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It is Allianz Real Estate’s view that ESG issues, such as climate change, are increasingly impacting the fundamentals of the real estate markets worldwide. As such, Allianz Real Estate believes that ESG needs to be integrated within its business, from the investment processes through to the way it interacts with tenants.

This document, which is based on the Allianz Real Estate ESG Group Policy, outlines its approach to integrating ESG considerations into the business processes within our investment approach. It applies to all areas of our investment activity – equity and debt, directly held and indirect – and has been adopted by all branches and hubs of Allianz Real Estate around the world. Approved by the Allianz Real Estate Executive Committee, the policy has been developed in conjunction with Allianz Climate Solutions but does not influence the own-use real estate managed by other entities within the Allianz Group. It follows Allianz’s holistic approach to the integration of corporate responsibility and particularly ESG criteria into business, which is recorded in the Allianz Group standards and governance records.

This report was originally published in https://www.allianzrealestate.com/_Resources/Persistent/306c15ef8a33b053fcc309911575501038f06b8c/ARE_ESG_Policy%20May%202021.pdf

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Cohen & Steers’ commitment to investment excellence is built upon a culture of continuous improvement, and that includes our approach to ESG integration. They believe their proprietary approach to integration and engagement, combined with the framework established in the Principles for Responsible Investment (PRI), helps to promote transparency and has the potential to enhance their ability to deliver more consistent, attractive risk-adjusted returns.

This report was originally published in https://assets.cohenandsteers.com/assets/content/resources/insight/ESG-Evolving-Landscape_ES2050.pdf

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In their Integrated Sustainability Report 2022, CDL talks about their reduction strategies to attain the goal of decarbonising towards net zero, guided by various globally-recognised disclosures such as TCFD, SASB and CDSB. They also share their determination to drive innovation and building performance, and create inclusive business environments and develop sustainable communities.

This report was originally published in https://www.cdlsustainability.com/pdf/CDL_ISR_2022.pdf

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This paper from MSCI examines the challenges presented by both climate change and the net-zero transition to investors looking to measure and manage climate risk in their portfolios. Effective management of climate risk requires a clear understanding of its multifaceted nature.

Broadly speaking, climate risk can be broken down into physical risk and transition risk, and it can impact companies and investors via both microeconomic and macroeconomic transmission channels. The transition to net-zero depends on many factors: policymakers’ decisions, the development and economic feasibility of green technologies, investors’ attitude toward climate risk and net-zero investing and consumers’ sentiment toward low-carbon consumption. This and the long horizon mean that investors face an elevated level of uncertainty when making investment decisions.

One approach is to undertake forward-looking scenario analysis, in which various outcomes for uncertain factors such as policy decisions and the development of green technology can be explored, along with their financial impacts. This is becoming a standard tool for climate risk analysis, supported by major organizations such as TCFD.

In this paper, the MSCI Climate Value-at-Risk (Climate VaR) metric is used to examine climate risk in a set of hypothetical portfolios and explore a few strategies to reduce that climate risk. A second approach could be to incorporate a carbon-emission factor in equity risk models to help quantify the impact of emissions on portfolio returns.

As more investors begin to consider the risk of climate change when making investment decisions, financial markets may see a reallocation of capital from carbon-intensive to carbon-efficient investments — and companies’ emission profiles may emerge as a systematic driver of equity returns. Although climate risk management is not yet widespread among investors or fully standardized by regulation, industry trends are pointing in this direction. Investors may therefore wish to be aware of existing approaches for measuring and managing climate risk. 

This report was originally published in https://www.msci.com/www/research-paper/net-zero-alignment-managing/03147524351

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This paper from MSCI seeks to lay out some fundamental principles and best practices for ESG reporting of short positions at a portfolio level, based on the results from MSCI’s consultation with over 20 market participants globally. It also explores related issues that influenced market participants’ views on this topic, including cost of capital, shareholder ownership, engagement and regulation.

The most important principle for long-short portfolio ESG reporting is transparency. Transparency allows both regulators and clients to more accurately assess the ESG risks and opportunities to which the fund is exposed on both the long and the short sides of the portfolio. The main difference in investor views on reporting short positions was whether the investor was assessing a company’s real-world impact or if they were focused solely on its ESG risk/return metrics.

In general, asset owners, asset managers and hedge funds agree that reporting for ESG transparency is different from reporting for ESG risk exposure, with both being important in meeting different ESG investment reporting objectives. It is therefore recommended that long-short portfolios report ESG and climate metrics separately for both the long and short legs, in addition to any preferred aggregation schemes, as this allows the greatest transparency and flexibility for aggregate portfolio reporting under both a double and financial materiality assessment.

