Sustainable real estate operations

I was at an IPF Sustainability Update yesterday.  Debbie Hobbs from LGIM provided some very useful takeaways.  In particular, Debbie had a lot of interesting and direct things to say about some of the practical and operational challenges of trying to improve the sustainability of real estate investment assets and funds.

  • She identified poor environmental performance in operation of some assets which are highly environmentally rated ‘on paper’ i.e. in terms of good EPC or BREEAM ratings. She had concerns about the knowledge and expertise of the maintenance engineering and asset/property/facilities management sectors.  She also expressed some disquiet about potential perverse incentives in the outsourced business models of service providers and their clients.   Such problems were exacerbated by outsourced supply chains creating “everyone’s responsibility becomes no-one’s responsibility” co-ordination problems. She argued that the combination of poor incentives and poor skills was causing poor operational performance and poor maintenance strategies.
  • It was also interesting to hear that, at LGIM, sustainability is a criteria in the individual performance measurement of individual staff and it directly affects their remuneration. Someone else mentioned that Land Securities has something similar in place.

The Real Estate Environmental Benchmark (REEB) is a publicly available operational benchmark of environmental performance for commercial property in the UK. It is one of the only benchmarks based on the performance of buildings ‘in-use’ and is increasingly becoming the ‘industry standard’ used by investors, fund managers and property owners to compare the performance of their assets with other similar assets from portfolios across the UK. Based on the annual consumption data of the BBP members’ property portfolios we provide energy, carbon, water and waste performance benchmarks for offices, shopping centres, retail / leisure parks and offices which others can use to compare the performance of their own buildings… The REEB dataset is one of the most comprehensive concerning performance in-use and, with the permission of our members, the data is made available on an anonymous basis to support a wide range of research projects in this important field.

  • Debbie highlighted the growing interest in “social value” of institutional investors and the emergence of financial products with social return and impacts. I found this technical paper on the issue useful.  It refers to social property REITs.  Coming soon?

Quite a lot of stuff there.

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