March 30, 2009
Real Estate Investors Are Encouraged to Apply Responsible Investment Principles to Property Investments
by Robert Kropp
The UNEP FI Property Working Group finds that equity approaches to responsible investment can be
applied to commercial property investment as well.
A recent report by the Property Working Group (PWG), an initiative of the United Nations Environment Program Finance Initiative (UNEP FI)
that aims to encourage Responsible Property Investment (RPI) among the fund and investment
management community, argues that approaches adopted by Responsible Investment (RI) investors in
the equity market can be transferred to the commercial property market.
The UNEP FI is a global partnership that works with over
170 financial institutions to understand the impacts of environmental and social considerations on
In the report, entitled Responsible
Property Investment: Similar Aims, Different Manifestations, the authors argue that such RI
equity approaches as engagement, screening, best in class, and enhanced analysis can be applied to
property investment as well. However, because property is a very different asset class from
equities, the forms these approaches take need to be amended to be effective with property
For instance, because property investment often involved property management
activities as well, investors in property can engage with their ownership holdings in the
engagement approach by employing sustainable practices in construction and redevelopment, and by
creating green leases that require both parties to behave in environmentally responsible ways.
A best in class approach to investment in direct property can be applied by referring to
industry-wide asset rating systems and building standards guidelines.
according to the report, "problems with data availability and the ability to parameterise the
effects of emerging sustainability issues, policy responses, and related social and market
attitudes on asset valuation and performance, make enhanced analysis very difficult to
operationalise in the direct property investment market."
Launched in 2006, the PWG is
committed to encouraging property investment and management practices that can improve the
sustainability of new and existing buildings by reducing carbon emissions and increasing energy and
water efficiency. According to the US Green
Building Council, buildings account for 38% of CO2 emissions in the US, and CO2 emissions from
buildings are projected to grow faster than any other sector over the next 25 years.
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