2016 GRESB Real Estate & Debt Results Release - Europe
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The document introduces GRESB, an organization that assesses the environmental, social and governance (ESG) performance of real assets, including real estate portfolios and infrastructure assets. It provides an overview of GRESB's assessment methodology and coverage, highlighting key metrics and trends in ESG performance for real estate portfolios globally and in Europe. The document also discusses drivers of high ESG performance and looks at how innovation can help advance sustainability in the real estate sector.
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2016 GRESB Real Estate & Debt Results Release - Europe
- 3. ACTIAM Aegon NV Alberta Investment Management Corporation (AIMCo) Amundi AMP Capital AP1 First Swedish National Pension Fund AP2 Second Swedish National Pension Fund AP3 Third Swedish National Pension Fund AP4 Fourth Swedish National Pension Fund AP7 Seventh Swedish National Pension Fund Archbishops' Council Armstrong Asset Management ATP Australian Ethical Investment AustralianSuper Aviva Investors AXA AXA IM Baldwin Brothers Inc. Bank J. Safra Sarasin Bayerische Versorgungskammer Bedfordshire Pension Fund BMO Global Asset Management BNP Paribas Investment Partners Brawn Capital Brown University Sustainable Investment Fund BT Pension Scheme California Public Employees' Retirement System California State Teachers' Retirement System Cathay Financial Holding Co., Ltd. Catholic Super CBRE Global Investors Cbus Super CCLA Central Finance Board of the Methodist Church Christian Brothers Investment Services Christian Super Christopher Reynolds Foundation Church Commissioners for England Church of England Pensions Board Church of Sweden Connecticut Retirement Plans and Trust Funds Dana Investment Advisors Danske Bank Asset Management Danske Civil- og Akademiingeniørers Pensionskasse Deutsche Asset Management Dragon Capital EdenTree Investment Management Ltd. Encourage Capital Environment Agency Pension Fund Epworth Investment Management Ltd ERAFP ESSSuper ETF Partners Eureka Funds Management First Affirmative Financial Network Friends Fiduciary Corporation Friends Provident Charitable Foundation FRR - Fonds de Réserve pour les Retraites Greater Manchester Pension Fund Henderson Global Investors Hermes Investment Management HESTA HSBC Global Asset Management IFM Investors Impax Asset Management Inflection Point Capital Management Insight Investment Jesuits in Britain Juristernes og Økonomernes Pensionskasse Kempen Capital Management L&G Investment Management Local Government Super London Pensions Fund Authority Mercer Merseyside Pension Fund Miller/Howard Investments, Inc. Mirova MN Nanuk Asset Management Pty Ltd Natixis Asset Management NEI Investments New York City Comptroller New York State Common Retirement Fund New Zealand Superannuation Fund NextEnergy Capital Nordea Wealth Management North East Scotland Pension Fund OFI Ohman Old Mutual Global Investors OPTrust Oregon State Treasurer OTTP Pax World Management LLC PensionDanmark PGGM PKA Plater Trust Railpen Investments Rathbone Greenbank Investments Representative Body of the Church of Ireland Reynders, McVeigh Capital Management Robeco Russell Investments Sisters of St. Dominic of Caldwell, New Jersey Sonen Capital South Yorkshire Pensions Authority Stafford Sustainable Capital Statewide Super Tellus Mater Foundation Temporis Capital LLP The Barrow Cadbury Trust The Joseph Rowntree Charitable Trust The Pensions Trust The Sustainability Group at Loring, Wolcott and Coolidge The United Reformed Church Trillium Asset Management Trustees of Amherst College Unipension FAIF A/S Unitarian Universalist Association USS Veris Wealth Partners VicSuper Vision Super Pty Ltd Walden Asset Management Wespath Benefits and Investments West Midlands Pension Fund West Yorkshire Pension Fund WHEB 130 investors
- 4. INTRODUCING THE 11TH GICS® SECTOR: REAL ESTATE
- 5. 99TWh 27.9Mt 0.47km3 15.5Mt Buildings are (a big part of) the problem...
