At Tomorrowland 2018 event, former Australian Financial Review property editor Robert Harley moderated a panel of major players in property to understand the motivations that drive their investment decision making. And where sustainability fits in that picture.
The owners of Australia’s largest office towers are looking towards the next wave of sustainability initiatives.
On 6 September, at The Fifth Estate’s Tomorrowland, Chris Wade, who heads the property business platform the Clean Energy Finance Corporation was joined in a panel by Mirvac’s Head of Office & Industrial, Campbell Hanan the Investa Property Group’s General Manager, Michael Cook.
Wade acknowledged that Australia’s premium grade office sector, which Mirvac and Investa both represent, was setting “leadership standards” in energy efficiency.
His point was underlined this week when Australian and New Zealand property funds once again topped the global ranking in environmental, social and governance performance in the GRESB results for 2018.
However, Wade noted that the sustainability performance differed by sector, with housing –Australia’s biggest, but most fragmented, property sector–lagging the commercial sectors.
Hanan said that since the start of the century the big institutional property owners had cut energy usage in their portfolios by 35-50 per cent through capital investment and “good return on effort.”
“In Australia’s real estate operators, you have an institutional group of owners who are particularly focused on sustainability from an energy, water and waste perspective,” he said.
Cook said sustainability was about “doing more with less”, particularly because, as a fund manager, he was investing other people’s money.
“We are mindful when we do anything that [it’s] not our money,” he said. “We have a responsibility to use our resources as wisely as possible.
“Now we are looking at what is the next phase of sustainability.”
Investa has committed to a zero carbon operation by 2040. “We think we can do it ten years earlier,” said Cook.
And Mirvac has just committed to zero carbon by 2030.
So how will that be achieved? “I don’t think anyone knows, is the short answer,” said Hanan. “Every institution knows that the technology that exists today will not get you there. So it’s a leap in faith, in part.”
One innovation he does expect is the upgrading of technology to harness solar power from facades, not just roofs.
Cook said that to date the industry had not invested a “heap of capital” in sustainability. “This is where we need some brain power and to spend some money,” he said, noting that for the Telstra headquarters tower in Melbourne, Investa had opted for the more expensive lift upgrade because it would cut energy use by 35 per cent.
The majors are also looking beyond technology.
They will encourage their tenants to save energy. “The holy grail is when I have all my tenants on the same page,” said Cook. “At 60 Martin Place (one of Investa’s office tower developments in Sydney) we have some very green clauses in the leases. Every tenant and tenant representative scrubbed them, but we held on.”
Wade said that gains in energy efficiency could come from the smarter use of existing technology. “
The Clean Energy Finance Corporation (CEFC) was established in 2010 with seed funding of $10 million and a mandate to invest in climate bonds and equity funds that target clean energy gains in infrastructure, property and agriculture. Already it has invested $1.2 billion in property and, targeting commercial returns, has encouraged the private sector to invest another $2-3 million.
“In some ways you can have your cake and eat it too,” Wade said.
He acknowledges that the money is really just a “drop in the ocean.” The real significance is how the CEFC can show the way through case studies, new standards and working with partners.
The CEFC invested $100 million in one of the Investa funds to support the commitment to zero net emissions by 2040.
Cook said the CEFC gave his group “a nudge” on issues like data sharing, a sustainability tool kit for tenants, and introductions to experts in other sectors such as solar power. “They have pushed us,” he said.
The CEFC is also an investor in the new Mirvac Australian Build-to-Rent Club. Wade said it was a showcase investment in a sector where sustainability standards are still low.
“The building will use 40 per cent less energy than a normal apartment project,” he said. “It just makes commercial sense. And it is using existing technology.”