OP-Vuokratuotto takes a big step towards a carbon-neutral housing portfolio

Finland’s largest housing fund wants to take its responsibility in climate work. Responsible investment and ownership are here to stay.

“This is where it starts now in a broader sense. We want to play a strong role in making Finnish real estate carbon neutral,” says Antero Tenhunen, Portfolio Manager of OP-Vuokratuoto. In the first phase, five residential properties owned by the fund will switch from district heating to a combination of geothermal heat and solar electricity. The properties will become carbon neutral.

The sites have been selected on the basis of a portfolio analysis by energy efficiency company LeaseGreen. The analysis included 70 residential properties owned by OP-Vuokratuoto, from which the properties suitable for the first step were selected.

The pilot project was implemented in Helsinki in the summer of 2020, with three of the sites now starting in Helsinki and one in Tampere. All sites are new apartment buildings with a total of almost 400 apartments. After the energy renovations, the properties will be connected to the LeaseGreen service, which will ensure optimal operation of the technology, smart control and results.

“We would like to do energy renovation on several properties at once. However, it is important for us to make sure that the investments do not overburden our fund’s return targets,” says Tenhunen.

OP-Vuokratuotto is one of the largest investment funds in Finland and the largest housing fund. It has a capital of around EUR 1.5 billion and more than 41 000 owners. The fund owns just under 6 000 completed homes and around 600 homes under construction.

In addition to a smaller carbon footprint and better rentability of homes, switching to geothermal and photovoltaic energy will save on heating costs and increase property values. The upward pressure on rents also decreases as heating costs fall.

OP-Vuokratuoto’s clearest goal is carbon neutrality. The fund is managed by OP Real Estate Investment, which aims to achieve carbon neutrality in the energy used by all its properties by 2030. For new construction, the aim is to be carbon neutral by 2050. The entire OP Group aims to be carbon neutral by 2025.

Investor interest first

A real estate investor must think about the equal treatment of its own investors. Portfolio manager Antero Tenhunen stresses that it is important for investors that investments in energy efficiency are spread over a longer period of time. This is why OP-Vuokratuotto makes energy renovations in batches.

There is also increasing pressure from customers to adopt low-carbon solutions.

“Institutional investors are putting more emphasis on energy efficiency and sustainability. Retail investors focus most on the profit outlook, but sustainability issues are starting to raise their heads there too,” says Tenhunen.

Tenhunen and his colleagues regularly monitor issues that affect clients’ investment decisions. The trend is clear: carbon neutrality is becoming increasingly important.

As the name suggests, OP-Vuokratuotto is a fund whose return is based on the rents received from apartments. This environmental friendliness is also clearly reflected in the rentability of the apartments. According to Tenhunen, geothermal heating and other energy-saving measures are particularly attractive to younger tenants.

“It shows strongly that young people value the things we do for the climate. They will choose a carbon-neutral home, especially if the rent is the same.”

Thomas Luther, Managing Director of LeaseGreen, considers the OP rental income business to be sensible and long-term. Once the big picture is clear and the goals are ambitious, it’s easy to get started with energy efficiency measures. Luther highlights the demand response, which is being piloted in OP-Vuokratuoto’s properties as part of the LeaseGreen service.

“The smart heating system will allow buildings to take advantage of demand response, which will further cut emissions and bring additional savings. These are the first residential buildings in the world to participate in the demand response market.”

Construction companies involved

A large proportion of the properties owned by OP-Renting are new construction. According to portfolio manager Antero Tenhunen, for the past couple of years, all new projects have explored the possibility of using geothermal energy, for example.

“We are working hard to get construction companies involved in the process. It’s sometimes challenging.”

Energy efficiency has also become a more important factor in investment decisions in recent years.

“This year we will further broaden the criteria for the investment decision. Energy issues will be much more important than before.”

Further information

Portfolio Manager Antero Tenhunen, OP-Vuokratuotto
+358 500 848 486
antero.tenhunen@op.fi

Thomas Luther, Managing Director, LeaseGreen
+358 40 5344 256
thomas.luther@leasegreen.fi