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October 19, 2020

Amid a growing global consciousness of the implications of climate change, investment managers are looking more closely at their own green credentials.

By end of this year, 23 commercial real estate owners in the UK, including Aberdeen Standard Investments, DWS, LGIM Real Assets and LaSalle Investment Management will publish their pathways to becoming net zero under the Building Better Partnership’s Climate Change Commitment.

“Greater disclosure of the progress being made towards net zero, from portfolio energy performance to the transition to clean energy supplies, is vital,” says Beth Ambrose, Director in Upstream Sustainability Services at JLL. “Things may have been sidetracked but the momentum is growing in spite – and to some extent, because of – Covid-19.”

In the UK, Derwent this summer set out its plan to become the UK’s first net zero carbon Real Estate Investment Trust by following a net zero carbon pathway. As well as working towards limiting its emissions across its portfolio, the company is looking at how it powers its business activities; both renewable electricity and gas will be procured and invested in. The firm says it has opportunities to self-generate renewable energy from its land holdings in Scotland.

Investment managers and real estate companies are definitely thinking more broadly about their sustainability credentials,” Ambrose says.

“There’s less focus on specific, thematic strategies which brand themselves as, for example, zero carbon – and more wide-ranging thinking around the attributes of investment managers and investment platforms,” says Ambrose.

The drive is expanding investment managers’ strategies to factor in how they work and interact with occupiers and suppliers, says Ambrose, pointing to UK real estate fund manager. Fund manager the Moorfield Group recently committed to being operationally net zero carbon by 2030.

It’s aiming to eliminate carbon emissions under its control, including its work with third parties. Where contracts are under its authority, initiatives include 100 percent of electricity to be sourced from renewables by 2030, as well as putting solar PV on all viable roof spaces by 2022.

Direct investment strategies which offer investors an opportunity to get involved in fast-changing areas of the sustainability drive continue to emerge. Focused on listed REITs with assets in Europe, North America and Asia, Foresight Capital Management has created a Sustainable Real Estate Securities Fund. The fund, launched this year, is aiming to be carbon neutral by buying carbon offsets for residual gas use by tenants.

With the built environment accounting for 40 percent of greenhouse gas emissions according to the World Economic Forum, pressure to act is set to grow. To meet the Paris Climate and Sustainable Development Goals, the world needs to more than double the share of global energy supplied by renewables.

“As the transition to a low-carbon economy advances, capital deployment into sustainable strategies is possible because great strides are being made both within building management and tech solutions,” says Ambrose. “The smart money is on solutions which drive energy efficiency and reduce costs and at the same time tackle greenhouse gas emissions.”

Longer term drivers, such as low interest rates and low returns across many asset classes, remain key factors for all investors when placing capital, says Ambrose.

But a greater effort from investment managers on improving their own green credentials will “undoubtedly continue to keep up momentum in the coming months and years”, she concludes.

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Beth Ambrose

Director, Upstream Sustainability Services at JLL.

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