At Hermes Real Estate we are pleased to have grown on our recognised position as a leader in sustainable investment gaining five GRESB Green Stars awards in the Global Real Estate Sustainability Benchmark (GRESB) 2015. GRESB is a leading source of portfolio-level sustainability data for the real estate industry that covers around $5.5 trillion in assets under management

Importantly we are keen to engage a discussion on ‘How we deliver this performance’ and ‘What does it take?’ for Real Estate investors and their asset owners to integrate Responsible investment principles?

This year our RPI report ‘Responsibly in practice’ provides a clear guide on the processes and tools we use to integrate responsible property investment (RPI) across all institutional levels. We are please to share this report with you and welcome your comments and sharing of experiences on how we can deliver across the industry am extended integration of Responsibility in Real Estate.

Corporate: Driving responsibility

There are major benefits from implementing a comprehensive RPI programme across organisational levels whilst also linking it to the appropriate aspects of various investments processes. These aspects span from governance, strategy and targets, stakeholder and sector engagement down to risk assessment, monitoring, comparability and reporting across portfolio and throughout the industry. These include:

• Improved ability to manage risks
• Improved transparency and comparability across the market, enabling asset owners to better engage with investment managers on the implementation of responsible investment
• Growing interest from clients, with RPI integration being assessed early during the investment manager selection process

Portfolio: Investing responsibly

One of the key challenges is the need to be more explicit about how sustainability affects the value of individual assets and the risk of depreciation of entire portfolios. Tailored responsible investment strategies are required to match the characteristics of different portfolios and actively manage risks. Sustainability information needs to be integrated into the discounted cash flow models of real estate investments and the valuation assessment of portfolios. This will allow current risk management frameworks to be strengthened whilst simultaneously unlocking and redirecting the capital required for the creation of commercially sound and sustainable assets.

Property: Managing responsibly

This also rings true for responsibility at property level, with a direct correlation between more sustainable and energy-efficient buildings, higher rents and higher sale prices and numerous occupier benefits. At the asset level, the strategic view is that owner and occupier preferences for buildings with better environmental performance will lead to those assets experiencing higher net income growth due to lower depreciation and operational costs.

Leading the charge for sustainable investment, Hermes has embedded this longer term approach into its investment strategy. This is highlighted in some of its biggest regeneration projects, namely King’s Cross in London, Paradise in Birmingham and NOMA in Manchester. These projects strive to achieve successful returns whilst benefiting the surrounding communities on a number of levels.

Saker Nusseibeh, Chief Executive Officer, Hermes Investment Management, commented:  “The strong culture of responsibility at Hermes is something that has filtered into every sector of the business. This report demonstrates just how important this approach is in the sector and further highlights the need for other companies to follow suit.”

Chris Taylor, Chief Executive, Hermes Real Estate, said: “Responsible, sustainable investment has sat at the heart of our strategy for many years now and will continue to do so for the foreseeable future. This approach delivers tangible socio-economic benefits for society at large and is also a sensible business decision. It increases long-term value across our property portfolio, ensuring we can deliver ethical returns that meet and exceed client expectations.”

Tatiana Bosteels, Head of Responsible Property Investment at Hermes Real Estate, added: “Having always approached sustainability in the widest sense of the word, we pride ourselves at Hermes on being ahead of the curve in delivering a truly responsible and sustainable investment strategy. Our ‘Responsibility in practice’ 2015 report shows in detail the procedure and tools used to deliver this performance. We are pleased to be able to demonstrate our performance compared to our peers through the GRESB awards.”

Hermes Real Estate is part of Hermes Investment Management, the £29.8 billion manager focused on delivering superior, sustainable, risk adjusted returns to its clients – responsibly.

Hermes' Responsibility Report is available at www.hermes-investment.com/realestate/ and hereunder.