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From climate risks to positive impacts: time for action.

Responsible Property Investment Report

2016

Home / Perspectives / From climate risks to positive impacts: time for action.

Tatiana Bosteels, Head of Responsible Property Investment
30 June 2016
Responsible Investing

rpi-report-2016_2

With our annual Responsible Property Investment (RPI) report - From climate risks to positive impacts: Time for action - we respond to the latest developments in tackling climate change, including the Paris Climate Agreement and we describe Hermes Investment Management’s approach to delivering and measuring positive impacts. We argue that ‘now is the time for action’ and we call on the industry to follow best practice.

Time for Action – Paris Climate Agreement
The Paris Climate Agreement demonstrated a clear shift in perceptions among the institutional investment community. There is now a sense among institutional investors that to finance the necessary transition to a low carbon economy, and the adaptation to the physical effects of climate change, requires a significant re-allocation and scaling up of current private efforts.

Despite this significant progress, however, many investors have yet to fully integrate environmental, social and governance (ESG) issues into their investment decision-making processes due to structural barriers as well as cultural issues which are preventing this transformation in practice. Hermes Investment Management believes investors have a positive duty to incorporate ESG risks into their investment practices and proactively engage with companies on these issues.

Managing climate risks and opportunities - Hermes approach
RPI has been a long-term priority for Hermes Investment Management, including mitigating the risks of carbon over the next 20 to 30 years. We have explored and developed a range of decarbonisation activities across the real estate asset classes we invests in, which would be applicable for the wider investment community.

There are four elements to our Hermes Investment Management’s strategy to manage these risks including:

  • Portfolio managers being aware of the carbon in their portfolios, which investments are the largest contributors and what are the associated carbon risks.
  • Portfolio and specific investment decisions must be made using this data as another measure of risk.
  • Directly-owned assets should be managed where funds hold assets with significant carbon risk.
  • Finally, to engage with public policymakers and sector organisations to support the wider market transformation of the industry.

Continuous performance - Delivering positive impacts
Beyond the medium to long term impacts of climate risks and opportunities, we work to deliver continuous performance today. We believe that in addition to delivering excellent performance returns to our clients and beneficiaries, we must equally aim to invest for the benefit of the broader society in which we operate. We have these additional responsibilities because our activities will have impacts on the world in which our beneficiaries live and work today as well as the one in which they will retire into tomorrow. A principle which guides our actions is therefore the aim to deliver holistic returns.

For real estate this means that as well as achieving a nominal financial return, we also seek to deliver and manage sustainable cities, communities and buildings, communities which have positive social impact through education and job opportunities and energy efficiency and low carbon buildings. To do so with we seek to integrate the long term positive and negative impacts in our value assessment.

The report draws on case studies to illustrate this approach in practice:

  • Sustainable place making for the future at King’s Cross Central in London;
  • NOMA sympathetic regeneration in Manchester to a create a new smart, digital and sustainable neighbourhood, and,
  • Driving positive socio economic impacts in our communities through the active management of our shopping centres.

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Tatiana Bosteels Head of Responsible Property Investment Tatiana joined Hermes Fund Managers in 2008 to lead, develop and implement the integration of ESG in real estate investment and asset management practices to protect and enhance asset value over time. In 2016, she was appointed Director within Hermes' Responsibility team and tasked with developing Hermes' carbon risk strategy and supporting the integration of ESG across all private market strategies, including real estate, infrastructure and private equity. Tatiana has experience developing innovative sustainability programmes through public private partnerships. At the London Climate Change Agency, where she advised the London Deputy Mayor, she developed and delivered the Better Buildings Partnership (BBP) and contributed to the establishment of the first London ESCO. Her previous work covered UK and international climate change policy, carbon markets and instruments, and third-party energy efficiency financing. Tatiana is chair of the Institutional Investors Group on Climate Change (IIGCC) property programme, board member of the Investment Commission's UNEP Finance Initiative, and she has been an active contributor to public policy and sector engagement. Tatiana is an active member of the Better Buildings Partnership, and she sits in the British Property Federation’s sustainability committee and the advisory boards of the Building Performance Institute Europe and the Global Real Estate Sustainability Benchmark. Tatiana holds an MSc in Environmental Management from Imperial College London, an MSc in Mechanical Engineering from UCL Leuven Belgium and is a Fellow of the Royal Society of Arts.
Read all articles by Tatiana Bosteels