This report was originally published in https://www.msci.com/www/research-paper/esg-reporting-in-long-short/03136460396

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With the pandemic now well into its third year, most markets in Asia Pacific have adopted a policy of living with COVID-19 as high vaccination rates, effective medical care and the emergence of weaker variants reduce the severity of the virus and remove the need for lockdowns and other related measures. The findings from CBRE’s 2022 Asia Pacific Occupier Survey, which was conducted from March-April of this year, reflect this new paradigm.The report identifies and explores the five key real estate priorities for Asia Pacific occupiers in the post-pandemic era:

  • Adopting Flexible Working as the New Normal
  • Refining Workplace Strategies and Policies
  • Augmenting Office Wellness and Sustainability
  • Facilitating a Return to the Office
  • Pursuing Long-Term Portfolio Expansion

The report also highlights the challenges that companies will need to address during this period of transformation.

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Executive Summary:

  • Office: The positive momentum from end-2021 carried over to Q1 2022 as Singapore remained on the path to reopen its economy.
  • Business Parks: Occupier demand has generally improved across all submarkets, with islandwide business parks recording a positive net absorption of 186,982 sq. ft. in Q1 2022.
  • Retail: While the recovery of the retail market was still capped by restrictions on social gatherings in most of the quarter, leasing activity continued to be stable.
  • Residential: Private home price growth plateaued in Q1 2022 as cooling measures took effect. 1,716 new private homes (excluding ECs) were sold in Q1 2022, below the 5-year quarterly average of 2,614 units.
  • Industrial: The industrial market experienced broad-based growth across all segments. Due to limited availability in existing prime logistics buildings, rents inched up by another 1.4% in Q1 2022.
  • Investment: Preliminary real estate investment volume in the quarter amounted to $9.994 bn, reaching a 4-year quarterly high and just 5.2% below the Q2 2018 peak of $10.542 bn.
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Inflation across the world has reached multi-year highs, driven by a confluence of demand and cost factors. Given Singapore’s small open economy as well as dependence on energy and food imports, the city-state’s overall inflation has picked up, rising to 5.4% yoy in March 2022, a decade high.

This report explores the implications of high inflation for real estate, and presents key strategies for owners, investors and occupiers to forge ahead in the inflationary environment. 

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The Fed moved on its widely anticipated 0.25 percentage point rate hike during the month, the first increase since December 2018, signaling the start of an incremental salvo to address spiraling inflation. However, with the move largely priced in, stocks in the region remained focused on the fallout from the conflict in Ukraine, which has exacerbated inflationary pressures through rising energy and commodity prices, as well as conditions nearer home. Signs of a resurgence in the pandemic across a number of major Chinese cities and the resultant lockdowns also depressed markets. While sentiment was lifted after China tried to shore up private sector confidence after a protracted regulatory crackdown, indicating support for its real estate and internet industries, the region’s equities remained on a down trend as it slumped to its third consecutive month of losses. MSCI’s total return benchmark for the region’s equities fell close to 6% in the first quarter to underperform the region’s property sector.

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Demand for office and industrial assets supports growth across key Asia Pacific markets

HONG KONG, 27 April 2022 – Leading diversified professional services and investment management firm Colliers (NASDAQ and TSX: CIGI) has today released its Asia Pacific Market Snapshot Q1 2022 report, which highlights how major Asia Pacific real estate markets continue to build on a recovery led by gains in the office and industrial segments and are looking forward to a pick-up in dealmaking across segments in the upcoming quarters.

In Australia, easing restrictions brought a return to work and travel, spurring deals worth over USD1 billion in Sydney and Melbourne’s office markets. China too saw demand surge for office space, including in business parks, with key cities witnessing the finalisation of deals worth a combined RMB11 billion (USD1.7 billion). In India, the residential market saw sales surpass pre-2020 levels while strong economic fundamentals triggered an influx of foreign capital. In Singapore, policy measures intended to cool the residential market spurred investments in commercial properties. Japan saw active investment led by REITs across multiple segments, including large office and logistics properties as well as industrial and hotel assets. The report, which examines the previous quarter’s performance of property markets in 16 Asia Pacific countries and territories, also provides forecasts for the current and upcoming quarters.

“In Q4 last year we saw a recovery taking root and, in the first quarter of 2022, that recovery really started to gather momentum across the region,” said John Howald, Executive Director and Head of International Capital, Capital Markets & Investment Services | Asia Pacific. “While the office and industrial segments have led the way so far in dealmaking activity, improving business sentiment and the growth-focused policies of governments throughout the region should come together to make demand more broad-based and spur transactions across segments.”

