22 / 02 / 22 - 7 minute read
Fortunately, many in the financial services industry are already waking up to the fact that they cannot wait to be told what to do about climate change. Real asset investment management is no exception. The statistic from the World Green Building Council – that the construction and running of buildings are responsible for 39% of carbon emissions globally – is much repeated and yet never loses its impact. Quite simply, if our industry doesn’t put its house in order, the world will have no chance of reaching net-zero carbon by 2050, as set out in the Paris Agreement.
The good news is that the tide has turned. Certainly, there is now little doubt that policies and regulations when it comes to carbon emissions from the built environment are going to become more stringent in most territories in the years to come – and soon, at least from both a development and real assets investment perspective. The EU’s Green Deal is one example; the UK’s minimum energy efficiency standards (MEES) programme another.
At PATRIZIA, we firmly believe in looking at sustainability in the round and have developed a robust and comprehensive ESG strategy, alongside a timetable and framework for its implementation. Assets that are energy efficient, low in greenhouse gas emissions and have a future proof design, are a win-win for everyone: for the tenants, for us, the owner operators, and of course for our clients.
The four long-term ESG goals that underpin our strategy are as follows:
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• Become a leading sustainable investor in real assets with a consistent UN PRI 5-star rating from 2025 onward and a majority of our assets certified under our Create Better programme.*
• Be an employer of choice in the Real Asset sector.
• Become a leading global impact investor in the Real Assets sector with a meaningful part of our AUM in impact investments by 2035.
• Achieve net-zero carbon status across our corporate operations and real estate portfolio (targeting equivalent best efforts for our infrastructure portfolio) by 2040 or earlier, with a clear ambition to execute as fast as external and our stakeholder requirements permit.
For PATRIZIA, net-zero carbon includes operational emissions and embodied carbon for new developments and major refurbishments, excluding the ‘sunk’ embodied carbon of the standing portfolio. Further details of the commitment, including a granular breakdown of the scope of the target, can be found in the PATRIZIA Net Zero Carbon Strategy paper.
We need to overcome several global challenges to support the UN SDGs, tackle climate change and create value for our stakeholders. Here’s our criterion:
These goals have been deliberately aligned to the United Nations’ sustainable development goals (SDGs), including but not limited to SDG 11 (sustainable cities and communities), SDG 7 (renewable energy), SDG 13 (climate action), SDG 3 (good health) and SDG 4 (quality education).
We are convinced that having clear sustainability goals allows us to create additional value for our clients, shareholders and society at large. To take the carbon agenda first, we are working hard to gather data on our assets’ carbon footprints and in parallel upskilling our in-house teams to implement fund- and asset level decarbonisation strategies, thereby reducing our environmental impact in a very tangible way.
Sustainability needs to be a way of working – embedded across the organisation, and that is the approach we have taken at PATRIZIA. Given PATRIZIA’s mission to ‘build Communities and Sustainable Futures.’ We already had an in-built and receptive corporate culture. Talent mobilisation, upskilling where necessary and reinforcement of our sustainability mindset, through our own “Create Better” PATRIZIA employee engagement programme and pathway to building a sustainable organisation.
Mathieu Elshout, Head of Sustainability and Impact Investing, PATRIZIA SE
We are also broadening the scope of our business to encompass infrastructure investment as well as pureplay real estate. Last year, we announced the acquisition of Whitehelm Capital, and the integration of the infrastructure specialist is now well underway. Our PATRIZIA infrastructure team will allow us to play an active role in promoting responsible capital allocations to support the estimated $14 trillion cost to fund the 2050 global energy transition agenda.
In addition, we know that our efforts cannot always be restricted to the emissions for which we are held directly responsible. For instance, we also need to start addressing the carbon embodied in building materials and inherent in the building process, which amounts to around 11% of global emissions. Applying this broader lifecycle analysis to the inputs of our operations redefines the scope of our internal emissions reductions thinking; for example, limiting vehicle movements to and from our sites must become a consideration in our emissions reductions planning.
We are also working closely with our tenants to encourage them to behave more sustainably. After all, providing an efficient building doesn’t necessarily mean that it will be used efficiently. By gradually rolling out best-in-class smart building technology, we can help tenants lower their energy bills and carbon emissions at the same time. Given that occupiers are increasingly aware of both their costs and their responsibilities to their own investors, this can be a win-win solution.
And of course, we can already point to examples of how our ESG approach is making a difference in lowering carbon emissions. A great example is The Louise in Brussels, an iconic office building needing redevelopment. We are stripping down the façade and technical installations but maintaining the superstructure and concrete slab, thus saving embodied carbon of approximately 8,500 T, a 50% lower carbon footprint than would have been the case for an average new-build office of the same size.
All stripped out materials will be recycled where possible, saving a further 1,500 tons of carbon emissions, while the project will also lead to the creation of 1,500 square metres of new green space. Once completed, it is anticipated that the building will achieve a BREEAM ‘excellent,’ rating.
However, such sustainability approaches only take us so far. PATRIZIA isn’t just dedicated to building sustainable buildings; it is committed to delivering sustainable communities too. What’s more, when we talk about communities, we do not simply mean the community that works or lives in one of our assets.
Rather, we mean the wider community: our buildings and developments should benefit as many people as possible and continue to do so in the long term. For example, our flagship open-ended pan-European residential fund, Living Cities, focuses on sustainable community creation. All Living Cities homes are located within walking distance to amenities such as kindergarten, schools, sports facilities, green spaces and supermarkets.
We are launching the first in a series of impact fund products dedicated to affordable and sustainable homes, focused on the challenges facing individual cities and countries. That new impact fund will offer an attractive financial risk-adjusted return and measurable positive social and environmental outcomes. We are confident that by channelling responsible investments to the right places and products. we can make a real difference while continuing to serve our clients. Impact investing, we believe, is here to stay.
Our new infrastructure team has a proven track record of providing a social return on a community level. Kinland’s preschool portfolio, for instance, offers essential services to working parents, allowing labour participation across all levels of society.
Further afield, the PATRIZIA Foundation continues, as it has now for decades, to invest in educational projects worldwide, empowering young people to enjoy a life of self-determination. Education is a fundamental human right: only by receiving an education can people build thriving and sustainable communities. Since 1999, this approach has benefitted around 250,000 children and young adults through our KinderHaus facilities.
PATRIZIA is making significant progress on its journey to becoming a truly sustainable company, while creating value for our clients. There is no alternative to being a sustainable partner for all stakeholders – be it for investors, city authorities or communities. Never before has being sustainable been more urgent or essential.
* As defined in the PATRIZIA Impact Investing policy, which broadly aligns to Article 9 of the EU Sustainable Finance Disclosure Regulation (2088/2019) and equivalents in other jurisdictions.
Aaron Scott, Head of Strategy & Sustainability, PATRIZIA
Head of Strategic Planning & Sustainability
Head of Sustainability & Impact Investing