AREIM's Sustainability Report is an example of how ESG strategy has been implemented within the organisation. The report serves as an example of how to build a strategy and identify the objectives through a stakeholder engagement process and materiality assessment.
In July 2020, COIMA SGR received equity commitments of €400 million for the first close of the COIMA ESG City Impact Fund, the first urban regeneration ESG fund to be launched in Italy. With an open collaborative structure including co investments, partnership and financial leverage, the fund is targeting further equity raises up to €1 billion, to create a total investment capacity of over €4 billion.
The 15th edition of the World Economic Forum’s Global Risks Report is published as critical risks are manifesting. The global economy is facing an increased risk of stagnation, climate change is striking harder and more rapidly than expected, and fragmented cyberspace threatens the full potential of next-generation technologies — all while citizens worldwide protest political and economic conditions and voice concerns about systems that exacerbate inequality. The challenges before us demand immediate collective action, but fractures within the global community appear to only be widening. Stakeholders need to act quickly and with purpose within an unsettled global landscape.
After securing the first and largest sustainabilitylinked loan in Asia’s real estate sector from DBS Bank (DBS). The CapitaLand Group has signed new sustainability-linked loans with Credit Agricole Corporate & Investment Bank (CACIB), Natixis Bank and Société Générale to raise a total of S$600 million to date. CapitaLand has the flexibility to use these sustainability-linked loans for general corporate purposes.
A report released in 2019 by Urban Land Institute and Heitman details the potential risks and implications of climate change on the real estate sector. Furthermore, the report makes a call to investors and investment managers to come into action and work towards better solutions in the future, for which the report presents a number of thinking paths.
Firstly, the report aims to give property investors a better understanding of climate risk and its real estate investment implications. As such, types of climate risk and their potential impact on real estate are explained.
Secondly, the research addresses the state of current practice for assessing and mitigating climate risk in real estate as well as highlighting best practices across the industry. From the examples it becomes clear that, nowadays, climate risk insurance is used as the main protection for asset value.
Finally, it is acknowledged that climate risk insurance alone is insufficient to mitigate the risk of devaluation in the future. As such, investors and investment managers need to find effective solutions. The report touches upon a number of potential solutions:
- Mapping physical risk for current portfolios and potential acquisitions;
- Incorporating climate risk into due diligence and other investment decision-making processes;
- Incorporating additional physical adaptation and mitigation measures for assets at risk;
- Exploring a variety of strategies to mitigate risk, including portfolio diversification and investing directly in the mitigation measures for specific assets; and,
- Engaging with policymakers on city-level resilience strategies and supporting the investment by cities in mitigating the risk of all assets under their jurisdiction.
Summarised by Barbara Maltha-Koppelman, ESG Committee member
40 Holborn Viaduct is a prime example of how using technology can help to enhance occupier experience, drive energy savings and optimise maintenance – all in line with our goal of developing a sustainable portfolio where the customer comes first. The building has already made a 12% reduction in energy use and is on track to achieve a 20% saving over a four year period. Health, wellbeing and productivity has also improved in the building with better regulation of temperature. Nuveen is now in the process of rolling out similar solutions to its offices and retail centres across Europe.
Prepared by Nuveen
Grosvenor Asia Pacific’s Hong Kong and Shanghai office refurbishments have both been awarded the International WELL building Institute’s™ (IWBI™) Gold Level Certification for the WELL Building Standard™ (WELL™). Both the Hong Kong and Shanghai offices were also awarded LEED Gold and Platinum, respectively.
With the release of the Financial Stability Board’s Final Recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) and increasing expectations from investors and Australian regulatory bodies, there has been a growing impetus for companies to assess and report the risks posed by climate change.
Located in the heart of the major commercial precinct of North Ryde Sydney, the Sydney-based asset marks Australia’s first Holiday Inn Express hotel and Pro-invest Group’s first operational hotel. Holiday Inn Express Sydney Macquarie Park offers a smart choice for value conscious business and leisure travellers, with the hotel’s business model strongly ingrained in operating ‘smart’ – offering guests everything they need and nothing they don’t. This philosophy extends to the hotel’s sustainability design, considerations for furniture, fixtures and equipment, and operation.
New construction is a vital part of a balanced real estate strategy, but in many cases, there are equally compelling opportunities in improving the operations and management of existing assets. More than 75% of existing commercial buildings will continue to operate as is over the next 15 years. Thus, it is important tackling sustainability through improved operational efficiency rather than focusing solely in newly constructed properties. Many changes can be done at lower or no cost, with significant improvements to both operational efficiency and a property’s profitability, such as 2-degree Fahrenheit temperature adjustment or installing VFD pumps for water features.
Furthermore, sustainability takes on even more important dimension when considering improved management and governance. By establishing a formalized sustainability program, property owners can then be better positioned to underwrite the skills and capabilities of the property managers needed to operate each property. Benchmarking properties will establish references which would make identification of sustainability success more apparent. Regular and open communication between all parties from asset manager to engineering team is also a key factor.
Finally, it can be stated, that better operated buildings are more profitable. Next to lower operational costs there is evidence of garnering rental premiums, faster absorption as well es lower cap rates. Moreover, studies have shown that individuals working in green buildings are more comfortable and have fewer illness symptoms because of improved indoor air quality as well as natural lighting.
Prepared by Principal Real Estate Investors
Holiday Inn Express Melbourne Southbank is being developed by Pro-invest Group, one of the largest hotel investment platforms in Australasia. Together with the guidance of Clean Energy Finance Corporation (CEFC) - a specialist clean energy financier, investing with commercial rigour to increase the flow of finance into renewable energy, energy efficiency and low emissions technologies - will incorporate a range of initiatives into the Melbourne Southbank hotel, boosting the initial targeted 4.5-Star NABERS Energy rating to 5-Stars.
