Stockholm (NordSIP) – Many large real estate investment managers are simply paying lip service to sustainability, according to new research published by UK-based responsible investment campaign group ShareAction. Built to Last, the NGO’s first ever examination of specialist unlisted real estate managers, assesses the climate strategies of 16 of the world’s largest such firms representing $1.6 trillion worth of assets under management.
ShareAction evaluated the managers according to twelve key standards covering target setting, decarbonisation strategy, and disclosures. Only one manager was able to meet all 12 standards, with three managers failing to meet a single one and a generally poor average peer group performance. Top of the ranking is Nordic firm Nrep, the only manager with an A rating. The study reveals a sharp divide between the top and bottom halves of the peer group, with most managers in the former having set science-based targets along with the requisite implementation plans and disclosures. These include B-rated Savills Investment Management, Patrizia, Heimstaden and Prologis, and C-rated Hines and CBRE Investment Management.
Bottom-of-the-class managers’ climate agnosticism
At the other end of the spectrum, F-rated Greystar, Starwood Capital Group, and Blackstone failed to meet any of the 12 key standards. Along with Praemia REIM and Brookfield Asset Management, none of these firms has published any net-zero targets. Other managers in the lower half of the peer group such as ESR Group and Partners Group have stated 2050 net-zero targets for directly held assets but have thus far failed to put in place interim targets or any detailed implantation strategies or disclosures. Several of the managers with targets in place fail to specify which of their portfolio assets are affected.
The general lack of concrete decarbonisation action is highlighted by the fact that Nrep is the only manager having committed to phasing out fossil fuel-based energy in its buildings. Despite the decreasing cost and widespread availability of heat pump, solar thermal and photovoltaic (PV) technology the remaining managers reserve the right to install gas or oil-fired infrastructure in their building projects.
ShareAction is urging institutional clients investing in real estate via these managers to push for positive change. This should start with the public commitment to achieve net-zero by 2050 or sooner, with interim targets covering all sources of emission from directly held assets, new developments, as well as landlord and tenant energy use. Managers should also commit to halting the installation of fossil-fuel based heating, hot water, cooking, or power generation equipment by 2030. ShareAction’s initial analysis reveals a real estate investment management industry seemingly out of step with the sustainability expectations of its client base.
Aidan Shilson-Thomas, Senior Research Manager at ShareAction, said: “Some of the world’s largest real estate investment managers are failing to act on climate change at a time when rapid action is needed. The construction and operation of buildings account for a staggering third of global emissions, creating financial risks that managers must take seriously. The asset owners they act on behalf of, including pension funds, are relying on them to do so.”
