Many companies may claim to have an interest in responsible investment, but find it difficult to show how they do it. Even in some areas of asset management, we can influence, vote and choose not to invest, but we can’t directly control what happens in another company. Real estate is different, though, simply because we own the physical buildings. As one of the largest asset managers in Europe, Aberdeen Standard Investments (ASI) directly owns around 1,600 real estate assets. This gives us huge scope – and a distinct opportunity – to be a driver of change in responsible investing.
Investors and tenants have become more ethically and environmentally conscious in recent years. They now take a far more holistic approach to their investments and the buildings they occupy. Global environmental targets and legislation at a national and European level are also pushing the boundaries on environmental, social and governance (ESG) integration. We want to be at the forefront of change in this area.
Our core beliefs
We integrate ESG factors into every stage of our real estate investment process. Our goal is to identify all the risks and opportunities within any real estate investment. Then we use our skills to meet the increasingly diversified needs of our clients. We want to generate long-term growth, to enhance returns, and to reduce volatility.
We integrate ESG factors into every stage of our real estate investment process
We base our responsible investment strategy on three key beliefs:
- ESG factors are important financially and they directly affect investment performance. Indeed, where we consider ESG factors, these investments tend to outperform those that don't.
- Understanding ESG risks and opportunities, alongside other financial metrics, helps us make better investment decisions for clients.
- Informed constructive engagement helps improve practices – with the aim of enhancing the value of our clients’ investments.
A force for change
We have identified four key topics that we believe will drive ESG integration in real estate. These are: environment and climate; governance and engagement; demographics; and technology and infrastructure. These factors guide how we prioritise and integrate ESG factors at the fund and investment level. They also provide a structure for engaging with, and reporting to, shareholders.
Our approach across all real estate investments aims to:
- Safeguard and enhance clients’ risk-adjusted returns. We do this by proactively identifying and addressing material ESG risk factors when acquiring, managing and selling assets.
- Identify and capture opportunities to deliver positive outcomes and solutions for society, without detriment to our clients’ investment performance.
- Agree specific long-term targets to set direction and provide vision.
The ESG Impact Dial
We have created a new bespoke solution to help integrate our ESG process into how we manage our buildings and funds. The ESG Impact Dial is the first of its kind in the real estate asset management industry. It gives us the unique ability to tailor investors’ ESG aspirations to their risk profile and target goals – and to integrate these into real estate management. Our innovative approach means that one size no longer has to fit all.
The house standard is the absolute minimum policy that we would use for all mandates. This focuses on avoiding undue risk when managing a real estate asset. Our strategy influences what we buy, how we manage assets and any future plans we have for our buildings. After that, investors can decide which of the four forces for change are key priorities for them. They can also decide where on the ESG investment spectrum they aspire to sit.
Making a difference
A clear ESG strategy can have real benefits. We can demonstrate that through our achievements and ambitious goals:
- GRESB awarded our funds 33 green stars in 2019.1
- We are committed to developing a net-zero carbon pathway for our global real estate portfolios.2
- We will assess the climate resilience of our real estate portfolios under different climate scenarios by the end of 2020.3
- In terms of emissions, we saved the equivalent of 1,548 London to Sydney return flights in one year.4
- We generated two gigawatt hours (GWh) of renewable electricity from our assets in 2018.5
As a global asset manager, ASI is dedicated to creating long-term value for our clients. Their investment needs are at the heart of what we do. With this in mind, the consideration of ESG factors is a fundamental part of all stages in our real estate process. We want to invest today in order to change all our tomorrows.
1 Source: GRESB Real Estate Assessment 2019
2 Better Building Partnership, buildings must be decarbonised by 2050
3 Source: Standard Life Aberdeen, as at December 2019
4 Source: ASI real estate portfolios, based on a comparison from 2017 to 2018
5 Source: ASI real estate portfolios, one year to December 2018