ESG Property
ESG should not be limited to equities and bonds, especially as property has such a huge impact on the environment. Mark Dunne reports.
GREEN HOUSES
ESG is not a part-time strategy. You cannot claim to be a sus- tainable investor if you integrate it into one area of your port- folio but invest like it does not exist in others. Equities have traditionally been the focus for investors pursu- ing sustainable strategies. Shareholders are using their influ- ence to improve a company’s impact on the environment, management diversity and standards of governance. This approach has spread to debt, where sustainability is typically written into the terms of how the capital will be used. Yet portfolios these days rarely comprise only equity and debt. To diversify and to generate the regular income needed to pay pensions on time and in full, mature final salary schemes are adding alternatives to their asset mix. Property is proving to be a popular option. Indeed, almost half (46%) of pension schemes in Europe have interests in domestic bricks and mortar, according to a survey by Mercer, with an average allocation of 7%. For the past 30 years, property has been an established part of multi-asset portfolios when institutional investors started struggling to achieve their income targets. “Property, as part of the growing alternative asset class, has constantly increased as an allocation in institutional portfolios
34 | portfolio institutional October 2020 | issue 97
since the mid-1990s,” says Christophe Montcerisier, head of real estate debt at BNP Paribas Asset Management. This is due to returns on investment-grade debt falling and property, although illiquid, offering bond-like features. “Real estate has always been an important part of a diversified portfolio, especially with bond yields where they are and with volatility in public markets,” says Greg Spafford, managing director & senior portfolio manager, real estate at Manulife Investment Management.
It is not just hitting a target return that is important to pen- sion funds. ESG’s influence on their decision-making is strong. Mercer claims that 88% of European schemes inte- grate sustainability into their portfolios, meaning that houses, offices, shops and warehouses need to comply with this strategy. “Across the board investors are looking for greener assets,” says Adrian Jones, director of infrastructure debt at Allianz. Property’s importance in de-carbonising the planet should not be underestimated. Bricks and mortar consumes 40% of the energy generated in the EU, Knight Frank says. There- fore, using less or tapping cleaner power sources could play a huge role in de-carbonising the economy.
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52