- 6. Innovation in renewable energy …but also part of the solution
- 7. Innovation in waste management …but also the solution
- 10. Sustainability Performance Regulation Leading BREEAM Outstanding LEED Platinum Green Star Six Star Etc. Building Stock
- 11. Market transformation Top down, bottom up Capital Market Company Portfolio Building Investment Community CAPITAL Investment Manager Portfolio Manager/ Asset Manager Property Manager/ Facility Manager COMMITME NT
- 13. 3.9x The difference in overall GRESB score between the Top 10% and Bottom 10% entities in 2016
- 14. “U.S. REITs with higher GRESB ratings deliver higher returns per unit of risk” “2.75% return spread between the Top 10% and Bottom 10% European non- listed GRESB entities”
- 15. 73,988 Homes Energy LFL consumption (between 2014-2015)
- 16. 90,197 passenger cars Carbon LFL consumption (between 2014-2015)
- 17. 1,200 Olympic pools Water LFL consumption (between 2014-2015)
- 18. 14,963 truck loads Waste LFL consumption (between 2014-2015)
- 19. The Assessment
- 20. REAL ESTATE PORTFOLIOS PROPERTY COMPANIES CAPITAL MARKET BENCHMARK SCORE ASSESS COMMUNICATE DATA QUALITY
- 21. DATA PARTNERS (API) GRESB ASSET DATA FREE GRESB ASSET SPREADSHEETS
- 22. Validation Three-layer process for investment-grade data 100% Validation Plus Site Visit All Participant Check Open text boxes (quality) Open-ended questions Hyperlinks Evidence (presence) Evidence (content) Data accuracy18% 2.5% Reporting boundaries Data quality Evidence for answers
- 23. GRESB Coverage
- 24. 63 Countries 759 Entities 66,000 Assets GRESB coverage
- 25. GRESB coverage
- 26. GRESB coverage
- 27. USD 100 billion
- 28. Apple Market Cap USD 584 billion
- 29. USD 7.6 trillion Commercial Real Estate Owned by Investors
- 30. Competitive Differentiation & Advantage Risk & Uncertainty USD 2.8 trillion GRESB Coverage
- 32. GRESB Model Global ESG performance
- 33. GRESB Model Regional ESG performance
- 35. ESG Performance Dynamics Global trends over time
- 36. Sector leaders Europe Property type Entity name Retail - Listed Altarea Cogedim 🌐 Retail - Private Steen & Strom AS Office - Listed Cegereal Office - Private Central Saint Giles Limited Partnership – Legal and General Property 🌐🌐 Industrial Prologis European Properties Fund II –Prologis Residential - Listed UBS (CH) Property Fund Direct Residential Residential - Private CSA Real Estate Switzerland Residential – Credit Suisse 🌐 Healthcare Achmea Dutch Health Care Property Fund – Syntrus Achmea Real Estate & Finance 🌐 Other Leisure Fund Property Partnership – Legal and General Property 🌐 Diversified - Listed Credit Suisse Real Estate Fund LivingPlus Diversified - Private Linked Life Fund – Legal and General Property Diversified - Retail/Office (Listed) British Land Company Plc Diversified - Retail/Office (Private) Managed Fund – Legal and General Property Diversified - Industrial/Office Castellum AB 🌐 Diversified - Residential/Office Credit Suisse Real Estate Fund SIAT – Credit Suisse 🌐 🌐 Global Leader 🌐 Global Sector Leader
- 37. Performance?
- 38. 13,645 Homes Energy Europe: Footprint and LFL Consumption 2014-2015
- 39. 3,401 passenger cars Carbon Europe: Footprint and LFL Consumption 2014-2015
- 40. 147 Olympic pools Water Europe: Footprint and LFL Consumption 2014-2015
- 41. 225,583 truck loads Waste Europe: Footprint and LFL Consumption 2014-2015
- 44. Intensities – energy consumption Input versus output
- 45. Intensities – carbon emissions Input versus output
- 46. But also...
