Nikodem SZUMILO, PhD Student in Real Estate Finance (Poland)

Nikodem Szumilo, Copyright: FONA

Tackling the main concern holding back investment into sustainable real estate – a lack of reliable evidence for financial returns on sustainable buildings – Nikodem Szumilo is addressing this important issue in his research.

UNIVERSITY OF CAMBRIDGE, UNITED KINGDOM

Research focus: Financial and investment advantages of sustainability in real estate markets

As 40% of energy consumption in the developed world takes place in buildings, sustainable development in the property industry is extremely important. Not only do environmental concerns play a central role here, but businesses, investors and the economy also stand to profit from sustainable real estate. “Nevertheless, there seems to be a significant gap between the level of sustainability investment which is optimal for the economy and the actually observed level”, notes Nikodem. Reluctance to invest in green building projects despite the long-term financial advantages seems to be based on a “lack of reliable financial evidence in the area of the economic viability of sustainable improvements”. Nikodem seeks to remedy this information gap with his PhD research project: “My research focuses on investigating if sustainable properties are financially superior and how exactly this premium could be captured.” He plans to follow three lines of inquiry to cover a variety of currently uncertain aspects.

The first of Nikodem’s research aims is to ascertain the financial return on sustainable buildings by developing indicators for benefits and focusing on their detailed nature. Secondly, he will explore the financial risks linked to sustainable properties in order to determine whether, the potentially superior, financial performance of such buildings is the result of more efficient investment or of additional risk factors. Nikodem’s third aim is to explore the “sharing of profit from sustainable improvements” and the impact on the financial returns this presents. It is of course important, from an investment perspective, to know “who captures the premium and how”. With this body of research, he hopes to help overcome the most common reasons for the reluctance to invest in sustainable real estate. These holdbacks have been identified as a mixture of unwillingness to be swayed by merely theoretical arguments (as opposed to empirical evidence of financial returns); additional evidence that is required by financial institutions for investment backing of sustainable real estate; and the lack of evidence establishing the optimal use of financial and physical resources in such projects.

The jury lauded Nikodem’s research strategy. They agree with his statement that “the research and technology we have available should allow for a much higher level of sustainability but are hindered by multidisciplinary practical barriers”, and are convinced that Nikodem’s research will help overcome this.