The ESG index was first designed to be used for the EU Taxonomy alignment disclosure by determining the top 15% / top 30%. However, we have published numerous indicators to extend their use and in the general interest of the market. Today, we know that the ESG Index has a wide range of uses (EU Taxonomy alignment, energy performance assessment, ESG scoring, etc.).
That’s why the values in the ESG Index are published as pure as possible, without any adjustments. For example, they are not corrected for climate or occupancy rate, making them a perfect reflection of how buildings behave in relation to these exogenous characteristics.This choice was made in consultation with the market and regulatory institutions.
This will ensure that each player is free to apply the corrections it deems appropriate when assessing the performance of its assets, using its own methodologies, which it can have validated by its auditors.
In this way, you can directly compare the annual energy intensity of a building with an ESG Index value, without correction, or apply corrections to the intensity of your building and to values of the ESG index (e.g., climate correction, occupancy rate correction, smoothing over several years).
Our index and EPC are complementary and driven by different approaches.
ESG Index’s top 15% / top 30% are based on actual energy consumption data which makes them more representative of the actual consumption of the commercial real estate sector. And, accordingly, its CO2eq emission.
EPCs are one-off assessments of a building’s expected energy performance (that can be valid for 10 years). It’s an assessment based on the building’s characteristics, especially the envelope of a building. Widely spread, the EPCs are presenting several challenges when it comes to assess the EU Taxonomy alignment:
EPCs methodology and grades aren’t harmonized between European countries.
Not all buildings have an EPCs.
EPCs may not be coherent at a building level (we can have some floors of a building graded A while another one is graded C).
EPCs hardly reflect the actual energy consumption of a building that depends on its actual use but describe the theoretical level of consumption that could be targeted by the building
Looking at both EPCs and the ESG index you can have a comprehensive understanding of your asset performance.
Published on an annual basis, each yearly result is based on previous year’s consumption data. For example, the 2022 results are based on 2021 consumption data from the buildings part of our representative sample.
Our benchmarks are based on actual/real energy consumption automatically collected and monitored for our customers in our platform Deepki Ready. Deepki has been collecting live energy consumption data for 10 years and is currently operating in more than 52 countries. Thanks to its experience in data collection and the capabilities of the Deepki Ready application, Deepki is able to monitor consumption throughout the building (including private areas). Of course, the ease with which private areas can be collected depends on the type of asset and its location. This is why the sample used for the ESG index benefits from the variety of Deepki’s customers: the sample is both based on owners’ data (e.g., pan European asset managers players) and occupiers’ data (e.g., international retail players) which means that we always have access to the entire consumption of a building, even for typologies that are more difficult to collect.
We use the Gross Domestic Product (GDP) as an allocation key at European level. We assume it is a good proxy for the distribution of the commercial real estate assets. So, in line with a proxy approach, the cumulative GDP of the 6 countries is overwhelming in the European breakdown, and only these 6 countries are taken into account. The European value was introduced in response to numerous requests from the market for a regional value at European level. It should be used as such: a macro aggregate of the average performance of the commercial real estate sector in Europe.
We have chosen to publish the national results for 6 countries as part of an iterative approach intended to bring the market together around a partnership initiative. We have started with the countries for which commercial real estate players have expressed the greatest need and which, by their very nature, are those where Deepki has the most data points. The ambition is obviously to eventually extend the scope of the published results by involving even more players. We actually provide our customers with benchmarking values for more European countries, only available through our platform Deepki Ready.
The CO2eq and Primary Energy conversion uses Deepki Ready’s advanced data collection capabilities. As the software automatically collects consumption data at the level of each building’s meter, we are able to perform a very accurate conversion. By having the data at the level of the meter, we are able to assess the energy mix of each building and thus determine the precise energy mix of the European real estate sector. We then apply official conversion factors recognized by the industry (e.g. IEA, national regulations). The CO2eq and primary energy conversions are therefore based on actual practices in European real estate portfolios and not on approximations based on national energy mixes. This makes them extremely accurate, reliable and consistent.
While there are other recognized initiatives with reliable results, the ESG Index is the only initiative in Europe that masters the entire process: from collection to filtering, calculation and aggregation. This capability ensures consistency throughout the calculation and, in particular, enables Deepki to carry out more informed quality checks by having direct access to the source of each given point. In addition, the ESG Index is an European initiative and we look for gathering national initiative and expertise. We are convinced that this partnership approach is the most beneficial for helping the European real estate sector reaching the Net-Zero Targets. Deepki is therefore exploring the discrepancies between the ESG Index values and other market references. These differences are mainly explained by different methodological approaches as well as different data samples.
All energy consumption is taken into account with regards to their relative uses in representative samples. In European commercial real estate portfolios, some utilities are way more used than others which correspond to the reality of those portfolios. This is why the ESG Index’s conversion in primary energy and CO2eq is so precise : because it fits the reality of energy uses in the European commercial real estate sector.
The ESG Index initiative was born to help the market determine the top 15%/top 30% to be used for assessing their EU Taxonomy alignment. The EU Taxonomy only requires to have a regional benchmark that distinguishes, at least, residential from non-residential assets. Based on the discussion we had with Real Estate players we chose to publish typologies that were more precise and more in line with the typical convention and classification of the market while respecting the guidelines of the EU Taxonomy. Deepki has the ability to provide more precise results and is already providing sub-typology figures in the data analysis features of Deepki Ready. Publishing more precise results in the ESG Index is an ongoing discussion that is fed and driven by the feedback we collect from the market and regulatory institutions.