A survey of unlisted UK and continental European property funds by Aviva Investors and the Environment Agency Pension Fund shows an overwhelming number of real estate fund managers believe there is a relationship between environmental performance and financial returns, although the majority felt this was difficult to quantify at the current time.
A survey of unlisted UK and continental European property funds by Aviva Investors, the global asset management business of Aviva plc, and the Environment Agency Pension Fund shows an overwhelming number of real estate fund managers believe there is a relationship between environmental performance and financial returns, although the majority felt this was difficult to quantify at the current time.
The survey, conducted with the aid of Innovest1 – a specialist provider of financial research, looks to establish real estate funds’ knowledge and awareness of environmental, social and governance issues (ESG) affecting property investment.2
The survey results found that:
- 95% perceived there to be a link between environmental practice and financial returns
- 95% of the parent companies held a broad social responsibility policy, although only 23% provided a policy targeted at a fund level
- 91% use environmental consultants for a variety of tasks, ranging from environmental assessment upon acquisition, to environmental management advice and monitoring
- 91% of the funds evaluate flood risk exposure, with 36% of these funds saying they would invest in flood plain areas.
The survey also showed, however, that emissions data reporting by funds is in the early stages of use, with 59% of funds reporting they did not collect CO2 emissions data. A slightly higher number (64%) either did not respond or said that they did not have water management programmes in place.
Commenting on the findings, Richard Jones, managing director of UK real estate at Aviva Investors, said: “Buildings are responsible for almost 50% of the UK’s energy and carbon emissions, and with the introduction of increasingly stringent and ambitious targets for carbon reduction by governments in both the UK and Europe, it is essential that real estate companies do their part to actively manage and reduce carbon emissions.
“Encouragingly, this survey show that the vast majority of funds believe there is a link between environmental performance and financial returns.
“The challenge is that despite this awareness, both actual performance and demonstrable commitment remain low, and few funds disclose, monitor or report environmental performance to investors. This is a situation that will need to change if government targets are to be met. Furthermore, pension fund trustees have an important role to play by challenging their property managers to ensure environmental issues are considered in managing their portfolios.”
Howard Pearce, head of the Environment Agency Pension Funds, stressed the importance of the survey as part of a wider responsible investment strategy, commenting; “We are committed to responsible investment across all asset classes and with potentially significant financial impact of climate change and other environment issues on property, this is not an area any investor, especially those in for long term, should overlook.”
Aviva Investors takes an active role in promoting sustainability issues throughout the real estate industry, through involvement with various groups, such as the UK Green Building Council, and utilises professional advisors, such as Forum for the Future, to help keep it abreast of the newest and best sustainable practices in the real estate industry.
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For more information contact:
Angela Warburton
Aviva Investors
Corporate Affairs
Telephone: +44 (0)20 7809 8618
E-mail: angela.warburton@avivainvestors.com
Jane Reynolds
Aviva Investors
Corporate Affairs
Telephone: +44 (0)20 7809 8313
E-mail: jane.reynolds@avivainvestors.com
Notes to editors:
1 Innovest are owned by RiskMetrics
2 All funds in the IPD Pooled Property Funds Indices and other selected UK and European funds investing in real estate were surveyed for the Unlisted Real Estate Funds – Environmental Review. The survey was conducted in 2008.
A copy of the summary report can be downloaded from the Environment Agency web-site www.environment-agency.gov.uk/pensions
Aviva Investors
Aviva Investors is the global asset management business of Aviva plc, the world’s fifth-largest insurance group. The company delivers investment management solutions, services and client-driven performance to clients worldwide. Aviva Investors operates in 15 countries in Asia Pacific, Europe, North America and the United Kingdom.
Aviva plc
Aviva is the world’s fifth largest insurance group*, serving 50 million customers across Europe, North America and Asia Pacific.
Aviva’s main business activities are long-term savings, fund management and general insurance, with worldwide total sales of £51.4 billion and funds under management of £381 billion at 31 December 2008, of which Aviva Investors manages £236 billion.
* based on gross worldwide premiums for the year ended 31 December 2008
Environment Agency Pension Fund
- The Environment Agency’s Active Pension Fund, with a market value of £1.2bn, is the 24th largest fund in the Local Government Pension Schemes (LGPS).
- Details of the Active Pension Fund’s investment strategy and its supporting Environmental Overlay strategy can be found at www.environment-agency.gov.uk/pensions.
- The Environment Agency’s Active Pension Fund is a signatory to the UN Principles of Responsible Investment and Carbon Disclosure Project, and a member of the UK Social Investment Forum (UKSIF) and Institutional Investors Group on Climate Change (IIGCC), and it supports the environmental campaigns of the Local Authority Pension Fund Forum (LAPFF).
- Between 2006-2008 the Environment Agency Active Pension Fund has won numerous awards for its investment strategy and work on environmentally responsible investment and corporate governance. Further information on these awards can also be found on the website.