Aberdeen’s Energy Strategy Addresses Risks and Adds Value

17/01/2018

To futureproof its properties, Aberdeen is working with partners and property managers on an energy management strategy that drives reductions in energy use, costs and CO2 emissions for occupiers. The initiative demonstrates to investors how Aberdeen is taking a long-term approach, managing climate change risks and adding value through sustainability.

£245,000 annual energy cost savings across 22 buildings

1,010 tonnes less CO2 emissions per year

300 properties with potential viability for solar PV installations identified

147 energy saving actions recommended

Situation

Aberdeen Standard Investments is a global investment management group. In recent years, investors have shown increasing interest in Aberdeen’s approach to managing the risks around sustainability, such as the future impact of climate change, and in the value sustainability activities can add. In addition, the UK Government has set a legally binding target for an 80% reduction in greenhouse emissions by 2050 and leaders from 195 countries at COP21 in Paris made a commitment to limit global warming to a maximum increase of 2°C.

In this context, Aberdeen set a long-term target to reduce energy use by 20% by 2020 versus a 2015 baseline, across its large and complex UK portfolio. Energy reductions would deliver CO2 and energy cost savings that could be passed on to occupiers through reduced service charges. Over time, this could make assets more desirable and less at risk from regulations. In turn, this has the potential to protect and enhance rental value, and ultimately underlying asset values for investors.

Actions

Aberdeen engaged with property managers, asset managers and fund managers, ensuring that everyone understood what the strategy was seeking to achieve and why. To drive performance, they developed reduction targets for each asset, using the BBP Real Estate Environmental Benchmark (REEB) and projections from Energy Savings Opportunity Scheme (ESOS) audits. They also established KPIs for property managers focused on completing feasible energy efficiency projects, so they were incentivised to add their own projects and surpass targets by identifying and implementing additional projects. Examples of efficiency projects implemented include changes to temperature controls and to timers for heating, ventilation and cooling, along with lighting upgrades.

Through a competitive tender process, Aberdeen selected Envizi to provide an energy data platform, adi Facilities Engineering for metering hardware and WSP for energy advisory services, working closely with the property manager for each asset. In addition, Aberdeen initiated a change in energy procurement to 100% renewable energy sources.

Envizi worked with Aberdeen to build specific user requirements into the software. The platform goes beyond data storage and visualisation, with property managers able to record and track energy efficiency projects live. Aberdeen is now working with Envizi to pilot an Equipment Fault Detection module, so property management teams can leverage BMS data to quickly identify equipment faults and inefficiencies.

adi and WSP surveyed the 37 largest energy consuming buildings, where service charge energy spend was over £50,000 per annum, to:

  • Identify requirements for improved metering hardware.
  • Baseline each building to inform subsequent remote analysis.
  • Carry out audits to identify energy saving opportunities, which also fulfilled ESOS requirements.

Of these buildings, 22 remain in the Aberdeen portfolio in 2017.

adi designed the metering and systems integration, installed and validated the metering, and worked with Envizi to ensure that data flowed into the platform. adi now liaises directly with the property managers to collect invoice data for all properties, and sends cumulative meter data for occupier billing to save resource and improve accuracy.

WSP now carries out quarterly performance reviews of individual buildings, before meeting with the property managers to create new energy saving actions and review progress on those raised previously.

Energy assessments across the portfolio have identified a range of opportunities, which are being progressed by Aberdeen and the property managers. These include:

  • 300 properties with potential viability for solar PV installation, which are now being explored and implemented where practical.
  • 147 energy saving actions, 41 of which are completed or in progress. These include Building Management System (BMS) refits, LED lighting upgrades, Digital Addressable Lighting Interface (DALI) controls, Outside Air Temperature (OAT) sensor controls on the BMS, time schedule changes, improved temperature setpoints, better control strategies and installation of Variable Speed Drives (VSDs).
  • 42 properties for LED lighting upgrades, which are now being progressed as appropriate.