John Marasco, Managing Director, Capital Markets & Investment Services | Australia and New Zealand noted: “As travel resumes and people head back to the office in greater numbers, we’re seeing a significant increase in interest from both occupiers and investors for office assets. With institutional investors also looking to expand their portfolios, we expect deal volumes to ramp up rapidly as the year progresses. In New Zealand, high-quality commercial assets will attract the attention of investors, including those from overseas once border restrictions ease in the coming months.”

Demand grows in Australia and New Zealand as restrictions ease

Major Australian cities witnessed heightened demand from both occupiers and investors following the reopening of state and international borders, and the return of workers to offices. Colliers expects Sydney and Melbourne to both see substantial increases in deal volume over the year as companies look to encourage more employees back into the workplace and institutional investors seek to expand their portfolios. Demand is particularly apparent for Premium/Prime assets with greater interest emerging for higher quality assets, as well as ESG requirements and a high level of amenities in core locations. In Auckland, demand for retail and office space is being driven by investors looking ahead to the easing of restrictions once Omicron cases subside. Demand for high-quality commercial and industrial properties is also expected to strengthen later in the year when border restrictions could be relaxed, prompting overseas investors to return.

Major Chinese markets witness strong demand for office space

Foreign buyers accounted for almost two thirds of the total transaction value of RMB2.94 billion (USD462 million) in Beijing while occupiers stepped up leasing of large office spaces. In Shanghai, office and business park offices made up 60 percent of the overall transaction value of RMB5.98 billion (USD939 million). In the Pearl River Delta, Shenzhen recorded transactions worth RMB785 million (USD123 million) and Guangzhou recorded one transaction worth nearly RMB300 million (USD47 million). Colliers expects continued strong demand for office space in central business districts (CBD) and business parks across major cities, including Chengdu and Xi’an in the country’s west.

Hong Kong investors turn to hotels, industrial assets

Investment activity in Hong Kong dropped 46 percent QOQ and 6 percent YOY to HKD11.2 billion (USD1.4 billion) in Q1, after investor sentiment was hurt by a surge in Omicron cases, global geopolitical tensions and stock market volatility. At the same time, investors turned to hotel assets due to their potential to generate steady revenue as co-living or quarantine facilities. As restrictions are relaxed and macro headwinds ease, Colliers expects transaction volumes to recover in H2. Hotels will continue to attract institutional investors and industrial properties, including data centres and cold-storage facilities, and will regain the spotlight while local investors will likely continue to be focused on retail assets.

Foreign capital flows back into Singapore

Private funds and family offices snapped up prime locations as demand shifted into the commercial sector in response to government measures introduced in December 2021 to rein in the residential sector. Commercial sales drove transaction volumes, which grew 34.4 percent QOQ to SGD10.6 billion (USD7.8 billion) in Q1, boosted by the sale of the mixed-use Tanglin Shopping Centre to Indonesia’s Royal Golden Eagle for SGD868 million (USD645.6 million) in February. As borders reopen, corporate M&A and cross-border activity will fuel capital growth, and demand will increase for retail and hospitality assets. However, prices and volumes will be capped by rising interest rates and geopolitical tensions.

Fewer deals but higher volumes in Seoul office market

Deal volumes in Seoul’s office market stood at a robust KRW4.5 trillion (USD3.6 billion) following the successful closure of a few deals involving large, premium properties. Rising interest rates and dwindling supply could suppress transaction numbers going forward, but mega deals in the works involving prime assets, such as the Brookfield-owned IFC in Yeouido Business District valued at approximately KRW4 trillion (USD3.2 billion), could keep total volumes high. Office prices will continue to trend upward, mainly in the Gangnam area popular with technology companies.

Japanese REITs drive investment across multiple sectors

Japan’s real estate market saw a number of investments in the office, residential and logistics sectors, driven by strong interest from Japanese REITs (J-REITs). Investments also flowed into the hotel and retail sectors, which stand poised for a sustained recovery in line with an overall improvement in the economic outlook as the country seeks to leave Covid-19 concerns behind. Colliers expects to see an increase in cross-border transactions following the easing of restrictions on business travel to Japan. J-REITs will continue to invest in the office and logistics sectors, and interest from foreign investors is already ramping up – as demonstrated by GIC’s purchase of Seibu Group’s hotels and ancillaries for JPY150 billion (USD1.2 billion) and KKR’s plans to acquire all outstanding shares of Mitsubishi Corporation-UBS Realty for JPY230 billion (USD1.9 billion).

Download the Asia Market Snapshot Q1 2022 report here

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