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Health, Wellbeing and Resilience: where do we start?

Earlier this month, we had the pleasure of hosting our first breakfast event in our newly expanded London office. Speakers included our own Oli Pye, Jo Smallwood from M&G Real Estate, Richard Hamilton-Grey from TH Real Estate and Roxana Isaiu of GRESB. A lively two hours of presentation and discussion followed. Many points and some great examples were raised. Here are some of the headlines.


Health and wellbeing – a roadmap approach

Health, wellbeing and resilience in particular needs to be defined at organisational level. Oli presented a structured road map approach – recommending that real estate organisations map boundaries, consider materiality, manage risk and opportunities and monitor performance, before feeding back through a continual improvement loop. Assessing materiality is key to reducing the long list of possible impacts into a short list of material issues, taking account of the key business risks and opportunities as well as stakeholder expectations.

EVORA Global health and wellbeing roadmap approach

 

It was notable that both Oli and Jo highlighted the need for health and safety to be recognised as a key component of the broader health and wellbeing  agenda, with the former being more the protection of value and the latter creating value. Oli recommended the use of existing certification standards such as FITWEL to provide content and guidance to your approach rather than trying to create an approach from scratch. In the same way, Oli highlighted existing resources which had been developed to identify political, climatic and natural hazards around the world.


Systematic and tiered approach to health and wellbeing

Jo presented M&G’s approach to health and wellbeing, talked about the systematic and tiered approach M&G take and the target to reach 10 million people with their health, wellbeing and inclusivity programmes by 2025. This was underpinned by their three pillars of health and wellbeing;

  • Training and Awareness for the property managers to deliver enhanced support and customer service;
  • Information and Services, providing information on building accessibility and facilities – great examples Jo gave were changing accessible toilet signage in shopping centres (not all disabilities are visible) and the use of apps for tenant engagement;
  • Physical Environment to positively affect customers’ experience, with a good example being the introduction of shared electric vehicles at residential developments.

Resilience to protect and grow long term value

Richard took the audience through TH Real Estate’s approach to resilience to protect and grow long term value through evaluating cycles, understanding megatrends and focusing on cities. As well as the consideration of political, societal and technological megatrends, Richard highlighted the importance of resilience at the asset level to protect exit yield from specific areas such as future regulatory risk, climatic impact, reputational risk and potential obsolescence.

He also explained the importance of TCFD – the Task Force on Climate-Related Financial Disclosures to provide the governance and transparency of reporting on climatic impacts for an organisation such as TH Real Estate.


GRESB real estate assessment

Finally, last-but-not least, Roxana discussed changes to GRESB. Happily for most of us, there are no major changes planned for 2019! She discussed the importance of buildings being healthy, resilient and efficient if they are to be sustainable and the requirement for GRESB to include these key elements into the survey. Health and wellbeing has been a separate module in GRESB for the last three years and in 2019 it will be fully integrated into the real estate assessment. Roxana discussed key learnings over the last three years, which included that investors care about health and wellbeing, that it has the ability to differentiate buildings and create value, and importantly that unlike environmental impact change that is driven by the capital providers, health and wellbeing is driven by the tenants and employees.


So, in conclusion, organisations should identify and define health and wellbeing and resilience strategies at the top level and establish systematic approaches to manage them (with continual improvement being a key element), as well as implementing controls and improvements at asset level to deliver on strategy promises.

For more information, please don’t hesitate to get in touch.

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Transparency and the business case for ESG in Real Estate

Last month we ran a thought leadership event on ‘Real Estate Sustainability: Planning for 2018 & Beyond’ kindly hosted by our client Schroders.

Two key themes were raised by the speakers and the panellists, which are certainly not mutually exclusive. The first was setting out the business case for ESG in Real Estate and the second was the issue of transparency.


Evolution of GRESB for 2018

Sander Paul van Tongeren, Managing Director of GRESB kicked off with 2018 updates for GRESB. Increased transparency is being introduced through ‘Validation Plus’ applied to a sample of indicators for all participants (as opposed to a sample of participants). Ensuring quality of submissions through greater transparency is essential for the ongoing credibility of the survey.

