Real estate and photovoltaics: How a PV system affects the ESG rating

ESG has long been a key topic in the real estate industry and is a decisive factor in investment decisions. Owners have numerous opportunities to positively influence the ESG rating of their properties - from reducing emissions and water consumption to increasing energy efficiency, sustainable supply chains and optimized waste management.

However, the weighting of individual measures varies depending on the ESG rating method, which makes it difficult to classify their significance.

In the following, we analyze the impact of installing a photovoltaic system on a building’s ESG scoring. To do this, we explain the 12 ESG assessment indicators according to RICS and examine how the use of a PV system specifically affects them, thereby improving the ESG score.

The Royal Institution of Chartered Surveyors (RICS) has developed a list of 12 ESG core indicators in collaboration with a large number of valuers, valuation service providers and relevant associations. The aim of these indicators is to improve awareness of ESG requirements and to create a consistent and transparent approach across Europe for valuing properties and portfolios according to ESG criteria (1). At the same time, they provide sound guidance for real estate funds, project developers and other stakeholders.

In the following, we analyze which of the 12 RICS rating indicators are directly influenced by the use of photovoltaics and how this affects the ESG scoring of the building.

1) Energy rating - direct impact

The energy performance certificate provides information on the energy rating of a property. The central component of the energy rating is the so-called primary energy demand. This is the total amount of energy required to cover the final energy demand of the building, including the energy required to generate and supply this energy. Basically, the lower the primary energy requirement, the better.

As grid-related electricity is still largely generated using fossil fuels, its primary energy factor is 1.8. Due to the fact that it is generated close to the building and the rapid energy amortization of PV systems, the primary energy factor of solar power is 0.0 (2). The use of solar energy therefore significantly reduces the primary energy requirement, which has a positive effect on both the energy rating and the ESG scoring.

2) Energy consumption - direct impact

This indicator looks at the energy consumption and energy efficiency of the building. The primary energy requirement is also a central measuring factor here. The best way to determine whether your own energy consumption is low or high is to compare it with other local properties. A good way to identify potential savings is to carry out an energy audit.

Although the use of a PV system does not reduce energy consumption as such, the lower primary energy requirement of the electricity generated close to the building plays a decisive role here too, as this is included in the calculation of energy consumption and reduces it.

3) Renewable energy production (on site) - direct impact

This indicator evaluates the use of renewable energy on site and is one of the most important aspects in our analysis. It measures how much electricity is produced on site in kWh per m² and per year by the PV system and how much of this is consumed in the building or fed into the grid. The higher the on-site consumption rate, the better.

4) Labels and certificates - direct impact

If the building has one or more valid sustainability certificates such as BREEAM, DGNB or LEED, this also has a positive effect on the ESG scoring. Key assessment criteria for certification are aspects such as CO2 reduction, self-supply of electricity and energy production close to the building. Due to the influence of a PV system on these assessment criteria, it can be said that the use of solar energy makes a significant contribution towards obtaining these certificates.

5) Greenhouse gas emissions - direct impact

The total amount of greenhouse gas emissions caused also plays an important role in the building's energy performance certificate. A comparison of the so-called emission factor, which indicates the CO2 emissions per kilowatt hour of electricity consumed, is useful here. For grid-related electricity, this was 380 g CO2 eq. per kWh in 2024 according to the Federal Environment Agency (3). With commercially available standard modules, the so-called monocrystalline modules, and a service life of 30 years, the emission factor of a photovoltaic system is between 43 and 63 g CO2 eq. per kWh (4). The photovoltaic system therefore makes a significant contribution towards reducing greenhouse emissions.

A practical example: the “Green Box” logistics building in Viernheim alone, which the real estate developer AVENTOS has equipped with a PV system with an annual yield of more than 1,281,500 kWh in collaboration with ENVIRIA, avoids the emission of approx. 602 tons of CO2 equivalents per year (5).

6) Emissions pathway analysis - direct impact

The EU Buildings Directive calls for the complete decarbonization of the building sector by 2050 (6). Emission pathway analyses can be used to determine when a building will reach this target. In contrast to the snapshot of greenhouse gas emissions from indicator 5, these provide a more long-term planning perspective and take various scenarios into account.

The Carbon Risk Real Estate Monitor (CRREM) provides a recognized standard in the building sector for calculating decarbonization pathways (7). Depending on the CRREM calculation method, the CO2 savings from the photovoltaic system can be fully considered, especially in the case of high self-consumption in the building, and thus contribute to a decisive shortening of the pathway towards the decarbonization target.

9) Mobility - indirect impact

The mobility indicator deals with the provision of the property with e-charging infrastructure and bicycle parking spaces. With regard to the e-charging infrastructure, the number of total parking spaces is set in relation to the number of existing charging points. In Germany, the Building Electromobility Infrastructure Act (GEIG) also stipulates how many charging points must be available for new builds and renovations of both residential and non-residential buildings. Photovoltaics can create the ideal basis here, as the charging points can be supplied directly with the solar power generated.

No direct or indirect impact of photovoltaics can be identified for the following indicators:

7) Physical climate risk - measures to mitigate the effects of extreme climate events such as heat and flooding.

8) Location characteristics - connection of the building to local infrastructure such as public transportation and utilities.

10) Building access - accessibility of the building for people with disabilities

11) Landlord & tenant relationship - relationship between owner and tenant, tenant profiles and type of tenancy agreements

12) Material use - quantity and sustainability of materials used for construction or renovation

Our analysis shows that the use of photovoltaics has a positive impact on seven of the 12 assessment indicators. In addition to the economic benefits that a PV system offers through the use of affordable, green electricity, it turns out that photovoltaics are an extremely efficient method of significantly improving the ESG rating in several areas. It is therefore advisable to focus on sustainable solutions such as photovoltaics at an early stage, particularly in the real estate sector - both to safeguard for the future and to benefit from economic advantages in the long term.