Ivanhoé Cambridge: The need for collaboration in ESG

Alignment of interest on ESG performance is key to engage with the entire real estate value chain, say Ivanhoé Cambridge’s Stéphane Villemain and Xuchao Wu.

This article is sponsored by Ivanhoé Cambridge. 

What were your firm’s key events in 2022?

Xuchao Wu

Xuchao Wu: We made investments in Asia-Pacific region with a high social impact, such as Australian Specialist Disability Accommodation, an impact fund which will accelerate the development of tailor-made, green housing solutions for people living with a disability. We have also partnered with Scape for close to A$1 billion ($690 million; €641 million) investment in Australia student housing. And, in 2022, jointly with other partners, we completed a key partnership with an experienced solar energy operator, who will develop

Australia’s largest array of rooftop solar panels at the Moorebank Logistics Park, powering the extensive automation on-site with an anticipated generation capacity of 60,000 MWh/year.

Across the region, we improved transparency on our assets’ ESG performance, together with our managers submitting their funds and ventures for GRESB reporting, thus supporting our annual global ESG reporting. This enables comparison of ESG metrics at finer granularity and deeper insights into performance improvement opportunities in what they manage on our behalf.

We have also started developing and rolling out decarbonization plans for our key assets, incorporating currently available measures and options in energy efficiency and renewable energy, and taking a forward-looking view of what will be made available in the future due to regulatory changes and technology advancement. We want to invest in the decarbonization of existing assets, this is how we’ll have a true impact. We have also evolved our ESG structure.

Historically, we had a centralized team, based in Montreal, but the reality of the company and our activities prompted changes to make it operate more efficiently. What we adopted is a hybrid model where the central team is supplemented by a regional presence and dedicated resource in each of the regions we operate. This team change helps bridge with our partners and properties on the ground to accelerate ESG progress.

What has the operating environment been like?

XW: In 2022, as a whole region, we were not out of the pandemic yet, which made it quite challenging from an investment perspective but also from an ESG perspective. Capex projects may have been delayed due to lockdown and supply-chain disruption. Furthermore, the APAC region overall is highly diverse with a lot of countries and markets, various ESG regulations and market mechanisms. There is a lack of consistent ESG standards across the region. So, we have to define our own ESG requirements, in line with our sustainable investment vision.

What key challenges did you have to overcome?

Stéphane Villemain

Stéphane Villemain: When it comes to investment alongside other investors, not every investor’s ESG agenda is aligned. Despite that, we do expect alignment in the medium and long run. We must see a broader picture because investments in certain ESG initiatives may generate a higher return over the long term. The alignment of interest is key and we look to better link financial incentives and performance with ESG performance across the value chain. We are very pleased to have agreed a green promote – a structure that includes ESG and carbon targets alongside financial ones – with one of our partners, with performance defined in sustainability terms.