Name CORESTATE Capital Group
Signatory type  Investment manager
Region of operation EU
Assets under management Ca. €28bn
Geography Germany
Sector Residential real estate
Asset class Real estate
Environmental objective Mitigation
Economic activity Building renovation

We welcome the EU taxonomy. Studies show that one of the biggest challenges the sector faces is the lack of a common taxonomy to define the minimum criterion and requirements for sustainable activities. The EU taxonomy, and the disclosure that accompanies it, should provide significant levels of transparency, objectivity and standardisation. These in turn will encourage investment in sustainable economic activities and contribute to a climate neutral economy, as well as militate against greenwashing and fragmentation.

Other aspect you would like to mention?

Our case study sets out the process of:

  1. identifying ‘appropriate’ buildings; and
  2. preparing a business plan for an EU taxonomy-aligned and sustainable real estate product.

Taxonomy implementation

Principles, criteria, thresholds

Technical Annex 8.2, Building renovation:

A renovation is eligible when it meets either one of the following thresholds:

a) Major renovation: The renovation is compliant with the requirements set out in the applicable building regulations for ‘major renovation’, transposing the Energy Performance of Buildings Directive (EPBD).

b) Relative improvement: The renovation leads to a reduction of Primary Energy Demand (PED) of at least 30% in comparison to the energy performance of the building before the renovation.

Our process to identify ‘appropriate’ buildings for taxonomy compliance:

  1. We conducted a high-level analysis of our existing building stock (using CAALA software) to identify buildings with the potential to achieve a 30% Primary Energy Demand (PED) reduction at ’reasonable cost’.

  2. Buildings identified in the first stage then undergo a more detailed analysis (in which an energy consultant conducts an on-site visit).

  3. We compile a business plan and implement renovation measures that are appropriate in both economic and ESG terms.

  4. To verify that renovations are taxonomy-aligned we ensure they ’do no significant harm’ (DNSH) against five environmental objectives (see below). In any event, we comply with minimum safeguards in all our activities, as required by EU law.

Do no significant harm assessment

For the buildings selected to undergo major renovations, we set up b uilding-specific ESG action plans with our development department to ensure:

  1. Renovation measures reduce all material physical climate risks to the extent possible and on a best effort basis. (Climate Change Adaptation)
  2. All relevant new water appliances are in the top two classes for water consumption in accordance with the EU Water Label. (Water)
  3. At least 80% of the non-hazardous construction and demolition waste generated on site is prepared for re-use, or sent for recycling or other material recovery. (Circular Economy)
  4. Building components and materials do not contain asbestos or other dangerous substances. (Pollution)

At least 80% of timber products used in the renovation for structures, cladding and finishes are either recycled/reused or sourced from sustainably managed forests. (Ecosystems)

Social safeguards assessment

At a company level, we will assess and verify compliance with standards embedded in the OECD Guidelines on Multinational Enterprises (MNEs) and the UN Guiding Principles on Business and Human Rights (with specific reference to the ILO Core Labour Conventions), so as to highlight due diligence in terms of safeguards at the activity level. We will focus on

  1. human rights,
  2. labour rights, and
  3. combating bribery, bribe solicitation and extortion.

We believe it would be useful to have more guidance on how we can assess, verify and report compliance to minimum safeguards at both company and activity levels (see recommendation to policy makers below).

Turnover/capex/opex alignment

Once we have identified a suitable building or buildings, chosen the most profitable taxonomy-compliant renovation measure(s), and verified alignment with DNSH principles and the minimum standards, we will be able to start the renovation process and report:

  • Fees generated from taxonomy portfolio
    Total fees generated
  • total investment costs of the renovation measures

  • energy and CO2 cost savings per year resulting from the renovation measures

Additional comments

So far, we have conducted the first stage of the process to implement the taxonomy in a pilot study. We chose CAALA as a reliable external partner to support the identification of suitable residential buildings. We used CAALA software to conduct a high-level analysis of three buildings selected from our existing building stock. We received a high-level evaluation of the buildings’ energy and CO2-saving potential, and predicted investment costs for the required renovation measures.

We are currently rolling out the second stage, with CAALA energy consultants conducting on-site visits to calculate more precise estimates of the investment costs and energy savings linked to the renovation measures.

Alignment results

Results from the first stage indicate that there is a huge potential to reduce our building stocks’ PED and associated CO2 emissions. Based on the current PED, the software evaluates four different ’decarbonisation paths’ for each selected building.

Input for the calculation:

a) address of the object

b) the Tabula data bank of the ’Institut für Wohnen und Umwelt’ as well as

c) cost estimates provided by architects.


Investment costs, and energy and CO2 savings of different renovation measures that would make the building compliant with: 

i) EnEV (German Energy Saving Ordinance, i.e. basically the German implementation of the EPBD)

ii) EnEV öko

iii) KfW 55 (a KfW 55 house consumes up to 55% of the EnEV limit) and

iv) KfW 55 öko.

(The ’öko’ versions use sustainable materials.)


1 at least 70% 13 to 21 years
2 at least 67% 36 to 82 years
3 at least 68% 13 to 20 years

The identified paths all significantly surpass the targeted 30% PED reduction and we intend to consult our investment team to discuss the economic implications.

Decarbonisation potential of three selected objects

Analysis conducted by CAALA

Three objects were analysed, Offenbach, Mönchengladbach and Gelsenkirchen, across the four scenarios listed above (EnEV, KfW 55 and öko variants of each).

The analysed buildings show a considerable potential for refurbishment, and comparing across the buildings examined shows that significantly different CO2 saving potentials can be realised at similar investment costs. For example, the renovation variant “Gelsenkirchen KfW öko” has a CO2 savings potential twice as high as the renovation variant “Mönchengladbach EnEV öko” at similar investment costs. According to the results shown here, the properties “Monchengladbach” and “Gelsenkirchen” are to be preferred to the property “Offenback”, as there is a signficantly more cost-efficient decarbonisation potential.

Challenges and solutions


How to transfer the taxonomy into building transactions (i.e. assess a building before its acquisition)? 

We set up an ESG DD assessment process with our investment team (based on building performance, decarbonisation pathways and climate risks) which will be implemented for selected funds starting this summer.

How to motivate the company to engage with the taxonomy on a product development level?

We initiated a taxonomy product concept task force.

How to disclose our turnover, i.e. the ’% of our fund invested in Taxonomy-aligned activities’?

For us as an investment manager it seems more reasonable to report the % of revenue generated by Taxonomy-aligned activities.



Despite implementation costs in the short-term, a failure to integrate EGS-criteria into investment and economic activities may result in higher costs in the future. We believe it is important to quantify as much as possible (beyond the Global Real Estate Sustainability Benchmark (GRESB)) when implementing the taxonomy. We participate in a German sector initiative that has developed a comprehensive building performance measurement tool, which includes the decarbonisation pathways based on the Carbon Risk Real Estate Monitor (CRREM) and corresponds to the taxonomy. We would be happy to provide more information about the concept if there is an interest.