This document is the final report for the DG Energy study ‘Preparation of common guidelines and recommendations to improve the consistency of the implementation of certain aspects of Article 8 and Annex VI of the Energy Efficiency Directive’.
Code, located in Paris CBD was a major redevelopment from a car park into a Grade A office with a strong focus on sustainability certifications and occupier health and wellbeing. Several sustainability and health and wellbeing certifications were achieved upon completion.
Prepared by EQT
Allee Center, located in Leipzig (Germany) is a daily needs shopping destination and community hub in the district. Indoor and outdoor greenery, water features and biophilic elements enhance the visitor experience. Active engagement with community groups and charities as well as holding community events have ensured strong links with the local community.
Prepared by EQT
Are you or have you recently worked on a project which has specifically considered governance as part of an investment selection or monitoring process? Perhaps your organisation has implemented a governance policy related to Diversity & Inclusion? We are looking for Governance related case studies to populate this section of the Global #ESG library.
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Sustainable real-estate investments are often characterised by various sustainability benchmarks and certificates, which set varying requirements. How do these efforts result in a more sustainable organisation? To what extent can the organisation’s sustainability performance be assessed by the market?
A case study prepared by Altera Vastgoed
Altera Vastgoed ESG Library Case Study ESG Benchmarks
In November 2019, Patron Capital announced its intention to establish the Women in Safe Homes (WISH) Fund, believed to be the world’s first gender-lens property fund, alongside Resonance and Big Society Capital. The fund will be a solution to the lack of affordable, safe and secure homes for women who are experiencing homelessness, have been involved with the criminal justice system, are survivors of domestic abuse or have other complex needs.
Nuveen’s Private Markets Impact Investing Report highlights its approach to impact investing and how they built their impact strategy over the last decade. Together with the real estate impact investing case studies, the report illustrates how to create a theory of change for impact evaluation and an example of building a responsible exit strategy.
Theory of Change
Nuveen created a robust Theory of Change connecting its investments to its overarching goal, “to create or preserve safe, affordable, and sustainable housing for low-income individuals and families”. To develop its ToC, Nuveen identified the challenges it seeks to address and the specific types of impact it intends to achieve. Through this process, Nuveen’s team recognized that its impact investment strategy for affordable housing encompasses several sub-strategies creating impact across multiple dimensions beyond access to affordable housing, such as access to social services related to financial inclusion, health and education, and building sustainability.
Nuveen’s U.S. affordable housing strategy aims to increase access to sustainable, safe and affordable housing for underserved and low-income communities.
In 2018, Nuveen invested in Shore Hill Senior Community, an affordable senior housing community located in the Bay Ridge area of Brooklyn, NY. The complex includes studio and one-bedroom rental units and tenants pay no more than 30% of their income towards rent.
As affordability restrictions were due to expire in a few years, there was the threat that a traditional investor could have bought the asset to profit from a sizeable rental uplift when exchanging tenants and modernising housing units. To counter this, Nuveen extended the affordability restrictions, which kept rent costs 45% below market rate for the tenants.
Whilst not conceived as an Impact Strategy, the Carbon Neutral Real Estate (CNRE) Fund is a good example of intentionality aspect of Impact Investment, as the investment thesis is focused on addressing a tangible environmental need, and investment decision making is rooted in meeting this goal in alignment with the financial objectives of the Fund. CNRE is a joint venture between Columbia Threadneedle Investments, the Carbon Trust and Stanhope, developed specifically to reduce the carbon emissions of the built environment. Columbia Threadneedle explain the strategy here:
“UK office buildings contribute around a fifth of total carbon emissions in the UK. New build, carbon-compliant real estate developments are low in comparison to the total supply, and these buildings can be typically very carbon inefficient to redevelop. The Government's 2050 Net-Zero target, means emissions from existing buildings will need to be reduced by 100%, which realistically can only be achieved via refurbishment of existing buildings, and their ongoing efficient operation. As an institutional manager of UK real estate we have the ability - and the responsibility - to help drive positive outcomes for society. In 2010 we took a pioneering step towards carbon reduction in the built environment by teaming up with Stanhope, one of the UK’s leading commercial developers, and the Carbon Trust, a world-leading adviser to businesses, governments and the public sector on carbon reduction. This partnership between industry experts adds value throughout the entire lifecycle of each office building, from acquisition through refurbishment, leasing and occupation, to ensure carbon emissions are minimised.”
A lack of affordable housing is a global issue and not one exclusively seen in developing markets, with acute issues also common in property hotspots in Western Europe and North America. Whilst there is no single definition of affordable housing, generally the term captures a wide spectrum of housing options, varying from social rent, to intermediate rent, to first-time buyer schemes aimed at getting people on the property ladder.
The AXA Impact Fund - Climate and Biodiversity, launched in July 2019, was developed in response to increasing concerns about how climate change threatens biodiversity.
The United Nations’ Sustainable Development Goals (SDGs) are a powerful organizational and communications tool for institutional investors and asset managers as they are universally accepted across multiple facets of society. But the SDGs are vulnerable to misuse, misrepresentation and dilution. Investors need to ensure that when a product is labelled as “aligned with the SDGs” that it moves beyond just alignment and makes a real contribution to positive social and environmental outcomes. In this article we explain how we have approached this challenge with an investment in affordable housing, one of the main sectors within social infrastructure.