Property
Carbon Neutral Real Estate Fund
Carbon reduction through commercial real estate investment
Climate change is firmly back on the agenda. As large asset owners, institutional investors have an important role to play in helping to reduce carbon emissions.
UK office buildings are bad offenders, contributing around a fifth of total carbon emissions in the UK. New build, carbon-compliant real estate only accounts for 1-2% of total supply. To meet the Government’s 2050 carbon reduction targets, emissions from existing buildings will need to be reduced by 80%. Realistically, this can only be achieved via refurbishment.
*Source: Carbon Trust, October 2020
Investment Process
Step 1: Identification
Columbia Threadneedle Investments leads in the identification of suitable redundant/obsolete/vacant/short-term let office property showing the optimal combination of location, building fabric, original construction, configuration and local market conditions, offering the potential for a desirable occupational solution that will benefit from a Low Carbon Workplace refurbishment.
The rigorous economic assessment by all three Partners to confirm the achievability of an economic, risk adjusted, profitable and low emission end product, which meets the needs of both occupiers and investors. The entry price, carbon engineering/ refurbishment budget and rental value equation will be computed under a number of potential scenarios.
Step 3: Carbon engineering/refurbishment
The ‘on site’ phase, where Stanhope and the Carbon Trust work in tandem to deliver the agreed physical and carbon specification, within the agreed budget and time scales. Concurrently, Columbia Threadneedle Investments leads early engagement with the potential occupiers, supported by the Carbon Trust.
Step 4: Completed projects and continuing carbon appraisal
Following and during the completion of projects the Carbon Trust applies rigorous carbon oversight of the strategy’s development and investment portfolios. Such oversight includes maintaining ongoing occupier engagement under the Low Carbon Charter, in order to provide training, support and assistance to occupiers with the target of ensuring annual certification under the Charter. This level of continuous occupier engagement provides the strategy with a clear competitive edge over its peers and increases the likelihood of occupier retention.
Step 5: Portfolio management
The strategic asset allocation of the portfolio is reviewed by reference to Columbia Threadneedle Investments assessment of the UK Investment Market and the relative prospects for the underlying geographical areas. Columbia Threadneedle Investments utilises the capabilities of its large and long-established investment team and seeks to generate outperformance in line with similar track records of Columbia Threadneedle Investments-managed property funds.
Value for occupiers and investors
Value to occupiers | Value to investors |
|---|---|
Reduced running costs | Lower energy costs mean properties are resistant to functional and environmental obsolescence |
Future-proofing against future energy price hikes and new legislation | Due to the imbalance between supply and demand, low carbon properties also benefit from better security and quality of income, greater potential for capital gains, shorter void periods and access to pre-let developments |
Improved employee satisfaction and workforce productivity | Together with the strong risk-adjusted returns we have generated, this is good news for investors |
Enhanced corporate reputation |
Explore the portflio
To date the Carbon Neutral Real Estate Fund has raised over £175m and the portfolio currently comprises of six buildings.
Low Carbon Workplace Standard
The Carbon Neutral Real Estate Standard assesses three things:
- Quantitative performance: Workplace carbon emissions are quantified per unit of floor area and per person. Occupiers must either meet best practice emissions benchmarks or demonstrate year-on-year improvements.
- Qualitative criteria: Occupiers are assessed against a set of broad sustainability performance indicators, together with occupant satisfaction. This assessment provides a holistic picture of the workplace’s overall environmental performance.
- Carbon management: Occupiers are required to have implemented a carbon management system that embeds energy efficiency and carbon management in the day-to-day activities of the workplace.
Awards
In 2015, the Low Carbon Workplace Partnership won three industry awards.
