Climate and capital come together

26 Sep 2019

Climate and capital were in clear alignment this week, as the world’s green building powerhouses gathered to take part in Climate Week NYC.

The world’s financial capital was an appropriate stage for discussions which unpacked the multi-billion-dollar investment opportunity ahead as we transition to a low carbon economy.

To mark Climate Week and World Green Building Week 2019, we are proud to partner with the World Green Building Council to launch a new industry report, Bringing Embodied Carbon Upfront. This report outlines the targets and actions needed to drive market transition to net zero embodied carbon.

This report arrives as demand for low-carbon investments accelerates at an eye-watering speed. The Climate Bonds Initiative, for example, estimates that $250 billion of green bonds will be issued this year alone.

The 2019 Dow Jones Sustainability Index – one of the world’s most widely accepted reference points for sustainable investment – recorded an 18 per cent increase in companies participating this year. This isn’t surprising. ESG issues, once considered non-financial risks, are now clearly material financial risks that can have a big impact on a company’s bottom line.

We applaud Dexus who is Dow Jones Sustainability Real Estate most sustainability real estate company. Additionally, congratulations to the five other Australian property companies – Stockland, The GPT Group, Lendlease, Mirvac, and Vicinity Centres – named among the world’s most sustainable real estate companies by DJSI. This follows Australia’s world record nine years on top of the GRESB league table. Our members continue to dominate the global rankings: for our full take on another year of impressive achievements through GRESB see our media release and comments from our leading members here.

As the rankings rolled in, the GBCA was delighted to see leading companies emphasise the importance of sustainability ratings to manage risk and meet investor expectations.

Dexus CEO Darren Steinberg, for example, said “Our strong sustainability performance is a result of the effective integration of ESG factors across our business operations to manage risk and generate long-term value for Dexus and our third-party capital partners”.

Frasers Property Australia’s CEO Rod Fehring pointed out that “GRESB, underpinned by Green Star, provides an appropriately rigorous framework for continuous improvement”.

Ratings now translate into clear financial savings, with Frasers Property recently securing a $600 million five-year green loan. Frasers Property must maintain its five-star GRESB rating in return for interest cost savings. We are excited to explore Frasers Property's leadership in green industrial in this month’s issue of Green Building Voice.

Fifty per cent of ASX50 companies now use Green Star to guide their decision-making. Woolworths, which has been working with us to achieve Green Star ratings for supermarkets for some time, recently became the first supermarket globally to issue a green bond. The $400 million bond closed more than five times oversubscribed after Woolworths was flooded with orders of $2.2 billion to support solar projects and the development of low-carbon supermarkets.

Meanwhile, the latest Green Property Index, published by MSCI and the Property Council in 2018, finds Green Star-rated buildings deliver a 5.6 per cent premium in value and a 13.4 per cent premium in net income.

We have a powerful and positive story to tell about the financial value delivered by Green Star projects. We have recently developed a new guide, Maximising your investment, in collaboration with NABERS, GRESB and the Climate Bonds Initiative, to help more investors understand how Australia’s world-class rating tools and standards can be applied to direct more capital towards projects that deliver on the triple bottom line.

This story continues to unfold, but as Emma Herd, CEO of the Investor Group on Climate Change, says in this month’s Green Building Voice: “there is no better time to look at what investors can do to accelerate their response to climate change”.