ESG Property Making the change
Property is an asset built for the long term and, therefore, long-term impacts should be considered, says Regan Smith, managing director, real estate sustainability at Manulife Investment Management. “Investors are expecting managers to factor in the future climate risks for those assets and how to make them resilient to those threats, whether it is increas- ing temperature or flooding,” she adds.
This is all very well for those designing and constructing buildings today, but those who only invest in newbuilds have a small universe from which to shop in, especially in prime locations of major towns and cities. “New constructions only account for 1% of all buildings, so existing buildings need to be taken care of,” Montcerisier says.
Older properties are a problem that need fixing if houses, fac- tories and shops are to play a role in the transition to a low carbon economy. It could also help boost productivity. “Usually, when investors buy existing properties the end goal is to improve efficiency through maintenance or a capex pro- ject,” Montcerisier says. “There are a lot of opportunities to make older properties greener.” Such opportunities can be found in the core of a property. “Older properties have opportunities to reduce carbon by upgrading the energy and lighting or put in more efficient fans,” Smith says.
Spafford believes there could be benefits to making older buildings more energy efficient. “With the gains you can make on the energy side, there could be an opportunity to invest in old buildings while benefiting from the character and history of the property,” he adds.
Architects are work- ing to future proof properties because carbon targets are only going to get tougher.
Adrian Jones, Allianz Global Investors
Sustainable returns? With the cost of any refurbishment added to the investment made in buying a property, should investors be worried that making a property greener will erode the returns? “Investors do not have to sacrifice return when investing in green properties,” Montcerisier says. “The going in price should be higher. However, rental revenues should also be higher because of the efficient nature of the building and the
36 | portfolio institutional October 2020 | issue 97
There are several actions that could be taken to improve the sustainability and efficiency of an older property. For exam- ple, changing light bulbs is a simple investment that can make a difference, while installing solar panels would be more complex. “99% of the buildings that will be in this country in the next 50 years have already been built,” Jones says. “Refurbishment and improving the efficiency of existing buildings is not glamorous. It is not like opening a windfarm, but, in terms of small incremental steps leading to a big change, it is a way to deliver a positive impact.” Pictet is an example of an investor that works to make every building it owns as environmentally efficient as possible. “In a multi-use building in the heart of Madrid, for example, we are looking to install reduced flow water taps that decrease water consumption by up to 40%, provide bicycle parking for employees, and put in a circadian lighting system,” Kohalmi said in a note. Political will is also pushing investors towards greener prop- erties. The Climate Change Act aims to cut greenhouse gas emissions by 80% before 2050. The UK government has set its targets, as have the EU, while municipals in North America have slapped disclosure and carbon emission caps on all man-made structures.
There are various accreditations, including The Building Research Establishment Environmental Assessment Method certification and GRESB, an ESG benchmark for commercial property. For Montcerisier, tighter regulation is not the main issue. He would like to see more consistency around labels that sepa- rate green properties from more traditional buildings. “The issue is bigger than regulation. It is necessary to harmo- nise labels,” he says. “Investors need to apply pressure by requesting commonly-recognised labels to ensure that their investment value outbids, in relative terms, the value of non- labelised assets.”
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
