ESG, TCFD, SFDR, 1.5 degrees, there seems to be a new ESG (Environment, Society, Governance) acronym every day and it can get confusing! With Global Real Estate valued at c.$280 trillion1. , asset managers play a fundamental role in contributing to the property industry’s success, ensuring their portfolios deliver returns to investors - ESG is becoming integral to that success, but what does it mean and how can it be factored into investment decision-making?
Looking firstly at the E in ESG, the climate crisis is having a significant impact and is now a critical investment risk, with the built environment being responsible for nearly 40% of the world’s global emissions. Impacts vary from heat stress in the UK to people losing their homes as highlighted in the tragic and horrific flooding in Northern Europe and China and recent Wildfires across different continents. As emphasized in the recent IPCC report, The effects of the climate crisis are upon us now and the real estate industry needs to know how to respond to protect the assets that drive its investment returns.
Moving on to the S in ESG, the global pandemic, health and wellbeing, broadening inequality and the pressing need for greater social impact through real estate investment are all issues that investors, occupiers, employees and more and more customers care about. And then there is the G in ESG - more than $43 trillion of assets under management are committed to net zero goals and ESG investment is forecast to grow to more than $53 trillion in by 2023 2. An increasing focus on transparency in UK and European Regulation is driving greater focus on governance including specific requirements concerning the sustainability credentials of financial products. This has already led to $2trillion of ESG investments disappearing as these rules have made greenwash harder, and with ESG investment growing exponentially, much closer scrutiny is inevitable.
In this context, asset managers’ primary responsibilities must now also include an understanding of ESG risks and opportunities and how these can be addressed by practical action throughout the investment life cycle from acquisition to disposal. So how can asset managers upskill and keep pace with such rapidly evolving concepts?
The groundbreaking Better Buildings Partnership (BBP) Real Estate ESG Training delivered by Hillbreak seeks to provide this fundamental training and is unique in its development, with BBP members (including Savills Investment Management) contributing significantly to the course content and materials. The two half day modules combine a wide range of taught content with case studies and the opportunity for live learning and peer to peer engagement. This collaborative and engaging approach ensures the course is highly relevant to real estate and asset management professionals and can also reflect the practical challenges associated with applying ESG across different investment strategies and diverse portfolios. Whilst focused on asset managers, the course has already proven useful to a much wider range of real estate professionals, demonstrating the cross-cutting nature of ESG.
It’s no secret that having a sustainability team does not equate to success in integrating ESG. It requires time and commitment from everyone in the business. Speak to any sustainability professional and they will tell you the importance of upskilling their colleagues, but the limited time and resources they have to do this within their own businesses and the lack of consistency in the knowledge base. Relevant and useful courses are hard to find and sustainability teams often find themselves fielding multiple training requests without a solution.
The BBP’s collaborative course fills an enormous training gap that the industry desperately needs and the interactive nature of the course provides multiple benefits such as peer to peer learning, access to industry experts from the Hillbreak Team as well as knowledge sharing and lessons learned. We have been delighted to help spearhead this programme at Savills Investment Management, with more than 35 of our asset management, fund management and risk management colleagues registered to participate. Colleagues who have already received the training have provided glowing feedback.
As a member of the Steering Group, it is fair to say that the demand for this course has far exceeded our initial expectations, with over 300 people now registered for the course in the first 6 months since it was launched. So, if you are a real estate organisation who has yet to take up this opportunity for your teams, then I would certainly advise getting in touch with the Hillbreak team as soon as possible to secure your places.
In this seminal year for climate change and with COP26 just around the corner, wouldn’t it be great to look back on 2021 as the year real estate accelerated the collective transition to shift the c.$280 trillion of real estate investments we manage towards a climate resilient, nature friendly, healthy and inclusive built environment by upskilling our professionals to deliver on this critical agenda? In doing so, we can place the real estate industry at the forefront of market transformation and capitalise on the opportunities to future proof our industry, create new jobs and contribute to a sustainable and prosperous future for our people and planet.
1. Building and construction activities together account for 36% of global final energy use and 39% of energy-related carbon dioxide (CO2) emissions when upstream power generation is included. Source - Global Status Report 2017
Head of ESG, Savills Investment Management