Issue: March / May 2013

Move to improve sustainability practices in SA property sector

As SA’s largest pension fund and leader in responsible investment practices, it’s significant that the G overnment Employees P ension Fund has become a member of the G lobal Real Estate Sustainability Benchmark.

GRESB membership will enable the G EP F to monitor and evaluate its entire property portfolio on sustainability criteria. It will also provide the necessary property-specific data for the G EP F to engage local property companies on ESG (economic, social and governance) issues.

An industry-driven organization committed to assessing the sustainability performance of real estate portfolios around the globe, the G RESB was founded by two Dutch pension funds (Algemene P ensioen G roep and P G G M) and one British (Universities Superannuation Scheme). They had cooperated with Maastricht University to measure the energy efficiency and sustainability of their respective real estate investments.

Today the GRESB conducts a global survey of property portfolios. It measures the environmental performance of real estate investment vehicles, both listed and unlisted. Membership of G RESB means the GEPF will have access to a transparent and comparable measure on the environmental performance of its real estate investments, so promoting informed decision-making.

GRESB’s dynamic benchmarking practice, used by institutional investors to improve the sustainability performance of their property investment portfolios, fits perfectly with G EP F’s Responsible Investment P olicy. This policy commits G EP F to integrate ESG issues within all GEPF’s investment decisions and ownership practices.

Adrian Bertrand, G EP F manager for ESG , explains: “O ur strategic objective is to be a leader in responsible investing. O ver the longer term, integrating ESG issues within our property investments will deliver better risk-adjusted returns through improving energy efficiency and reducing energy usage costs. Increasing demand by blue-chip corporate tenants for green and efficient buildings positions the owners of these buildings to attract higher quality tenants at higher rentals.”

Bertrand . . . local alignment

GEPF’s property portfolio includes directly-held properties (managed by P ublic Investment Corporation P roperties) as well as investments in listed and unlisted property companies and property funds. It covers the range of office buildings, retail centres and other real estate assets.

“GRESB provides the much-needed measure of the ESG performance in our property investments,” Bertrand adds.

GEPF’s mandate provides for a 5%-7% asset allocation in property. As at August last year, 4 ,9% of G EP F’s assets under management were allocated to the G EP F’s property portfolio. O f this, 2,10% (R23,6bn) was in listed property and 2,8 % (R31,7bn) was in unlisted property.

The benchmark offers several tools to further G EP F’s sustainability initiatives in the real estate sector, points out G RESB executive director Nils Kok: “In addition, it makes G EP F part of a worldwide initiative to improve the sustainability performance of the global property sector.” This sector, which at present accounts for more than a third of global greenhouse gas emissions, has

great potential for carbon reduction as the world moves increasingly towards a carbon-constrained economy. Improving the energy efficiency of buildings, and of the appliances installed in them, could offset approximately 8 5% of the projected incremental demand for energy by 2030.

GEPF believes that benchmarking through G RESB will serve as a catalyst for increased environmental engagement with the SA property sector. Currently, no SA property companies are included within the G RESB global database.

“We trust that G EP F’s endorsement of G RESB will encourage the SA property sector to align itself against global best practice for addressing sustainability issues and in turn make SA property stocks increasingly attractive to international institutional investors,” Bertrand says.