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ESG: Don't be a spectator

by Jackson Franks

Environmental, Social and Governance (ESG) investing is at the forefront of most investors’ minds and the real estate sector is no exception. A survey published by Bentall Kennedy, Real Property Association of Canada (REALPAC) and the United Nations Environment Programme Finance Initiative (UNEP FI), which included investment managers representing over $1 trillion in assets under management from North America, Europe, and the Asia-Pacific region found that 93% of investors include ESG criteria in real estate investment decisions. At Momentum we are no different. The built environment is currently responsible for 40% of global energy consumption, 25% of global water consumption and is emitting 1/3 of greenhouse gas (GHG) emissions. At Momentum we believe it is vital for the sector to manage and reduce these levels and we expect the same of our Real Estate Investment Trusts (REITs) in which we invest.

Momentum invests both directly and indirectly into the real estate sector via MAREF (Momentum Africa Real Estate Fund), a pooled vehicle facilitating investment in African real estate for our clients and REITs. Even though these are two different investment approaches, the ESG criteria does not differ. Quantifying ESG criteria within the real estate sector is simpler than other sectors due to the tangible living nature of a property. Environmental factors consider water and energy consumption as well as emissions from the building. Social factors consider the societal impact of the development (infrastructure, housing, job creation etc) as well as the health and wellbeing of its occupiers. This has become an even more important factor due to COVID-19. Governance factors consider aspects such as diversity and reputation which can be applied to both the landlord (if invested indirectly) and the occupiers. In addition, safety measures such as fire safety will be applicable towards governance scores.

Within MAREF we set high standards regarding our ESG principles which was commended by winning the Best Green Building at the Africa Property Investment Awards in 2019. MAREF contributes to the global initiative and economic impact of efficient water and power resource utilisation by benchmarking to IFC EDGE or LEED specifications. IFC EDGE and LEED are green building certification systems which is comparable to BREEAM in the UK. In terms of the social aspect of ESG, one of MAREFs core principles is job creation. Throughout the construction period MAREF upskills staff so those with the most basic jobs can be trained in more specialist roles and thereby strengthening their future employability. MAREF prides itself on offering international Grade A standard facilities in developing markets thanks to the expertise of our sister company and developers, Eris Property Group (fellow subsidiary of Momentum Metropolitan Holdings).

The indirect investments, the REITs in which MGIM’s daily dealing funds invest, each have an ESG policy to which they adhere and are held accountable. As an example, Ediston Property Investment Co PLC (EPIC), a UK REIT in which we invest, strive for the highest environmental standard to minimise its environmental footprint with proactive management of energy, waste, water, material and associated carbon emissions. This is showcased through their day to day management of their assets where they look to minimise the carbon footprint of their portfolio whilst maintaining a high level of service for their occupiers. 

At Momentum we are committed to playing our part in creating a more sustainable world, both directly and indirectly. To achieve this everyone needs to part take in driving ESG implementation forwards. Don’t be a spectator.

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