Jens Böhnlein, global head of asset management and sustainability at Commerz Real, reviews the ESG certification landscape and explains why the German DGNB certificate has the edge over BREEAM and LEED.
The history of ESG certification began in the UK in 1990 with the Building Research Establishment Environmental Assessment Method (BREEAM). This scoring system has a maximum of 100 points that are awarded by independent assessors. All aspects, from energy and water consumption to user comfort, are factored into the assessment as percentages and result in one of five levels of excellence for new buildings and six levels of excellence for existing buildings. As a first-generation certification, BREEAM is clearly focused on sustainability, although the 2008 update takes greater account of social aspects. The green building approach makes it a powerful promotional tool.
The current favourite standard: LEED
LEED (Leadership in Energy and Environmental Design), developed by the US Green Building Council (USGBC) in 1998, is also a first-generation certification. Based on BREEAM, it is a 100-point system. LEED is the standard for sustainable construction and is used in 40 countries - including for marketing. In contrast to BREEAM, LEED considers the differentiation according to construction tasks. For example, different criteria apply to ‘new buildings and renovations’, ‘investor models’ or ‘municipalities and cities’, which are recognised by their own variants. In addition, the LEED online platform, which digitally processes data generated for specific buildings, provides a baseline data set for further certifications.
In the context of the taxonomy: Holistic ESG through DGNB
The certification of the German Sustainable Building Council (DGNB) is different. Launched in 2008, it is based on the experience of the first generation, but focuses on the life cycle, considering environmental impacts from planning to demolition of a building and giving equal weight to E, S and G. As a second-generation certificate, it considers the different phases of building and district projects and offers different variants that serve as planning, optimisation or management tools depending on the project phase. There are variants for new construction, operation or renovation, as well as for districts, interiors, demolition and construction sites. Using a life cycle cost calculator (LCCC) to make sustainable building practicable, measurable and thus comparable leads to an enormous complexity, which not only clearly distinguishes the DGNB certificate from its predecessors, but has also caused teething troubles. Now, however, a rethink is taking place - certificates are no longer just for image and marketing purposes. Sustainability is no longer a ‘nice-to-have’, but a ‘must-have’ that is demanded by users, investors and, not least, by regulators.
Sustainable marketing is not enough for regulation, DGNB certainly is
The Sustainable Finance Disclosure Regulation (SFDR), in force since March 2021, and the EU Taxonomy Regulation, which has been mandatory since January 2022, are milestones. Since asset managers and investment advisors have had to disclose sustainability risks and classify their products as Article 6, Article 8 or Article 9 investments, there has been a growing ambition for sustainability in the industry. Certificates play an important role in this, especially the multifaceted DGNB certification. This is because the focus is not on marketing, but on building a good - i.e. sustainable - house. The DGNB certification has been developed continuously since 2008 and is now harmonised with the criteria of the EU taxonomy, so that proof of conformity can be provided in parallel with certification without major effort. The same applies to reporting in compliance with EU standards.
Recognised beyond Germany's borders
With its substance-based, engineer-driven approach, the DGNB certificate is considered the most advanced in the world and is recognised internationally as the ‘global benchmark for sustainability’. In Germany, it is now the market leader among certification providers, with a share of over 80% in new construction and over 60% in the overall commercial real estate market. The DGNB is the European leader in district certification and the organisation is also catching up fast outside Europe. The system is so well designed that it can be easily adapted to the climatic, structural, legal and cultural characteristics of other countries. Close cooperation with leading local organisations and country-specific system partnerships helps here.
A standard that brings more than just opportunities
DGNB certification is not yet as popular as BREEAM and LEED. In our opinion, this is only a matter of time. A DGNB certificate in platinum, gold, silver or bronze means active health protection, lower running costs, long-term usability of the building, a long-term attractive investment, easy access to subsidies and loans and stands for adaptation to the latest building standards. Naturally with different degrees of fulfillment. The DGNB Gold Standard is certainly conceivable as an official benchmark for new buildings. On the one hand, because there is still no official definition of an ESG building and, on the other hand, because a certificate as proof of sustainability is also understandable to laypeople. Ideally, the transparency required by the taxonomy can even be achieved automatically.
Jens Böhnlein, global head of asset management and sustainability at Commerz Real AG, is an auditor for both BREEAM and LEED standards