Aberdeen is now expanding the energy strategy to other countries in its European portfolio, starting with the Nordic region.

Financials

  • Payback for the programme within three years.
  • Energy cost savings of £245,000 in the first year in the 22 largest energy consuming buildings.
  • Forward funded by the individual fund / property level budgets, and recharged through the service charge.

Benefits

Savings across the 22 buildings in 2016 were ahead of expectations, compared to the baseline year of 2015:

  • 6% average reduction in energy use, saving a total of 2.5 GWh.
  • 1,010 tonnes less CO2 emissions.

Additional benefits include:

  • Futureproofing Aberdeen’s UK portfolio and demonstrating to investors how Aberdeen is managing risks around climate change and adding value through sustainability, responding to the Paris COP21 agreement and complying with regulations.
  • Reducing energy use, costs and CO2 emissions for occupiers and increasing engagement, including some occupiers now accessing Envizi for their own energy management.
  • Promoting sustainability performance throughout asset and investment management teams.
  • Consolidating all sustainability data and reporting requirements onto the Envizi platform, providing Aberdeen with a single source of information for reporting to investors, regulators, occupiers and indices such as GRESB. 

Challenges & Achievements

FUNDING

How to finance energy efficiency initiatives?

Aberdeen set a fundamental rule for the energy programme that the savings must be greater than the project cost, with payback within three years. The financial case for the portfolio-wide investment in the metering hardware, software platform and advisory services was based on forecast reductions, which are well on track. Aberdeen funds the upfront costs through the individual fund / property level budgets and recharges a flat annualised rate through the service charge to occupiers. This was straightforward to agree, as there was a sound business case and short payback period. This funding model has also driven engagement internally with fund managers and asset managers, raising awareness of ESG issues in general and, more specifically, the energy performance of their assets.

PORTFOLIO

How to roll out efficiency programmes across complex portfolios?

In rolling out the strategy across a range of commercial property types and multiple funds, Aberdeen applied a multi-tier approach. In the first tier of 22 properties with the highest energy consumption, meters were installed on every floor, as well as for major heating and cooling equipment. In the second tier, AMR meters were installed for incoming supplies of gas, electricity and water in 96 buildings where annual consumption was above £5,000 and metering was not already in place. Below that, Aberdeen engaged with energy suppliers to feed data from 330 buildings directly into the Envizi platform. There were some challenges installing meters, as scheduling needed to be carefully planned with all parties to minimise any impact of temporary power disruption during installation, including the property manager, building manager, facilities management (fm) team, mechanical and electrical (m&e) engineers and occupiers. However, once implemented, this ran smoothly. The ongoing engagement with energy suppliers has been more challenging, as they need to provide data in a consistent format to automatically feed into Envizi. However, as reports were sometimes being manually run, then different users were creating slightly different templates. This issue is now largely resolved. As remote sensor technology becomes cheaper and more powerful, these may prove an attractive option over time.

BUY-IN

How to get buy-in from stakeholders?

Aberdeen engaged with property managers, asset managers and fund managers early on, motivating them to achieve success. To get buy-in and sign-off from all fund managers, Aberdeen and WSP prepared a robust business case and clear programme delivery model. The reporting of best and worst in class properties is also incentivising change by harnessing the natural competitiveness of property professionals! Asset managers and fund managers increasingly appreciate the contribution ESG performance can make to reducing occupier costs and improving engagement, which, over time, will support rental income and property value. In addition, WSP ran training sessions for around 50 property managers, building managers, FM teams and M&E engineers, ensuring they had the skills to use the software platform and securing buy-in from the teams on the ground.

Find out more

 

Dan Grandage

Head of Responsible Property Investment

 

www.aberdeen-asset.com

“The benefits of having an effective energy management strategy for our properties and the environment are numerous. This is a critical element of day-to-day asset management. It’s a vital component for keeping our properties modern, efficient, profitable and attractive to occupiers and investors.” 

Dan Grandage, Head of Responsible Property Investment at Aberdeen Asset Management