“Responsible investment requires a leap of faith on the part of institutional investors. They need to anticipate change. A big hurdle here lies in the fact that the conventional fund manager’s approach to investment involves looking back on past performance. But if we are to think about the future, rather than benchmark against the past, then as an industry we need to change our approach to investment. The demand from clients is there: as an industry we need to meet this.”
“Responsible Capitalism”, Hermes Oct 2015.
At Hermes we have long recognised that responsible investment practices are changing real estate market conditions. The regulatory drivers and growing market demand indicate that sustainable portfolio and building characteristics affects real estate investment’s fundamentals: creates reduced risk of obsolescence and depreciation, enhances tenant retention, reduce void periods and lowers operating costs.
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 which have positive social impact through education and job opportunities and energy efficiency and low carbon buildings.
In order to implement our vision and strategy we a set of corporate objectives:
- Leadership: To be at the forefront of thinking and research in the responsible property investment and sustainability arena and support market transformation.
- Risk management: To understand, evaluate and manage the impacts of sustainability on future performance.
- Strategy: To acquire, develop, manage and dispose of property assets, taking into consideration the environmental and socio-economic risks and opportunities.
- Management Systems: To have appropriate systems and procedures in place to ensure that RPI can be effectively implemented.
- Compliance: To ensure that we and the property assets we are responsible for comply with all current legislative and regulatory requirements, and demonstrate preparedness for any forthcoming legislation.
- Good Practice: To ensure that our property assets make a positive long-term contribution to the protection of the local and global environment. To develop and manage our property assets with consideration for their impact on local communities. To ensure we engage with our supply chain. To develop effective relationships with all stakeholder groups and facilitate the sharing of good practice. To ensure that all staff are aware of our RPI policy and objectives.
Responsible Property Investment in Practice
We see environmental, social and governance (ESG) risks as business critical to our funds and are committed to embedding responsible investment principles across our investment practices. Over the year we have integrated responsibility principles throughout our investment and asset management processes, including: investment, development, property management and, occupier and community engagement.
Leadership and market transformation
We also have an active programme of internal and sector wide initiatives to develop the tools, benchmarks and knowledge required for an effective integration and comparison of performance at fund and market level.
- Better Building Partnership
- Building Performance Institute Europe
- British Property Federation
- Institutional Investors Group on Climate Change
- Global Real Estate Sustainability Benchmark
- Portfolio Decarbonisation Coalition
- Principles for Responsible Investment
- Royal Institution of Chartered Surveyors
- UNEP Finance Initiative
Relevant sector publications: