In a One-on-One interview, Abigail Dean, global head of strategic insights at Nuveen, explained to CMS partner Clare Thomas how ESG is now at the heart of Nuveen’s investment culture and decision making process but there are a number of challenges to implementing the policy.
“Over recent years that conviction has really grown, so we do feel it is really important to really look in a lot of detail at ESG throughout the investment process – when acquiring buildings when deciding how to invest in those buildings and when leasing and managing them – and we think that that secures the best value.”
A recurring theme of the REALX.Global ESG sessions was that sustainability is no longer a “nice-to-have” it is now a “must-have”.
“We know that buildings that aren’t going to be able to transition to the low carbon economy will start to lose their value at some point in the future,” she said. “We know that the physical impacts of climate change will have an impact on real estate values in certain locations and we also think that it’s pretty common sense that buildings that are at odds with the local community’s needs in the locations in which they are placed, will not hold their value.”
Dean said that taking account of ESG risk and opportunity throughout the investment life cycle has long made a lot of sense and has been the way that Nuveen has worked for some time. What has changed is that there is now so much more data, information and support available. The sheer quantity of data available can be a challenge in itself, however.
From ‘drowning in data’ to missing key information
“On one hand we feel like we’re drowning in data – you can get very granular in terms of the minutiae of how energy is used in a building for example, but at the same time some of those big pieces of data that are most fundamental, such as what are going to be the costs of adapting this building so that it is net zero carbon, compared to a similar building, we don’t have that information. And we quite regularly don’t have access to information about what are the carbon emissions associated with energy use in a building on the point of acquisition.”
The role of the Global Real Estate Sustainability Benchmark (GRESB) has been really important in standardising how real estate investors gather and report on that kind of data to their investors. Furthermore, certification systems such as BREEAM, DGNB and LEED really help in terms of clarifying the sustainability of individual buildings.
“But none of those frameworks or certifications really address the net zero carbon transition that we are all embarking on at the moment so there is certainly a gap there.”
She also said that what the real estate industry thinks of as a zero net carbon building might not be what an occupier thinks it is. “We need to make sure that we are fully lined up there.”
“When I look at our pathway to net zero carbon as an investor in real estate, for me it is about getting all of our real estate to a level of energy efficiency that is recognised by, ideally, BREEAM, LEED, and I hope they all bring out a consistent standard around this.”
But in addition to buildings achieving a level of efficiency they need to be using renewable energy sources and she said that it is essential to look at the embodied carbon that is inherent in building construction and in an average building will be equivalent to 50 years of its use.