This Pension Fund Wants To Invest In North America – And Its Goal Is Near Carbon Neutrality

Dutch pension fund investment manager Bouwinvest Real Estate Investors has a bold ambition: to be near carbon neutral by 2045. Coupled with this strategy, the firm is looking to expand its presence in North America to $2.5B within two to three years. Bouwinvest already has $17.5B in assets under management globally, including $2B in North American real estate.

Pursuing such a green strategy isn’t easy, Bouwinvest North America Senior Portfolio Manager Bert van den Hoek said, but it is necessary for two reasons. First, the firm sees it as its responsibility as a long-term investor and, second, because of real estate’s growing risk profile due to climate change. And the drivers pushing these two agendas are only set to increase.

“Someone said that if you talk about it now, others in the U.S. will talk about it in two years’ time,” van den Hoek said. “At this moment, sustainable investing is being led by a few companies who feel responsibility and who are urged by their investors, but through regulatory procedures and tenant demands for green buildings, the industry will have to move in this direction.”

Sustainability To Match Financial Returns

To create a near carbon-neutral portfolio, Bouwinvest is aiming to make its entire portfolio "Paris Proof," a nod to the 2015 Paris Climate Agreement that agreed to limit global warming to 1.5 degrees by 2050. To do so will require work on its existing portfolio, as well as a commitment to only invest in assets and development projects that will be near carbon neutral. How straightforwardly the company will be able to stick to this commitment will differ between markets, types of real estate and regions, van den Hoek said.

“In Northern Europe, there’s an emphasis on the ‘E’ of ESG — environmental, social and corporate governance — but I have definitely observed that in the U.S. the emphasis is more on the ‘S,’” he said. “Capital is focused on diversity and inclusion policies, whereas in Northern Europe, attention is focused on climate change and climate resilience, energy efficiency and eventually sustainable buildings.”

However, van den Hoek said he is seeing more and more development opportunities in North America focused on net-zero carbon. Bouwinvest is pursuing a strategy to invest in the single-family rental sector in southern U.S. states. Several developers presented schemes and the firm will select the manager that has a net zero-energy ambition. Van den Hoek believes this is a message that developers will be taking on board.

“Ultimately, when you put different offerings side by side, the net zero offer won simply because we balance sustainability with financial returns,” he said. “It certainly makes life more challenging, all the more because we’re investing indirectly with local partners who manage buildings for us. We’re a distance away from the action, so it’s all about engagement. We have to challenge managers to keep sustainability at the forefront of their minds and implement sustainable investments on our behalf.”

It's Down To Data

The key to creating a near carbon-neutral portfolio is having the right data, van den Hoek said. Bouwinvest’s goal is to have 100% energy data coverage of its core portfolio by 2030 — that is, to have a complete, accurate picture of the actual energy performance of every single core holding. This is a bold statement, van den Hoek admitted, but is the necessary ammunition the company needs to reach its goal of near carbon neutrality by 2045. To this end, the firm is using GRESB, an investor-led organization that collects, validates and scores ESG data on real estate for financial markets.

“GRESB allows us globally to gather data on ESG and we have seen adoption really increase in the last five years," van den Hoek said. "It will still take a lot of engagement for people not just to participate but to improve their performance. We’re very much at the beginning stage of gathering data from GRESB and translating this into a near carbon-neutral profile.”

Bouwinvest’s next step is to link the data from GRESB to another system called the Carbon Risk Real Estate Monitor. The tool created by CRREM allows investors and property owners to assess the climate change risk to their assets and set science-based carbon reduction pathways.

CRREM is driven by a belief that climate change poses a serious threat to real estate companies that don't take measures to transform the properties they manage, a belief shared by van den Hoek. While much of Bouwinvest’s focus on near carbon neutrality is based on a feeling of responsibility, it is also a financial driver, he highlighted, that every involved in real estate should take seriously.

“The challenge is also an opportunity,” he said. “If we find a manager that isn’t far along its journey in terms of focusing on sustainability, we see it as our responsibility as a capital provider to engage with them and improve their practices. This is the way the world is turning.”

This article was produced in collaboration between Bouwinvest Real Estate Investors and Studio B. Bisnow news staff was not involved in the production of this content.

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