From Strategy to Action: Pulse guides Ethias in future-proofing their real estate

Ethias has a very broad and diversified real estate portfolio. We aim to cover all types of property: offices, nursing homes, logistics buildings, residential housing, etc., with the exception of hotels and retail. Our objective is clear: to have an exemplary ESG portfolio. The idea is that, over time, our portfolio will not only comply with ESG standards - whether environmental or social - but also exceed them. As far as governance is concerned, we were already advanced, as Ethias is required by default to comply with the governance standards applicable to the insurance sector as a whole. To achieve this ambitious goal, we first established a complete list of our real estate portfolio. We then defined two distinct focus areas. On the one hand, when we acquire new buildings (residential, offices, student accommodation, stakes in funds, etc.), we ensure that they comply with the key ESG criteria. On the other hand, for existing buildings that are more than five years old, and therefore by default do not comply with current standards, we have taken strategic decisions. This includes selling these properties to reinvest the capital gains in upgrading other assets, acquiring new buildings or investing in participations.

Within this overall portfolio we distinguish three asset types. There are assets that we own through joint ventures and participations. In these cases, Ethias has asked the fund managers to produce ESG reports and see how they can be improved. We also have properties that we own 100%, either directly or indirectly. We have chosen to focus on this type of assets because it allows us to make decisions in a completely autonomous way. We tried to perform a total screening of buildings that are more than five years old. To this end, we set up environmental monitoring (‘E’), together with external partners. The monitoring is done using sensors installed in the buildings, and provides an accurate overview of the current situation in terms of energy and water consumption.This is a first key step, but the ultimate aim is to improve the performance and sustainability of the buildings. This is where PULSE steps in, completing the available data with Taxonomy alignment, CRREM analysis as well as BREEAM-In-Use or WELL pre-assessments. This is followed by quantified showing the impact on the EPB certificate and the value of the property.

For me, two elements are crucial: having objective data to make informed decisions and ensuring tenant satisfaction.The information we get from monitoring water and electricity consumption, combined with Pulse's analysis of the cost of recommended improvements and their impact, helps me to make objective, quantified decisions. In a way, we're still investors, so we're looking for the best solution to invest with the best possible return, while respecting the environmental and societal impact. By providing solutions, we are de facto providing solutions for the building's tenants, who - because they are satisfied - will be staying on. Does this mean that I can increase the rent after undertaking the renovation work? Frankly, with the same tenant, I doubt it. On the other hand, if the lease is extended as a result of the works, there is a significant return on investment in terms of value enhancement and the revenue is guaranteed over the longer term.

In all honesty, I don't have an answer for you today. That's why we asked the Pulse team to perform an analysis on two types of asset: an office building and a nursing home. I hope that the results will make it easier to prioritise the most urgent assets to target.

Without a doubt, my main challenge is the cohabitation between the occupant and the renovations to be fitted. I'm convinced of the benefits of the improvements that need to be made, but if you really want to have an energy impact, adding a coat of paint to the hall is not going to do the job. We have a portfolio with a relatively long average lease term, so how do we get started? Even if everyone around the table is willing and recognises the need for change. In my opinion, we need to involve the occupants every step of the way in our efforts to improve the building.

Furthermore, there are only four of us in our small team. In order to move forward, we need to keep an overview and subcontract to partners with expertise in the field, such as Pulse and the CFE Group teams.

Westia is a fifteen-year-old office building ideally located in Jambes, on the outskirts of Namur. It is occupied by several departments of the Walloon Region, including the Agence du Numérique (AdN). Fully rented, it offers a balanced size - not too big, not too small - for a building in a secondary city. As I'm coming to the end of the lease term, I've been thinking about how to bring it up to current standards.During our discussions with the Pulse team about which project to pilot with Ethias, Westia was an obvious choice. All the stakeholders were motivated, and the building was unique, with no complex external constraints.

Frankly, I was pleasantly surprised by the quality of the work that was delivered. The recommendations were clear, concise and precise. Pulse's report proposed different scenarios, with all the necessary information: the impact of each component, the cost of the renovation works and the return on investment, both for ETHIAS and for the tenants. We provided the consumption data, which varied over time. The Pulse team supplemented this with ESG requirements, providing a global and comprehensive picture of the building. What I particularly appreciated was the 3D model you created. It allowed us to change one or more parameters and immediately see the impact on energy consumption. For example, you could compare the effect of installing double glazing, triple glazing or blinds. Another key benefit of Pulse is its ability to identify the changes needed to reduce a building's energy consumption in order to meet the requirements of the CRREM curve.Ultimately, as I mentioned, this report helps me to make objective decisions based on concrete data: how much will the work cost, how much will it benefit the tenant and ETHIAS, and what information can I include in our annual report, for instance.