Industry guidelines provide orientation
Many real estate fund managers are only just starting to capture comprehensive sustainability data on their portfolios. This is why the real estate companies within the German Investment and Asset Management Association (BVI) adopted specific guidelines for sustainable real estate portfolio management in 2016. These guidelines cover social, environmental and economic aspects at portfolio level. The fund industry is mindful here of its responsibility to ensure that the guidelines neither favour certain providers and products, nor exclude future providers. The aim is to enable people to understand and compare the methods used to assess property portfolios.
In the interest of investors
Real estate fund managers manage funds as trustees acting in the sole interest of their investors. When choosing a real estate fund, investors have a range of different needs based on their personal values and investment objectives, with capital preservation and long-term income typically being key priorities. Economic aspects are therefore the main driver of sustainability for real estate fund managers. Publication of these guidelines means that recommendations for assessing sustainability at portfolio level are now available for the first time. The following key sustainability indicators provide the basis for analysing portfolios:
- Define overall sustainability strategies
To integrate sustainability aspects into portfolio management as additional performance indicators, real estate fund managers define a clear sustainability strategy for their portfolios and select the performance indicators that are relevant for implementing the strategy at property and portfolio level. During portfolio management, fund managers put in place the processes necessary for operational implementation of the sustainability strategy. These principles are also incorporated into asset and property management, thus ensuring that external service providers likewise comply with fund managers’ sustainability objectives.
- Use certification as proof of sustainability
Sustainability certification renders the individual sustainability aspects of a property transparent for real estate fund managers and tenants alike. However, it should be noted that sustainability certification is only ever indicative of a property’s sustainability, it should not be regarded as the sole criterion.
- Record consumption and building data relevant to sustainability
Sustainable property management starts with reliable data on consumption as well as on qualitative criteria such as user convenience and accessibility. This enables real estate fund managers to increase the transparency of the raw data (e.g. consumption data, building specification, usage information) used to calculate key indicators. Depending on the size of the portfolio, real estate fund managers may create their own benchmarks to help identify optimisation potential and then define property-specific measures for improving sustainability performance.
- Work with rating agencies
Fund rating agencies can provide reliable assistance to investors looking for a simpler and better way to compare different products in terms of sustainability. Real estate fund managers need to provide rating agencies with the necessary data.
- Use green lease clauses to promote sustainable fit-out, management and use of real estate holdings
Green leases can also play a role in sustainable building management. When letting properties, real estate fund managers can draw on an extensive list of possible green lease clauses. The aim is to include clauses in tenant agreements that are most likely to achieve a continuous increase in the sustainability of the building, based on the specific circumstances.
- Communicate sustainability requirements
Real estate fund managers inform their investors and other stakeholders about their sustainability strategy, activities and progress. They can do this by making the information available online or by publishing a sustainability report. Real estate fund managers follow Global Reporting Initiative guidelines when publishing their sustainability information.
To conclude, it is apparent that real estate fund managers have a significant impact on sustainable management of the environment through the acquisition, construction and management of properties and via ongoing development of their property portfolios. It will not be possible to implement the guidelines overnight; ongoing dialogue and further refinement by real estate fund managers are essential. For the real estate fund managers in the BVI, sustainable property portfolio management means taking responsibility and looking to the future.
An article by:
Alexander Kestler, Director at BVI