Allianz pledges two-year ESG turnaround of dirty real estate
Dr Raphael Mertens, chief risk officer and head of ESG for Allianz Real Estate, told AsianInvestor that the company had completed a two-year audit for each of the more than 550 assets in the portfolio at the beginning of this year.
“We have selected the so-called impact assets - large negative outliers which are stranded from today’s point of view. We are giving ourselves six to 12 months to come up with a plan and we want to see a turnaround within two years.”
He declined to say how many of the poorly performing assets were in Asia. The company has €7.1bn under management in the region ‒ 9.6% of the global total of €74bn. In the next few years it plans to increase this to around 15%, or €11.1bn.
The audit is part of a regular monitoring process for all assets. It collects comparable data about the energy consumption and the greenhouse gas emissions of all Allianz-owned buildings and provides a framework for all new Allianz acquisitions. It is based on Carbon Risk Real Estate Monitor (CRREM), an EU-funded research project that measures direct and indirect emissions from the construction and operation of buildings.
Mertens said that Allianz Real Estate’s efforts in this area had focused on Europe up to now, where 65% of the company's assets are and where data and the technologies to help improve a business’ carbon footprint are more plentiful.
Asia laggards
Mertens noted that, outside of Australia and Singapore, good data about the carbon emissions of buildings in Asia is hard to find.
“CRREM works less well in Asia than in Europe or Australia. [In Asia] we’re missing clear energy and carbon benchmarks generally speaking,” he said. “In Japan, residential real estate is not yet a commercial asset class; the [carbon] toolboxes are still focused on commercial buildings. China is also hard,” he said.
He said that, though Singapore had plenty of data on energy consumption and CO2 emissions, improving energy performance in buildings by switching to more sustainable electricity sources was difficult there. “Singapore is a small country and renewable energy is not easily available,” he said.
Poor stock
Mertens said that Asia had a poor stock of well-performing buildings, compared with Europe, Australia and North America, because in some countries in the region the concept of energy efficiency and greenhouse gases was less relevant [to building owners].
“There is a shortage of energy efficient buildings. Many developers are more interested in [building] a modern [looking] building than its energy efficiency so a big focus for us is shifting that mindset.”
Filling the gaps
To fill the gaps in reporting in Asia, Allianz Real Estate collects proxy data, including technical specifications of building’s heating and cooling systems, from which it attempts to infer efficiency and emissions data. Identifying the energy utility providing electricity allows it to work out how much power they generate from renewable sources.
But there are other sources of energy consumption data, too. For example, tenants provide much of it, since 80% of a building’s emissions comes from their activities, Mertens said. However, they can be reluctant to disclose this information. In these cases, Allianz Real Estate will explain why they need the information and why the tenant may benefit from its collection, such as advancing the tenants’ own ESG agenda.
Improving emissions performance typically involves shifting to powering buildings by renewable energy and by installing technology such as smart metering and software to reduce energy consumption.
Consultants
Mertens said the company was spending time with consultants in Asia helping them understand Allianz Real Estate’s approach.
“It is more difficult to find ESG experts in Asia on the consultant side and takes longer to explain what is needed. Compared with Europe and US, in Asia ESG is a relatively new topic,” he said.
This article has been edited to differentiate Allianz Real Estate from Allianz RE, which refers to the firm's reinsurance arm.