- 49. …and many more indicators Such as Health & Well-being
- 52. Carbon Management Global 1. ESG policy includes carbon emissions 2. Carbon emissions target in place 3. Due diligence process includes carbon emissions 4. Risk assessments include carbon emissions 5. Data management system in place 6. Reporting carbon emissions data 7. Offsetting carbon emissions 8. Reporting carbon intensity data 9. External review of carbon emissions data 1. 2. 3. 4. 5. 6. 7. 8. 9.
- 53. Road Ahead
- 54. 759 ENTITIES 60 (’15: 54) LISTED AUS/NZ -2% LFL Change in Carbon Emissions (427kt) SCORE LEADREPORT
- 56. Sustainability Performance Regulation Leading BREEAM Outstanding LEED Platinum Green Star Six Star Etc. Building Stock
- 57. This needs radical innovation! …in products and services
- 59. And it’s not just investors… Lenders are waking up… 18 GRESB Debt Participants USD44bln Total Loan Portfolio USD7.1bln Green Property Bonds
- 60. Sustainability Performance Building Stock Regulation Leading BREEAM Outstanding LEED Platinum Green Star Six Star Etc.
- 62. So, what is your GRESB Rating?
Editor's Notes
- 7.3 billion people, of which most live in cities. This was only 14% a century ago. Annual worldwide GDP output is massive: 73 trillion USD per year This also translates to a considerable carbon footprint, of almost 10 Gigatonne of carbon per year – 400ppm
- New global commitment to reduce emissions First ever legally-binding climate agreement The Paris Agreement on climate change provides a clear signal to investors that the transition to the low-carbon, clean energy economy is inevitable and already underway. Governments have a responsibility to work with the private sector to ensure that this transition happens fast enough to catalyse the significant investment required to achieve the Paris Agreement’s goals including: Holding the increase in the global average temperature to well below 2°C above pre-industrial levels, and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels, and Achieving net zero greenhouse gas emissions (“a balance between anthropogenic emissions by sources and removals by sinks of GHGs”) in the second half of the century."
- More responsible investors More focus than ever on environmental, social, and governance performance across all asset classes They urge to: Increase pace of transition Increase green investments I short: carrots & sticks are needed List of investors that signed G20 letter from: http://www.igcc.org.au/resources/Documents/FinalWebInvestorG20Letter24Aug1223pm.pdf
- 4 months electricity supply in the UK 4% of all global carbon emissions from ailrine sector XXXX Olympic pools 2.5 times the Great Pyramid of Gaza
- Prologies produces one third of on-site renewables in GRESB 2015: 190GWh 2014: 179GWh https://www.greenbiz.com/article/65-billion-real-estate-titan-second-only-walmart-solar Add GRESB Green Star logo/GRESB Green Star rating
- Link REIT case study - https://www.gresb.com/insights/2016/08/fresh-market-waste-separation-pilot-scheme/?preview_id=11966&preview_nonce=2c17e598f7&preview=true A joke here can be...”Yes this is innovation”
- But how to differentiate between leading and lagging? GRESB provides unique insight for real estate, and real estate only GRESB provides a global “yardstick”/business intelligence tool to define and recognize leadership Assess Score Benchmark Communicate
- How can the real estate sector contribute to solving climate issues
- Regulation provides minimum performance requirements Leaders are in the right tail, however, the bulk is still in the “bell” So, how to move the bell forward (= transformation to net-zero buildings that are safe, healthy, comfortable, connected, socially engaged etc.)
