4 October 2023
A unique methodology which addresses the “value at risk” and cashflow impact of the climate and sustainability agenda on real estate assets held for investment purposes and as debt collateral.
Developed specifically for real estate investors and lenders, RECVR aligns conventional valuation methodology with a highly transparent and explicit reflection of climate and sustainability related risks in order that the scale and timing of impacts can be visualized, quantified and addressed within decision making – whether that be at the point of acquisition or during asset management strategy reviews.
Asset specific consideration
Whether it be geography, construction, leasing profile or market dynamics, no two assets are the same. Similarly, the climate and sustainability agenda is not simply a “cost to comply” challenge – a range of valuation levers are impacted including void risk, rental growth potential and discount rate. RECVR draws together a range of real estate valuation, modelling and ESG skill sets from Deloitte and Longevity Partners to provide an advisory service grounded upon the specific circumstances for each individual asset.
RECVR calculates an indicative “Value at Risk” and also provides a profile illustrating the impact on cashflow over time – thereby providing insight on “stranding” concerns and aiding the development of asset management strategies to mitigate the risks.
Transparency to support understanding
After initial assessments by Deloitte and Longevity specialists, RECVR is used to calculate the value at risk “as is” and to assess the mitigating effect of asset management interventions.
Critically, the reasoning for the Value at Risk impact is entirely transparent and shared with clients during an interactive workshop. The workshop also provides the opportunity for clients to visualize the sensitivity of inputs and to participate in flexing the scenarios and asset management approaches adopted to mitigate the impact.
The resulting output for the client is a practical and concise deliverable highlighting the climate and sustainability profile of an asset through a financial impact lens and with clarity on strategies to address concerns.
Informing Asset and Portfolio-level strategies
Supporting Credit Risk decisions for lenders
Philip Parnell, Partner
Stephen Wolfenden-Gunnell, Director, Business Modelling & Analytics