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The most sustainable buildings are becoming increasingly attractive to investors as the world moves toward a low-carbon future, according to the real estate fund management arm of U.S. pension fund TIAA.
TH Real Estate head of sustainability Abigail Dean said in a research note that net zero carbon buildings — buildings that are highly energy efficient, with all remaining operational energy use coming from renewable energy on-site or through off-site procurement — are more “future proof” and therefore are being seen as more valuable.
“Only a fraction of the global building stock meets these criteria, so there is a long way to go, but it is positive that the skills and technology to achieve this goal already exist, and these buildings are already being built and shown to be commercially viable,” Dean said. “The evidence continues to mount that these buildings are easier to sell, more attractive to tenants and less vulnerable to obsolescence. It seems obvious to us that we should consider investing our clients’ money in the buildings that are properly 'future proof' and that can offer the potential for the best returns.”
Dean said there is plenty of evidence that the real estate investment community is enthusiastically embracing the concept of net zero carbon buildings. The Global Real Estate Sustainability Benchmark has been a driver of investor interest in the sustainability performance of real estate funds, and participation is now a minimum expectation for most of TH’s investors — with some setting minimum performance requirements.
In 2018, for the first time in the four-year history of CBRE’s Investor Intentions Survey, more investors said sustainability is a critical criterion in asset selection than said it was unimportant. This reflects a gradual trend of increasing investor interest in sustainability, Dean said.
In 2017 TH set a target to reduce the energy intensity of its real estate equity portfolio by 30% by 2030. That target aligns it with the reductions necessary to meet the Paris Agreement commitment.
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