APG, PGGM and USS create index of greenest property companies

Three of the largest European institutional investors, Dutch pension management giants APG and PGGM and the Universities Superannuation Scheme in the UK, have clubbed together to set up a global benchmark of the greenest listed property management companies to gee up poor reporting levels in the sector. The index creation comes after a survey of 688 property managers – of which 198 responded – commissioned by the funds and carried out by the European Centre for Corporate Engagement (ECCE) at Maastricht University, revealed a “strikingly low” number able to provide meaningful data on environmental factors. The survey found that just 19% of respondents could report verified numbers on energy consumption of their buildings, while only 16% could do the same for water consumption and just 14% for carbon emissions. The findings of the report, titled: Environmental Performance: A Global Perspective on Commercial Real Estate, have been endorsed by Europe’s biggest property associations: the European Public Real Estate Association and the European Association for Investors in Non-Listed Real Estate Vehicles. The new global ‘Environmental Real Estate Index’, scores the property companies on environmental management practices and their implementation. It breaks out the top ten green property companies in Europe and the US and the top five in Australia. Big Yellow Group, a UK-based self-storage property company, was the top green property company in Europe due to a strong dedication to zero-carbon buildings carbon reduction and extensive use of renewable energy. Vornado Realty Trust, one of the country’s largest commercial property investors topped the US list.Vornado incorporates environmental practices in its property management and is certifying its existing portfolio under the U.S. Green Buildings Council’s LEED for Existing Buildings system. The pension fund investors said they hoped the benchmark would prompt institutional investors to lobby property companies falling outside of the index to improve their environmental performance. Angelien Kemna, chief investment officer at APG, said: “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.” The investors pointed to a plethora of research, including the Stern Report, which has shown that the built environment offers the largest potential for greenhouse gas abatement, mostly through reduced electricity use via greater energy efficiency. They said rising energy costs would only increase the importance of this issue for the profitability of real estate investment. In addition, they said it was possible to turn environmental risks into opportunities. ECCE said that research it had carried out shows that rents of energy efficient buildings are higher than conventional buildings by 6 to 8%, that occupancy is higher and less volatile, and that transaction values are higher by up to 18%.
Link to ECCE survey