Norway SWF flags key ESG obstacle in property portfolio

Norges Bank Investment Management (NBIM), which manages the $1.4 trillion Norwegian Government Pension Fund, the world’s largest sovereign wealth fund, has said that timely data on energy use continues to be a major obstacle to improving environmental performance in its property portfolio. 

“Too much time is still spent on sourcing data, especially tenant data, and although we are continuously evaluating new technology solutions, we do not think the market is there yet,” senior manager Nina Galbiati told AsianInvestor.

“If there is one thing we could magically change it would be having access to real time energy data which would allow us to understand how and where the building was using energy and from what sources,” she said, adding that the data would help to optimise existing equipment as well as plan for improvements. 

She added that access to good quality data is the starting point for a data-driven approach to improving energy efficiency in buildings, which the fund is pursuing. A key means to progressing this was through its contacts with tenants, she said.

BETTER TENANT DATA

NBIM’s concern is also shared by other asset owners in Europe and Asia.

Robert Jan Foortse, head of European real estate at APG Asset Management told AsianInvestor that the biggest change he would like to see was better tenant data in buildings that they did not own.

“We invest a lot in combined owner-operator platforms where we have much more access to ESG data compared to vehicles where we have separate tenants. This is very beneficial as a good ESG strategy and effective ESG engagement starts with good quality and availability of ESG data.”

In response to these challenges, a leading investor in Asia is looking to roll out detailed measuring infrastructure on energy consumption.

Suat Ghee Ong, Allianz Real Estate’s head of asset management in Asia, based in Singapore, said the company is working to better understand emissions in its Japanese residential portfolio, and is considering applying AI technology to fill gaps in emissions data while respecting tenants’ privacy.

“This will help us educate tenants on how to minimize the cost of their energy bill and as a result, their individual carbon footprint,” she said.

In a December interview with AsianInvestor, Ong emphasised the importance of working with tenants to reduce emissions. “Seventy per cent of carbon emissions stem from tenants and therefore it is vital to engage with all stakeholders: joint venture partners, fund/property managers, borrowers, tenants etc,” she added at the time.

READ MORE: Allianz eyes net zero for Asian logistics assets

GREEN LEASES

The desire to improve energy-data collection is driving the deployment of green leases by NBIM, as well as other asset owners across Europe and Asia. 

As of June 2022, Allianz Real Estate had signed green leases for around 30% of its total residential portfolio by value in Asia and across all four of the office buildings in which it is directly invested.

Norges uses green lease clauses in all new leases across its global portfolio: while it does not currently have an accurate figure for the number of green leases that are in place it is working to track this more closely, according to Galbiati.

“The lack of real time data is not so much a problem per asset class but more a question of how leases are structured and who procures the energy,” she said.

In a September JLL survey of green leases in use in Asia, the most common clauses pertained to the sharing of energy data. 72% of leases reviewed included clauses stipulating the sharing of data on energy, water and waste; 70% stipulated a joint commitment to energy-efficient fit outs and 68% stipulated commitments to renewable energy procurement.

“We consider [green leases] the new standard for lease contracts going forward as this ensures high ESG data coverage,” said APG’s Foortse, adding that the company did not have an exact number on its current green-lease coverage.