Nuveen yesterday launched its Article 9 global real estate carbon reduction strategy, focused on lessening global carbon emissions through investment in listed real estate.
The global real estate carbon reduction strategy aims to provide long-term capital appreciation and current income by investing in real estate companies that have either achieved carbon neutrality, or have a target to reduce, or track record of reducing, greenhouse gas emissions in a manner which is aligned with the Paris Agreement.
“We believe companies that are committed to reducing emissions have the potential to deliver superior long-term results as a result of reduced future financial liabilities, better pricing power for assets by appealing to a larger pool of tenants and better access to debt and equity capital,” said Ben Kerl, portfolio manager and head of listed real estate investments, Nuveen.
“Our clients are increasingly committed to portfolio diversification away from traditional equity and fixed income asset classes against a backdrop of challenging market conditions,” he said.
The durability of real estate combined with increasing interest in carbon reduction solutions can potentially provide a long runway for future growth within carbon-aware real estate securities.
Global efforts to combat climate change are fuelling worldwide demand for decarbonisation-focused investments, while cyclical tailwinds in real estate such as favourable valuations, healthy fundamentals and solid earnings and dividend growth may help create compelling investment opportunities.
Kerl will co-manage the strategy with Jay Rosenberg, head of public real assets. They will be supported by Scott Sedlak and Jagdeep Ghuman, respectively the regional real estate leads in the US and Asia. The team has over 18 years’ experience across a wide variety of market environments.
The strategy joins Nuveen’s other Article 9 strategies: the Global Core Impact Bond; US Core Impact Bond; Emerging Markets Impact Debt; and Global Clean Energy Infrastructure Impact strategies.
“Global carbon emissions are on track to increase temperatures by 4-5°C, leading to likely catastrophic effects on the world as we know it,” said Kerl. “Buildings are thought to be responsible for approximately 40% of global carbon emissions, a figure we believe could be hugely reduced by implementing creative plans to reduce emissions.”
Nuveen, the investment manager of TIAA, has $1.1 trillion in assets under management and a presence in 27 countries. The group has committed to achieving net zero carbon across its private real estate portfolio by 2040.