Sustainability best practices increasingly accepted as new norm among investors

Most managers around the world have already built ESG into their decision making, according to a survey by Bentall Kennedy, Realpac and UNEP Finance Initiative. Around 90% of the investment platforms analysed, which manage around USD 1,100 billion worldwide, include ESG reporting in their processes. The process is now standard in Europe, where all respondents said they report ESG indicators for their managed portfolios. Respondents also emphasised investors’ growing interest in sustainability, with 83% reporting a higher number of questions on the issue in the last fiscal year.

The survey also reveals that asset managers are placing greater emphasis on social responsibility, sustainable corporate management and the circular economy, in addition to just energy-related matters. For example, almost 90% of investment managers responding said that they include health and wellbeing in their ESG processes.

Other market signals, such as the widespread use of energy certificates for new builds and conversions, also show how the real estate industry is embracing sustainability. According to Minergie, Switzerland’s biggest energy label, over 39 million sqm of energy-consuming floor area received a provisional certificate between 2010-2018. Furthermore, comprehensive sustainability certification for buildings was introduced a few years ago by the likes of SNBS (Swiss Sustainable Building Standard) and SGNI (Swiss Sustainable Building Council), and this is now consolidating its foothold in the Swiss market, according to UBS.

Analysis of the sustainability profile of the entire real estate portfolio, and not just of individual properties, has recently gained ground. GRESB (Global Real Estate Sustainability Benchmark) is one very well-established comparison indicators. The first GRESB assessment was in 2009 and real estate investments worth over USD 4,000 billion, or over 100,000 individual properties worldwide are nowadays included in the benchmark. GRESB has become well established in Switzerland in the last three years, with many big Swiss real estate investment managers regularly taking part. GRESB does not just assess the energy efficiency of buildings but also looks at their overall sustainability.

Brice Hoffer – Research & Strategy, Real Estate & Private Markets, explains:

“This places ESG as a whole under the microscope while at the same time continually adjusting and improving the measurement process. In Switzerland we are also working to standardize measurement and comparison. The start of 2020 will for example see the launch of the new Swiss Sustainable Real Estate Index (SSREI) that will examine sustainability at both property and portfolio levels.

“This is probably just the start of a more integrated approach to sustainability. Many currently peripheral areas will be drawn in to become more important. Figure 4 shows that less than half real estate asset managers include biodiversity in their sustainability strategies. Within the context of the circular economy, construction materials are included at a higher 63% but this does not yet appear to have become an industry standard.”

james.wallace@realassetmedia.com