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The eco side of commercial

Thursday, January 28, 2010

Source: Catherine Deshayes

A major report on the environmental performance of the commercial real estate sector is published today by three large European institutional investors - APG, PGGM, and the Universities Superannuation Scheme, together with some of the major real estate industry bodies...

The report is based on a global survey of 700 listed property companies and fund managers, and was carried out by the European Centre for Corporate Engagement at Maastricht University. It reveals that, despite the fact that energy-saving investments can create value for property investors, the majority of survey participants are not yet actively managing environmental issues in their portfolios. Only a few investors from Australia, Sweden and the United Kingdom come close to attaining the top score in the global "Environmental Real Estate Index". These best practice property investors should serve as examples for others in the industry.

The survey also shows that a strikingly low number of property companies are able to report actual numbers on energy consumption (19% of respondents), water consumption (16%), or carbon emissions (14%).

The research has resulted in a new environmental benchmark, the global 'Environmental Real Estate Index', which includes scores on environmental management practices and on the implementation of these practices. By using information contained in the index, institutional investors can compare the environmental score of individual property investments with their environmental real estate targets. The intention is that this benchmarking will serve as a catalyst for environmental engagement in real estate investments.

Angelien Kemna, CIO at APG, commented, "In the integration of environmental, social and governance factors across asset classes, we were finding it difficult to measure the environmental performance of our real estate investments. We therefore decided to develop our own environmental survey of the sector and to use the results as the baseline for engagement. Ultimately, this should reduce the environmental impact of APG's real estate investments and improve financial return, given that emission reductions are directly linked to energy savings and therefore lower costs."

Johan van der Ende, CIO at PGGM, said, "Improving the sustainability performance of real estate managers fits in our responsible investment belief. The results of this global survey provide useful information allowing us to engage with parties we invest with and to further improve the sustainability of our real estate investments. It will serve as a tool allowing us to further implement our responsible investment policy for real estate."

Roger Gray, CIO at the Universities Superannuation Scheme, said, "As long-term investors, the environmental performance of our assets is a major consideration, even in the aftermath of the financial crisis. Management of environmental issues is an essential component of good management and financial performance of our property investments, and we believe that the drivers in this area will only get stronger."

Dr. Nils Kok, professor at Maastricht University and principal author of the report, said, "Benchmarking the energy consumption of a real estate portfolio is the key first step to making properties more efficient, and the current lack of metrics indicates that we are standing just at the beginning of the road to energy efficiency in the commercial real estate sector. The environmental performance of the property sector is likely to improve, as many of the property companies surveyed indicated that the assets acquired or developed in 2008 comply with "green" or energy-efficiency standards, such as LEED or BREEAM.

"Given the current financial crisis and its effects on the property industry, it would not come as a surprise if property investors were paying more attention to issues other than the energy efficiency of their portfolios. But that appears not to be the case. "

The complete report "Environmental Performance: A Global Perspective on Commercial Real Estate", and a 2000-word summary, can be downloaded from www.corporate-engagement.com

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