Sander Paul made it clear that GRESB is increasingly focussing on the asset level.  The GRESB Assessment at the fund level will be strengthened by adding asset level data.

In addition, Sander Paul made it clear that GRESB is increasingly focussing on the asset level.  The GRESB Assessment at the fund level will be strengthened by adding asset level data. This will necessitate the collection of asset level data where the transparency of that data has been evaluated, i.e. has it come from a trusted source, and its quality identified through adequate validation. This is where sophisticated software systems such as SIERA will become fundamental in receiving asset & meter level data with automated validation functionality to ensure the completeness and quality of the data, which will support high scores in GRESB.


Transparency through public disclosure

Ed Gabbitas of EVORA presented the findings of a recent research paper identifying that strong sustainability practices combined with public disclosure are associated with superior investment returns. The award-winning research found that “sustainable” Real Estate Investment Trusts (REITs) benefited from higher rental income and lower interest expenses, resulting in increased cash distribution to shareholders. A lower risk profile was also identified attracting higher premiums to Net Asset Value (NAV). Transparency through public disclosure was found to be a key facilitator of driving improvement.

Overall, a 3% fund return uplift was observed between the lowest and highest GRESB scoring funds.

Ed went on to highlight research to evaluate if strong GRESB performance correlates to enhanced fund returns for non-listed funds. Overall, a 3% fund return uplift was observed between the lowest and highest GRESB scoring funds. These finding are clearly helpful enabling the capital markets to use GRESB as a broad indicator of fund quality in their evaluation.


ESG ratings lead to better financial performance

Murray Birt, Senior ESG Strategist at Deutsche Bank advised there had been more than 2000 academic studies since 1970, seeking to identify if there is a link between ESG and financial performance – clearly not a new endeavour! The findings demonstrated high ESG ratings correlated to better financial performance across multiple asset classes and regions.

Neither this, or the immediate impact of global physical climate change, which Murray also highlighted, have had a major impact on the uptake by the real estate industry, to accelerate energy efficiency in buildings. The answer – improved and increased European wide policy requiring corporate disclosure and greater transparency to promote the setting and delivery of long term objectives to address climate risk.


Social Value and Impact Investing

Finally, Debbie Hobbs, Head of Sustainability at L&G Real Assets presented on the importance of Social Value and Impact Investing, ensuring investments generate a beneficial social impact as well as a financial return. Debbie presented research highlighting that nine out of ten millennials believe the success of a business should be measured by more than just financial performance and 60% of millennials want to join companies that have a societal purpose. Fundamentally transparency of impacts and social engagement is becoming a necessity, both in the way funds invest and corporates run their businesses.

60% of millennials want to join companies that have a societal purpose.

Anecdotally, we have recently been recruiting for a number of positions at EVORA, and remarkably, so far, every candidate interviewed has highlighted EVORA Giving, which focusses on our social side of sustainability, as a key element that has attracted them to apply to EVORA.


Transparency and the business case for ESG

So, going back to our two key themes. Firstly, transparency is clearly the new buzz word and for many good reasons it should help bring quality, clarity and progression of the ESG agenda.

A decade ago I saw sustainability almost as a leap of faith for many - now I see it as a leap of common sense. Click To Tweet

And what about the link between ESG and fund performance? – well research, which has been ongoing since the 1970s, has shown that there is direct correlation. Will that put the debate to bed? I doubt it. But as I said in my closing remarks at the event, a decade ago I saw sustainability almost as a leap of faith for many – now I see it as a leap of common sense. So let’s stop putting our energies into trying to prove its worth and instead make our buildings and the world we live in more sustainable.


If you have any questions about the event or would like to speak to us about how we can support you with your GRESB submission for 2018, please get in touch with the team.

 


GRESB Premier PartnerAs a GRESB Real Estate Premier Partner, we are perfectly positioned to provide GRESB support. View our official Premier Partner profile.

We can work with you to complete the submission and understand your scoring, as well as develop a sustainability plan that will improve your future GRESB performance and align with your organisation’s key environmental objectives.