Building a sustainable future

We highlight how important SI has become to traditional businesses and look at the ways the ESG framework is applied to our investments

By David Hirst, Head of Real Estate & Private Markets (REPM) Sustainability Workgroup

What trends are driving sustainability in real assets?

Climate change, energy needs and water scarcity are counted among some of the most pressing challenges of our century and we have seen environmental considerations in running real assets become mainstream. This is particularly notable in investors' initiatives towards reducing their carbon footprints. The impact of these challenges on society and the environment are expected to be vast and the signing of the Paris Climate Agreement and the UN Sustainable Development Goals (SDG) for example, are both clear indicators of the increase in momentum of environmental, social and economic (ESG) globally. Furthermore, if we are to meet the UN SDGs, real assets play a crucial role. As a real estate investor, therefore, it is our responsibility to understand the ESG impacts and their value potential to our investments as ultimately we strive to deliver long-term returns whilst also managing exposure to material risks.

How important has sustainability become to traditional businesses?

Many companies have moved away from talking about regulations and compliance, and started realizing that sustainability in itself is a good business practice. One consequence of climate change and population growth has been an increased focus on preserving natural resources. This has led to new laws, regulations, price changes, incentives and technologies which must be analysed and incorporated into our investment strategies. We are committed to reducing the environmental impact of our real assets by conserving resources, which, in turn, reduces the operating costs of our properties, assets and portfolios.

How integral is sustainability to all stages of the real estate investment process?

We believe there is a direct link between responsible investment and long term returns and our integrated approach enables us to harmonize financial goals with environmental and social challenges.

It is our mission to:

  • Deliver superior risk adjusted investment performance by integrating sustainability considerations into our investment process
  • Implement sustainable practises and promote health and well-being through innovation and the sharing of best practises
  • Being a responsible investor, developer and operator by addressing environmental impacts while enhancing property operations and values
  • Placing a strong emphasis on social responsibility following our long tradition of supporting worthy causes and working with non-profit and charitable organizations.

How is our ESG framework applied to portfolio investments?

ESG principles are embedded in our investment process when identifying opportunities, conducting due diligence and actively managing investments in the portfolios we manage on behalf of our clients. We believe delivery against a robust ESG framework reflects good management, delivers lower risk investments, greater community and employee support and over the long term, stronger financial returns.

  • Environment – climate change, environmental management systems and compliance, environmental efficiency and other environmental issues
  • Social – workplace health and safety, human capital management, corporate conduct and stakeholder management
  • Governance – corporate governance

Why should investors consider REPM for their real assets investment when thinking about a sustainable future?

As a leader in the industry for more than 75 years, we understand that real estate contributes to energy consumption and produce considerable quantities of CO₂ emissions. We are committed to understanding the ESG impacts and their value potential to our investments in order to deliver resilient, long-term returns and to manage exposure to material risks. We have established a comprehensive approach to ESG factors across each of the investment disciplines. As we strongly believe responsible ownership and operation of real property can have a significant positive impact on the environment and returns for our client, we operate with this in mind while investing both directly and indirectly into real assets. Our policy focuses on increasing the value of our investments for our investors and tenants but at the same time ensuring our assets and portfolios remain secure, resilient and profitable today and in the future. Sustainability is therefore integral to all stages of our real estate investment process and maintain a keen focus on responsible investing and resonate well with investors’ desire to make a positive impact.