Australia and New Zealand have scored the highest in the latest annual ESG ratings by GRESB, the leading data collector and assessment organisation for property and infrastructure. ‘Oceania’ was first, followed by Asia, then Europe, then the ‘Americas’.
GRESB (Global Real Estate Sustainability Benchmark) says in its annual global real estate assessment, published in Amsterdam last week (November 25), the participation in its data collection process jumped 22 per cent in the past 12 months, despite the challenges of the COVID crisis, “showing an industry responding decisively to the accelerating investor demand for comparable ESG data”.
Private investors lead the publicly listed sector in the rankings overall, but only because of a big lead in the Americas. In the other regions, publicly listed investments were ranked slightly higher than real estate private equity and debt. The latest study covered 1,229 portfolios (1,005 in 2019) and a total of US$4.8 trillion (A$6.5 trillion) in assets under management. There were 96,000 assets across 64 countries represented in the portfolios.
For the purposes of aggregate investment data, Oceania is basically Australia and New Zealand, although its geography consists of 14 countries and thousands of islands spanning the Pacific. Australia has about A$3 trillion in superannuation assets, followed by New Zealand with about A$200 billion in super and other fiduciary funds, and Papua New Guinea with about A$4 billion in government funds.
Although a change in methodology means that the latest dataset is not strictly comparable with previous years, with a higher rating given to performance, GRESB says that there are several remaining trend lines:
. Listed property companies still outperform the private sector, but with a smaller lead than previous years. The average GRESB Score for standing investments portfolios is 71 for listed companies and 70 for private entities. For development portfolios, the differences are slightly larger and favour the private sector – listed companies have an average score of 73, compared to 75 for private entities.
. By sector, average GRESB scores for offices continue to outperform other property types, but the other sectors are closing in.
. The regional breakdown shows Oceania still ahead, with an average GRESB score of 77. The Asian real estate sector comes in second, with 72, followed by Europe at 69.5, just slightly ahead of the Americas at 69.
. Once again, Europe leads the world in transparency with the highest number of new entities participating in the benchmark, while the Americas cohort remains the largest in dollar terms globally. Americas is also the only region where the average score for the private sector (70) is higher than the listed sector (67).
Reflecting the ESG trend in property, the global real estate investment management firm Heitman has committed to the ambitious target of becoming net carbon neutral for its global private equity real estate portfolio by 2030.
Laura Craft, Chicago-based senior VP, head of global ESG strategy, says that Heitman has had a strong ESG culture for many years, involving the adoption of ESG principles throughout its range of property investment activities.
Since advising clients and others of its plan mid-last month (October), Heitman has struck a timely chord due to changes in people’s behaviour and personal preferences due to the impact of COVID. As has been well documented, at least in several western countries, many people have reset personal and family values around sustainability during lockdowns.
Craft, who has advised GRESB on reporting frameworks, says there are a lot of places around the world where there are incentives to implement ESG principles, which the manager looks to maximise. “It’s a win for us, it’s a win for occupants and it’s a win for investors,” she says, noting the value of a building will rise after it becomes more energy efficient with less operating expenses.”
Greg Bright is publisher of Investor Strategy News (Australia)