Schroder REIT pins ESG ambitions on ‘brown to green’ drive
The team at Schroder REIT has launched a net zero carbon pathway that its fund manager hopes will set it apart from rivals, as it doubles down on efforts to makes its properties more environmentally friendly.
“The opportunity for us is to differentiate ourselves [by] becoming a brown-to-green specialist,” Nick Montgomery told EG after the company revealed plans to ensure developments will be net zero by 2030. It is also aiming for operational and embodied carbon from landlords and tenants to reach net zero by 2040.
“We’re not saying that we’re going to have an expensive transition of selling the assets that we own today and overnight buying BREEAM ‘Excellent’, operational, net zero assets,” Montgomery added.
The team at Schroder REIT has launched a net zero carbon pathway that its fund manager hopes will set it apart from rivals, as it doubles down on efforts to makes its properties more environmentally friendly.
“The opportunity for us is to differentiate ourselves [by] becoming a brown-to-green specialist,” Nick Montgomery told EG after the company revealed plans to ensure developments will be net zero by 2030. It is also aiming for operational and embodied carbon from landlords and tenants to reach net zero by 2040.
“We’re not saying that we’re going to have an expensive transition of selling the assets that we own today and overnight buying BREEAM ‘Excellent’, operational, net zero assets,” Montgomery added.
“Where we think the opportunity is – and frankly, where the need is – is to improve current building stock. The elephant in the room is embodied carbon – planners are increasingly aware of it, and the market clearly is adjusting and repricing for ESG risk.”
Scores on the doors
The REIT already has an impact and sustainability action plan for each asset, but the team will now measure a range of metrics with what Montgomery calls a “scorecard” for each property, mapping use of resources and their impact.
“We’re not turning into a specialist impact fund,” Montgomery said. “It is more about how we can improve sustainability, therefore ultimately achieving the net zero ambition, but also continuing to deliver sustainable, high levels of income and attractive levels of total return.
“Our shareholders own our company for income. And we will only deliver improvements in net income if we can buy and drive value and grow income – buying grade-B assets, which we’ve always done, and improving them.”
The new strategy will likely see the REIT pull in talent and ideas from elsewhere in the Schroders group – Montgomery highlighted its stake in impact investor BlueOrchard and, last year, Natural Capital Research.
“We think articulating our brown-to-green strategy more clearly is really a way that we can differentiate ourselves against peers, and also allow us to use the broader resources of Schroders to improve the way that we do it.”
Onwards and upwards
Montgomery spoke as the investment community digested the news that the offices of DWS and Deutsche Bank had been raided over accusations that the asset manager had practised ‘greenwashing’ by exaggerating the level of ESG criteria in its portfolio. With that in mind, he acknowledged that ambitious goals have to be spelled out alongside realistic expectations.
“Everybody’s extremely alert to the risk of greenwashing,” Montgomery said. “I’m not for a moment going to sit here and say that our portfolio is where it needs to be. [But] we have delivered a year-on-year improvement in [ESG benchmark] GRESB. We’re coming from a good place, but recognising that we can be a lot better.”
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