ESG: ‘Exciting times’ ahead as consensus on KPIs grows
It’s been an incredible year for the sustainability of real estate investment according to CBRE Investment Management’s EMEA head of sustainability Robbie Epsom. He said that much has changed, and in three respects particularly.
Firstly, whole-life carbon has risen up investors’ agendas and has become a key topic. “It’s helping to inform decision making, it’s starting to appear in regulations like the EU taxonomy,” Epsom said. He explained that it is helping in the process of building an understanding of the impact of construction materials across that whole building life cycle rather than just in operational terms.
Second, the importance of social value or social impact, has been recognised. “We just haven’t progressed that as a sector like we have Net Zero, like we have physical climate risk. Social impact can’t wait anymore. We can’t wait for the regulators, we need to make progress,” he said. The conversation is advancing, however.
“We’re seeing investment managers, including ourselves, start to take those next steps and they’re being bold and they’re saying ‘look we’re not going to get this right, but we need to make progress’,” Epsom added.
He said that social impact and how we measure it and how we drive positive change in a systematic way across cities is key.
The third point is the need for clear definitions at both the financial product level and the asset level.
“These definitions exist, particularly on transition risk and climate risk. Already we’re starting to see around 10 KPIs (key performance indicators) across Europe that are becoming transactional, sort of value points.”
Over the next year a focused conversation is needed across the market to start to agree how ambiguities are addressed. “So if you had four investment managers all trying to launch a brown-to-green product you would trust that the way they are defining brown-to-green; that 30% reduction in primary energy demand that the EU taxonomy gives us, you trust they’re all calculating it the same way. That is a big step.”
Defining these KPIs will make next year “really exciting” for the market according to Epsom. “I believe that the interest is there to invest in things like impact funds, sustainable funds. They just need the confidence that we are defining it in a way that the market understands and the regulators recognise, and that there’s trusted value points in there.”