AMP Capital has become the latest premium property company to commit to a low-carbon future, with its newly released sustainability strategy committing to net zero carbon by 2030 for Scope 1 and Scope 2 emissions across its $28 billion of assets world-wide.
The strategy comes as the focus on carbon emissions from buildings and their potential for the low cost abatement gathers momentum under intensifying scrutiny from institutional investors questioning the sustainability and sustainability ratings of property portfolios.
AMP Capital said in the strategy that environmental, social and governance (ESG) factors have been identified as crucial to maintaining the bottom line and financial resilience.
“Sustainability has become a dominant global economic risk and business megatrend that will transform industries and society,” AMP Capital head of sustainability, real estate, Chris Nunn said.
“The real estate sector holds many of the solutions and is in a position to act now. AMP Capital is committed to working with our industry peers, clients and customers to improve every day for future generations.”
Mr Nunn launched the strategy last week before taking part in discussion of these key issues in a panel that also included Emma Herd from the Investor Group on Climate Change, Chris Wade from the Clean Energy Finance Corporation, Lisa Wade from NAB and AMP Capital head of sustainability, real estate, Chris Nunn. Moderator was Tina Perinotto from The Fifth Estate
Mr Nunn said among the elements he was most excited by in the strategy was the creation of a conservation reserve of more than 400 hectares, equal in size to its entire managed real estate portfolio “which we believe is a first for an Australian real estate company.”
Other targets include improved accessibility for the one in five people who have a disability across its managed assets and improved supply chain governance and work with partners to identify and address ESG-related supply chain risks such as modern slavery and materials safety.
Waste, water and benchmarking progress against the UN’s Sustainable Development Goals (SDGs) are also key elements of the strategy.
The strategy was a “step change” in how the company intends to help shape a better future, he said.
A detailed position paper, Why Sustainability Matters in Real Estate released alongside the strategy explores the risks and opportunities driving change across the global property sector, as well as the value proposition.
“Green alpha” has strong appeal in a “lower for longer” returns environment
Mr Nunn said in the paper and at a panel event that there was a “green alpha” financial benefit that environmentally sustainable buildings can offer investors for the long term, an “important consideration in an increasingly challenging ‘lower-for-longer’ returns environment.”
The financial case includes a premium placed on green buildings and buildings with high NABERS ratings by both tenants and owners, and the simple common-sense equation of lower outgoings on energy delivering a higher return from built assets.
“Greener buildings, apart from delivering superior returns, tend to offer investors lower systemic risk with a more stable income profile, lower incentives and enhanced tenant “stickiness” which can reduce the vacancy of a portfolio,” the report said.
Risk mitigation is the fulcrum – including the physical risks of climate change enhanced severe weather events, reputational risks and governance risks.
Director’s duties are identified as a key driver of sustainability, alongside investor sentiment and customer sentiment.
“It is now accepted in Australian Corporate Law that Directors’ duties encompass a positive obligation to understand climate change related risks and opportunities, take appropriate action to transition to a zero carbon future, and manage the risks associated with the physical impacts of climate change,” the report says.