SIAM's Sustainability Impact Assessment uses the existing environmental quality of property investment portfolios as the basis of identifying risks from changing occupier demand and investor sentiment as a result of the social, political and commercial response to climate change.

The model examines the potential impact of increased statutory compliance costs, non-recoverable expenditure, varying tenant retention rates and extended voids to forecast whether the portfolio will perform in line with current expectations and to identify ways in which any risks can be managed.

Rather than examining environmental performance as a distinct issue, the model seeks to quantify the extent to which the relative environmental performance of properties will influence the overall perception of quality of an asset from both an occupier's and an investor's perspective.

The Base Case - the existing environmental performance of the portfolio will be established.

Options for Improvements - options to improve the sustainability of the portfolio will be identified. The broad cost of generic improvements will be quantified.

Net Cost - we calculate the net cost to landlords by identifying improvements that can be undertaken by landlords at their own expense, improvements that can done at the tenants' expense and those works that can only be done with vacant possession or with the agreement of tenants.

Physical Risks - we examine the exposure of the landlord's property portfolio to current and projected climate-related risks to determine whether the portfolio is sufficiently diversified to make existing levels of risks acceptable and to identify properties where the risk to value is most severe.

Tenant Migration Risk - a growing proportion of the most desirable tenants now have Environmental Policies and claim that sustainability will influence future leasing decisions. Current occupiers are classified according to the likely importance of sustainability to their future leasing decisions.

Investment Performance - we stress-test existing valuations to assess a range of impacts on rental growth and capitalisation yields that might arise from carrying out improvements.

Asset Management Strategy - the cost of achieving the best combination of investment returns and environmental benefits will be spread over a period of 10 years, with priority given to those assets considered to be most at risk or capable of delivering the best returns.

Progress can be measured, year on year, with adjustments being made to reflect any changes to the underlying assumptions made in prioritising the expenditure. The programme can then be varied to reflect prevailing market conditions in the UK property investment market. Inessential expenditure will be avoided and all significant costs will be deferred until better evidence emerges on the likely return on costs.

For more information, please contact us or you can have a look at our Glossary Terms, where you will see that we have invented a whole new vocabulary of our own...