New strategy: Manage to Green
Union Investment currently manages real estate assets worth around EUR 10 billion on behalf of institutional customers. In the following interview, Jens Wilhelm, a member of the management board at Union Asset Management Holding AG, explains the role that sustainability plays in his strategy for the real estate sector and looks at how climate policy targets affect risk management of real estate investments.
Mr Wilhelm, ESG criteria play a major role in the securities sector when it comes to sustainability. Are these criteria also applicable to real estate?
The German Investment and Asset Management Association (BVI) recently formed its own working group which aims to demonstrate how ESG criteria can be effectively applied to real estate activities. An initial guideline on this subject, which Union Investment helped to develop, has already been produced. Overall, there are still far too few sustainability standards when it comes to real estate funds.
The number of properties in a fund that have sustainability certification is often the only indicator cited. However, these certifications are only of limited information value. That is why we support the BVI and other institutions in their efforts to highlight the importance of ESG criteria. Our objective is to make our sustainability strategy for the real estate segment as comprehensive as possible.
What does that strategy look like?
We have made sustainability a priority at senior management level and established it as a key pillar of our corporate strategy. In the real estate segment, we have brought together various aspects that we believe are important for the future viability of our portfolio and incorporated them into a manage-to-green strategy. The aims of this strategy are based on the climate protection goals set by the German government for the period up to 2050, with specific intermediate stages defined up until 2030. We believe this strikes a good balance between medium-term objectives and long-term strategic direction.
What are the most important criteria against which you will be measured?
The manage-to-green strategy essentially pursues four objectives. Firstly, sustainability thresholds for the acquisition of commercial properties will soon be introduced at Union Investment. If these are not reached, a budget will need to be provided at the acquisition stage so that the property reaches the threshold within a specified time frame. In 2020, we aim to announce a CO2 savings target for a substantial sub-portfolio and intend to achieve this by 2030 through property-specific strategies. Going forward, this savings target will then be applied to the entire international real estate portfolio.
In addition, we plan to introduce energy monitoring for all of our real estate holdings by 2025. Digitally captured consumption data will enable us to produce more accurate reporting, which will form the basis for ongoing energy-efficiency optimisation of our assets. As our fourth point, we will improve our communication on sustainability with our institutional customers.
Where do you see room for improvement when it comes to communication around sustainability?
Institutional investors are usually property professionals themselves and are not guided by feelings or fine words, but by hard facts. Effective reporting should communicate relevant indicators in an easy-to-understand manner while also raising investors’ awareness of the complex nature of sustainability issues in relation to real estate. Ultimately, one of Union Investment’s key priorities is to expand its business operations and attract new customers in a sustainable investment context.