating average than 3 Stars. 

Average NABERS star ratings by sector

Shopping Centres4.33.7  
Apartment Buildings3.13.6  
Data Centres4.4   
NABERS average star ratings by sector; Source: Annual report FY21; Only available ratings displayed per sector

NABERS ratings are different from other schemes because they measure actual environmental impact, not design intent or management strategies.

By relying solely on measured results, there are no prescriptive methods to improve ratings and no “picking winners” – only initiatives that actually reduce the environmental impacts of a building will lead to a better rating result. 

Check out the NABERS Sustainable Portfolios Index 2022 here.

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