ESG sits front and center for real estate investors, but the logistics sector faces challenges inherent to its asset class and stakeholder relationships. As institutional capital learns how to align activities to decarbonized investments, steps to achieve net zero, implement effective social measures and improve regulatory governance will improve performance for sustainable logistics.
Our clients rank in the top 25 percent of global real asset investment managers by AUM, and we see how ESG impacts price, risk appetite and value – and how it presents fundamental complex challenges. To transition towards low- or zero-carbon, the logistics sector must monitor, track and measure emissions throughout the asset lifecycle to achieve targeted net-zero reductions and embodied carbon footprints under the decarbonization hierarchy. However, conversations with logistics’ friends and clients highlight two concrete scenarios hindering progress: data and building activities.
Scores of single tenants do not collect or won’t share consumption data, causing disclosure challenges for investment managers. Aligning with the SFDR and EU Taxonomy pressurizes landlords, while landlord-tenant transparency in some countries means procuring energy separately.
National legislation and energy market conditions exacerbate different geographical attitudes and obstacles to data sharing. These factors obstruct landlords from understanding portfolio impacts and the materiality of holdings, and they limit decarbonization.
Logistics benefits from autonomous mobile robots and ESG tenant surveys for data-driven action. And although digitizing data remains a challenge, especially if non-mandatory, the Netherlands is a guiding beacon for the sector.
Many stakeholders with different motivations and strategies add complexity and abundant interventions to building activities, like onsite PV solar. Installing solar unpacks a series of obstacles: is the roof strong enough, will the occupier consent, how secure is installation against insurance risk, will surplus energy be delivered to the grid, and who is reaping the benefit? In regions where solar remains a ‘financial risk’, banks refuse to lend money.
“Navigating geographical regulations and supply chains is intricate and confusing”
Shining a social lens on logistics uncovers granular challenges. Christean Schmidt, head of sustainability at Palmira, tells us: “Most people working in logistics centers don’t want to hang around to socialize or go to the gym at the end of their shift. They want to go home.” Although social amenities, green spaces and accessible transport uplevel logistics assets, it is a tall order to engage employees on remote industrial sites.
Putting it all together
Today, I heard a discussion on SFDR disclosures for an EU-wide logistics portfolio. Navigating geographical regulations and supply chains is intricate and confusing. Government legislation may encourage renewable energy and energy-efficient retrofits, but it is an uphill struggle for large-scale assets facing fragmented building permits and environmental assessments. Standardizing data, risks, regulations and disclosures will encourage resilient assets and ROIs.
So, what are our key takeaways? Get under the hood to figure out material climate risk and opportunity across lifecycles to target capex and ESG activities, embed best-practice SFDR disclosures and knowledge across your organization to attract investment buy-in, strengthen tenant relations to obtain data and discern what is ‘good’ and ‘resilient’ to steer effective ESG.