Situation

CBRE Global Investors (CBRE GI) is one of the world’s leading real asset investment managers, giving institutional clients access to real estate and infrastructure in the Americas, Europe and Asia Pacific.

CBRE GI and its parent company, CBRE, have a long track record for managing and reporting on environmental, social and governance (ESG) issues. They support the ten Principles of the United Nations (UN) Global Compact, the six Principles for Responsible Investment (PRI) and the 17 UN Sustainable Development Goals.

Many of CBRE GI’s institutional investors also have their own sustainability aspirations and commitments, and there is a range of ESG compliance requirements affecting different assets. In the UK, CBRE GI manages over 45 portfolios with £12bn AUM.

In this context, with the aid of the CBRE Sustainability Consultancy (CBRE SC), CBRE GI set about developing an ESG programme that would drive progress towards shared commitments across all funds, whilst offering flexibility for individual portfolios.

Drivers included recognition that:

• Responsible real estate investment management is essential to the delivery of world-class investment results and exceptional service for clients.
• Commercial real estate is at the nexus of many of today’s most important issues, including climate change, resource depletion and workplace health.

Actions

Stage 1: Analysis

CBRE SC carried out analysis of the ESG commitments and policies of each institutional investor, including:

• Environmental: carbon emissions, pollution, energy, water, transport, waste, materials, biodiversity and building certification.
• Social: community, charity & volunteering, health & safety, wellbeing and stakeholder engagement.
• Governance: board structure, human rights, compliance, procurement, transparency, employee rights and consumer rights.

They also reviewed the commitments, policies and strategies of CBRE Group and CBRE GI, and external standards such as the UN Global Compact, the UN Sustainable Development Goals (SDGs), the Carbon Disclosure Project[A1]  (CDP), the Principles for Responsible Investment (PRI), the Task Force on Climate-related Financial Disclosures (TCFD), and the Global Real Estate Sustainability Benchmark (GRESB)[A2] , as well as building certifications such as BREEAM, LEED, Ska and WELL.

Stage 2: Workshops, Investor Survey and Materiality Matrix

CBRE SC then held ESG workshops for each fund, looking at material issues and the level of ambition. Each workshop was attended by the ESG team, fund manager and asset managers. A materiality survey was also sent to all institutional investors, exploring what issues were most significant to them. Findings from the analysis, workshops and investor survey were then used to create an aggregated materiality matrix.

Stage 3: Planning

The materiality matrix exercise revealed three key ESG issues common across all portfolios. Thus, the ESG strategy was developed around these key pillars of carbon, transparency and compliance.

CBRE GI established three levels of implementation, depending on the level of ambition: Bronze, Silver and Gold. This categorisation is applicable to various aspects on asset and fund level, such as green leases and carbon emissions reduction targets. For each portfolio, the ESG team established three-year plans, targets and key performance indicators (KPIs), along with recommended actions at an asset level. They then held additional ESG workshops and calls with fund managers and clients to review these plans. Most have now been agreed.

Stage 4: Implementation

CBRE GI tendered for a partner to support the implementation of the ESG Programme, selecting CBRE’s Sustainability Consultancy out of six consultancies, thanks to their exceptional approach to tenant engagement on asset and corporate level. They are using Measurabl sustainability data software to record, benchmark and report all the KPI data. Progress on the three-year plan is fully reviewed annually.

At a corporate level, CBRE GI’s ESG team supervises the overall ESG programme. At a fund level, CBRE GI’s fund managers and asset managers are responsible for delivery. At an asset level, actions are undertaken by CBRE SC and property managers CBRE and Workman.

Different team members and partners are involved at an asset level, depending on the targets and actions. For instance, external consultants are brought in for energy audits; property managers are responsible for implementing asset improvement plans; property managers and CBRE SC lead on occupier engagement; and all are involved in GRESB and client reporting.

Benefits

• Supporting their ESG commitments and policies of CBRE GI and institutional investors, helping address many of today’s most important global issues, including climate change, whilst providing flexibility for diverse investors.
• Contributing to world-class investment results. Firms with good performance on material sustainability issues significantly outperform firms with poor performance, suggesting that ESG investment is value enhancing. In addition, firms with good performance on material issues and concurrently poor performance on immaterial issues perform the best, reflecting the importance of focusing on the most material issues.[i]
• Aligning with external standards such as UN Global Compact SDG, PRI, TCFD, REEB, GRESB and building certifications such as BREEAM and LEED.

[i] Khan et al: Corporate sustainability: first evidence on materiality, Harvard Business School working paper (2015).