Nuveen on why ESG is a mainstream issue

The past decade has seen ESG issues become a core part of investment decision-making, writes Nuveen’s head of real estate and real assets, Mike Sales.

This article was sponsored by Nuveen Real Estate, and appeared in the A-Z of Responsible Investing special section in the November 2019 edition of PERE magazine.

The Paris Accord, the UN Principles for Responsible Investment, the UN Sustainable Development Goals and the Taskforce for Climate Related Financial Disclosure have played a key part in embedding sustainable thinking into global investment activity. And a significant change is how ESG engagement by investors has risen up the agenda in the last couple of years, particularly for Dutch, Scandinavian and Australian investors. ESG is now a deciding factor in their decisions over where to place capital.

Investors are setting carbon reduction targets and mandating real estate funds to take meaningful steps to reduce carbon and improve the energy efficiency of buildings. It is now common for investors to require funds to participate in GRESB, and in some cases a minimum performance score is specified. Investors are also focusing on climate change resilience, fair wages in the supply chain, tenant activity and the impact of buildings on the health, wellbeing and productivity of occupants.

Tenants are also placing more emphasis on the sustainability of buildings when selecting real estate and we expect this to increase as more corporate occupiers and retailers set their own carbon reduction targets. In the US, 70 percent of our office tenants reported that an ENERGY STAR Rating was important or very important in their search for office space.

Investing for tomorrow

As long-term investors, protecting the sustainability and integrity of investments is part of Nuveen Real Estate’s investment approach. We are dedicated to investing in tomorrow’s world for the enduring benefit of clients and society.  We are preparing for, investing in, helping to create and ready to be part of tomorrow’s world. It impacts how we retain our people, how we choose and manage our assets, the places we create and look after, and the partners that we work with.

Fundamentally, by incorporating ESG into investment strategies we are future-proofing the value of our property assets. Focusing on a wide range of ESG issues means that our portfolio is better protected from risk and better placed to take advantage of opportunity. We assess the climate change vulnerability, energy efficiency and exposure to environmental risk at the point of acquisition; then our Sustainable Property Management Requirements are in place to ensure that we improve the sustainability performance of the buildings we own.

The A-Z

We partnered with PERE on this A-to-Z initiative to help our clients and industry partners better understand our approach. The A-Z is a compelling snapshot of the responsible investing themes that are top of mind, not only at Nuveen, but for the responsible investment community, our partners and our clients. One of the biggest challenges we have experienced with responsible investing is the inconsistent taxonomy – there is a lot of jargon and terminology used by the industry, which sometimes confuses our clients and partners. Bringing these terms together in such a collaborative and visual way helps us to speak a common language that will ultimately improve communication and drive better investment decisions.