Guidelines

The investment manager should provide or facilitate the provision of relevant and verifiable data and information to the external valuer in relation to sustainability factors that may impact valuation outcomes.

Such information and data could include, but is not limited to:

• A description of the current state and condition of the property with respect to material sustainability factors - see the inrev-guidelines">INREV Sustainability module for details regarding materiality assessment of ESG factors;
• A view of the current and future impact of sustainability regulations on the operation and ownership of the property;
• Information related to assumptions taken on current and future rentability related to sustainability factors associated with the property;
• A view on sustainability factors that have an impact on current and future operating costs assumptions (eg energy, waste disposal, water);
• A summary of sustainability considerations that are driving key capital expenditure (CapEx) assumptions in the valuation model. For instance, requirements and intentions to meet certain environmental targets to address physical and transitional climate risks, or decarbonisation pathways such as the Carbon Risk Real Estate Monitor (CRREM);
• Details of building and/or energy efficiency labels.

The investment manager should ensure that the external valuer assesses the sustainability information provided to them and its relevant elements in the input assumptions to the valuation model.

Sustainability factors should be taken into account in current valuation models based on the market evidence to support their inclusion.
 

The investment manager should ensure that the external valuer summarises and discloses how the sustainability data and information have been taken into account in their valuation process.

Information provided should take account of the investment manager’s obligations to report under various regulatory requirements (eg Sustainable Finance Disclosure Regulation (SFDR), EU Taxonomy). Further guidance on the nature of information exchange between external valuers and investment managers may be included as part of recognised valuation frameworks.
 

In following the transparency principle (PV-P05) and its related guidelines, the investment manager should, in its reporting to investors, disclose whether sustainability factors have been taken into account when arriving at valuation outcomes.

The investment manager should report to investors whether sustainability factors were deemed material during the valuation process and to what extent they were reflected in market value.

Appendix 2 illustrates a range of potential qualitative and quantitative disclosures in relation to valuation inputs that could be materially impacted by sustainability factors.