Asset owner platform adds Asia REITS to sustainable investments universe
In response to growing calls from investors for wider coverage of real assets, the Sustainable Development Investment Asset Owner Platform (SDI AOP) has added the first real estate investment trusts (REITs), including some in Asia, to the universe of investments for which it collects sustainability data.
The taxonomy of the AOP, among whose four pension fund founders is Australian super fund AustralianSuper, evaluates a range of equity, fixed income, and now real estate assets against their contribution to the UN Sustainable Development Goals (SDG), providing asset owner members with a sustainable investment universe.
In September, the AOP, whose asset owner members collectively account for $1.5 trillion in assets under management (AUM), started providing members with information about a small number of global REITs, focusing on those where the majority of holdings contributed to the UN’s sustainable development goals, the standard against which the AOP taxonomy evaluates companies’ sustainability credentials.
IN THE SPOTLIGHT
“To start with, we have focused on REITs where the contribution to areas such as healthcare provision or research, or education, can be measured for the majority of holdings. We will continue to enhance the offering around real estate as the data becomes available,” said James Leaton, head of research at SDI AOP.
He contrasted challenges around the availability of emissions data, which was frustrating the AOP’s efforts to provide comprehensive measures that would allow investors to compare one REIT with another.
“Beneficial social impacts for assets dedicated to research or social services are easier to identify in specialised types of funds. Data remains patchy with regard to the environmental impact associated with higher emissions from general retail, office, or residential assets,” he said.
“A carbon audit might have been done but disclosed only to a specific industry initiative, or it might still be privately held. Not all the data is in the public domain or even available from industry bodies. And we need a full set of information. [It won’t work] if we can only find it for half of the REITs,” he added.
Leaton said the recent focus on expanding the taxonomy’s data coverage to real estate reflected growing demands by investors for information about private markets. The platform’s efforts are at an early stage, having historically focused on public equities, and expanding more recently to cover fixed income.
“We are looking to build on the asset owner experience on the private market side to support other investors with tools to apply [the taxonomy] to their own private holdings,” he said.
PLAYING CATCHUP
Hans Op’t Veld, chair of the markets and members committee of SDI AOP and principal director for responsible investments at Dutch pension fund manager PGGM Investments, noted that adoption of the AOP platform in Asia — where sustainability considerations had generally not extended beyond monitoring and controlling emissions — continued to lag behind other regions.
“Asia is somewhat behind the curve, as investors are navigating the thematic landscape and have particularly focused on climate-related aspects,” he said.
He contrasted the slow pace of adoption in Asia with the recent proliferation of the AOP user base in Europe and North America. “In Europe, we have welcomed Belgian, Scandinavian, and British companies. In Canada, we also see increasing interest. The growth of the user base indicates to us that the approach that we have been taking is gaining traction,” he said.
Leaton noted that investors are currently struggling with tightening requirements over sustainability reporting.
“Definitely some regions are ahead of others in terms of their thinking and in terms of the regulatory drivers to do this, and they are engaging with us particularly at the moment. Once this reporting headache passes, we expect the focus to return more to identifying and backing future opportunities.” he said.