- We’ve seen that the capital market provides a very effective top down push towards bottom up commitment PRI currently meeting in Singapore – 1,500 asset owners
- Transparency companies and funds vary significantly in their environmental, social, and governance performance Opportunity leadership, quality, competitive advantage, resilience, superior returns, lower operating costs, mitigation of social and environmental impacts Risk regulation, compliance, obsolesce, competitive disadvantage, physical damage, material impact, lower returns, higher operating costs, excessive social and environmental impacts Speed this up
- Almost 4x The difference in overall GRESB score between the Top 10% and Bottom 10% entities in 2016 Message: there is a great differentiation amongst GRESB reporters. Our aim is to provide transparency to the bottom performers in terms of how the top performers are managing risks and utilizing opportunities, so they can close the gap. Top 10% average score: 86.6 Bottom 10% average score: 21.9
- There is an increasing amount of evidence that backs the correlation between financial performance and ESG performance. Studies using GRESB data clearly show that market transformation also makes business sense.
- What does current market transformation look like in terms of reducing the built environment’s footprint? Less energy consumption
- Less carbon emissions
- Less water consumption…
- …and less waste streams
- Our process to connect industry stakeholders Central in this process is data quality, both at the company/fund level and at the portfolio level
- But increasingly, also at the asset level. Our API and asset-level spreadsheet provided GRESB participants to report on building data for about 1/3 of all assets that are (indirectly) covered by the benchmark.
- Process that supports in providing investment-grade data (co-developed with PwC)
- Something different: highlight GRESB leaders
- This map shows the countries asset count based on asset level data
- Listed: 201 Private: 558
- No need to show these (already included in previous slides)
- Let’s put these figures in context
- Disclaimer: this figure is from 5 September 2016 iPhone 7 will be presented today, let’s see what Apple’s market cap is tomorrow morning
- Transparency on ESG provides competitive differentiation & advantage. The opposite is true for lack of transparency.
- Conclusion: transparency leads to improved performance/leadership
- The good: renewable energy consumption increases by 25% The bad: overall energy consumption increased as well, and the net impact is marinal
- The good: renewable energy consumption increases by 50% The bad: overall energy consumption increased as well, and the net impact is marginal
- Drilling down deeper, companies and funds are also differentiated in terms of carbon output Looking at intensities, this differentiation provides interesting insights into sector types and their impact Looking at intensities per unit of invested capital, it becomes clear where the opportunities for improvement are, and how “green investments” might actually have the most positive impact
- These are all insightful environmental performance results, but performance is more than just “E”
- I thought there were 43 leaders?
- ESG policy includes carbon emissions Carbon emissions target in place Due diligence process includes carbon emissions Risk assessments include carbon emissions Data management system in place Reporting carbon emissions data Offsetting carbon emissions Reporting carbon intensity data External review of carbon emissions data
- New global commitment to reduce emissions First ever legally-binding climate agreement The Paris Agreement on climate change provides a clear signal to investors that the transition to the low-carbon, clean energy economy is inevitable and already underway. Governments have a responsibility to work with the private sector to ensure that this transition happens fast enough to catalyse the significant investment required to achieve the Paris Agreement’s goals including: Holding the increase in the global average temperature to well below 2°C above pre-industrial levels, and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels, and Achieving net zero greenhouse gas emissions (“a balance between anthropogenic emissions by sources and removals by sinks of GHGs”) in the second half of the century."
- Regulation provides minimum performance requirements Leaders are in the right tail, however, the bulk is still in the “bell” So, how to move the bell forward (= transformation to net-zero buildings that are safe, healthy, comfortable, connected, socially engaged etc.) CP: Rating systems should move to the right too.
- Regulation provides minimum performance requirements Leaders are in the right tail, however, the bulk is still in the “bell” So, how to move the bell forward (= transformation to net-zero buildings that are safe, healthy, comfortable, connected, socially engaged etc.) CP: Rating systems should move to the right too.
- Regulation provides minimum performance requirements Leaders are in the right tail, however, the bulk is still in the “bell” So, how to move the bell forward (= transformation to net-zero buildings that are safe, healthy, comfortable, connected, socially engaged etc.) CP: Rating systems should move to the right too.
- Add real numbers