1) What are your short term/long term views of ESG within the real assets space?
- Real asset investments expected to last and provide long-term value to the society over decades. It is therefore imperative that industry players possess a long-term mindset and remain as responsible stewards by ensuring these assets are sustainable and resilient for the future. The principles underlying sustainable investment form the cornerstone of a successful long-term investment strategy. ESG and sustainability considerations can not only decrease the financial risks associated with environmental disasters, but also enhance the financial performance of a real estate asset resulting in higher distributions to investors.
- ESG and sustainability as a whole within the real estate space have positive impacts for they affect the overall credit profile of the company. The push of the real estate sector to adopt sustainability is valuable not only for developers but also for other stakeholders connected to the properties. It’s about creating an environment in which the tenants can benefit from ESG practices.
- ESG are getting increasing traction with clients. There might be a degree of faddism about it, but this tide is going to continue to rise and companies are going to have to accept this. There is an increasing opportunity for companies to be more highly rated by investors because of their higher ESG standards. Investors are looking at how ESG risks will affect the credit worthiness of the company.
2) How can ESG benchmarking be further enhanced to meet the industry needs?
Competitive benchmarking can show whether corporate sustainability strategies are really effective and can highlight ways to improve performances and demonstrate the positive impact of corporate sustainability strategies on financial results.
- In the public market, investors have established benchmarks and tools at their disposal to reflect their ESG preferences and guide their investment strategies. Different ESG data vendors use different methodologies, which will add complexity for the rating. To improve the standardization and transparency of providers’ data collection and scoring methodologies, one should strive to resolve the data challenge and help nurture the growth of ESG investing. ESG benchmarks should be expanded to provide data-driven insights to support corporate strategy and management as well as visibility to stakeholder audiences that follow benchmark rankings.
- The factors considered in private market assessment are very different. ESG disclosure and assessment in private markets are more limited. It reflects the level of data available to many infrastructure and real estate owners, which can be quite granular in terms of environmental impacts, but more limited in terms of employee and the board. It will meet the industry needs better if the benchmarks and regulatory oversight are improved. Besides, legislation and corporations are stepping up the efforts to ensure our real estate is more efficient and sustainable.
3）How has Covid-19 changed the real assets industry view/manage/adapt to ESG practices?
- The coronavirus outbreak is impacting the trajectory of ESG trends substantially. The nature of real assets means they will play a crucial role in preparing for future crises. They are long term. They transform communities. And they are crucial to global economic growth. ESG considerations have a central role to play in coronavirus recovery programmes worldwide.
- Physical assets, particularly infrastructure and real estate, have a critical role to play in facilitating the transition towards a more sustainable economy and a greener world. As ultimate asset owners, investors are deeply engaged in the issues, and ESG considerations becomes a fundamental part of an asset manager’s duty to their clients. ESG and social purpose will be a central focus point as the real estate industry hits the headlines post lockdown period.
- The pandemic has accelerated many trends, while magnifying the issues and bringing into focus the opportunities the industry faces. The real estate industry was embarking on a period of seismic change. The transforming environmental, political and social landscape and rapid advances in technology were changing where and how we build, and changing where we live, work and spend our leisure time.
- As the heating and cooling of buildings are major contributors to climate change, building renovations and sustainable alternatives begin to replace previous building technologies. It includes insulation and energy-efficient technology for air and temperature management as well as lighting. We are seeing a shift in focus, particularly around energy efficiency. Enhanced building envelope requirements are commonplace and sometimes even renewable energy or net-zero goals are being pushed forward.
