SSgA who manage our global passive low carbon portfolio, undertook a robust research and due diligence examination of close to 30 data providers, they partner with multiple data providers for climate data that can offer insights into portfolios.
SSgA's data covers over 10,000 listed companies, which represents approximately 93% of global markets by market capitalisation and coverage may differ depending on the different metrics in question and access to multiple datasets from multiple vendors where they can cover for all major indices. They use the climate metrics recommended by Task Force on Climate-related Financial Disclosures (TCFD).
Identifying companies with high carbon emissions intensity and exposure to fossil fuel reserves is the cornerstone of any climate-focused strategy. SSgA expect companies with high direct carbon emissions to face increasing challenges, as they navigate challenges ranging from cap-and-trade schemes to carbon pricing regulations. In addition, companies with high indirect carbon emissions (e.g., Scope 2 emissions from electricity consumption) are likely to face increased energy costs as carbon pricing regulations become more widespread. SSgA partner with S&P TruCost as their primary source on carbon intensity and emissions data.
SSgA also partner with ISS Oekom Research to make use of several ratings on a company’s position on climate change. These ratings evaluate the following:
• Whether a company has a clear position on climate change (i.e. position on the scientific evidence of climate change, the company's responsibility in this context and its commitment to contribute to the reduction of greenhouse gas emissions).
• Whether a company has GHG Reduction Plans. For the maximum grade, the company must have set a science-based target in line with the emission reductions required to limit the global temperature increase to 2°C compared to pre-industrial levels. Further, it must have implemented a comprehensive action plan to reduce greenhouse gas emissions, comprising sub-goals, planned measures to achieve emission reductions and progress reports.
• Whether a company assesses most important industry risks with regard to climate change, and whether it has respective adaptation and mitigation strategies in place.
Vision's property opportunities exposures via the BlackRock Real Estate Funds have now been fully exited, with the last sale being Academy Gardens in Greece via Europe Fund III. As a result of this milestone, we thought its still worth noting how BlackRock Real Estate work have worked with their asset operators and property managers to identify opportunities for continually improving the ESG performance of their assets. This may include the development of asset-level Sustainability Action Plans to identify opportunities and associated KPIs (Key Performance Indicators).
Opportunities for improvements in areas such as energy efficiency, water efficiency, waste management and improved community, occupier and tenant experience are also regularly reviewed.
Some recent examples from across their portfolios are as follows:
Data management and measurement
BlackRock Real Estate continue to increase auditing and monitoring activities across their assets to improve the quality and quantity of the environmental performance indicators being measured, analyzed and reported. Data management programs have been rolled out across their global portfolios to obtain key information, including energy consumption (and associated greenhouse gas emissions), water consumption, and waste generation and waste recycling rates.
Environmental audits are undertaken across their real estate assets to help identify where improvements in environmental and operational performance can be achieved. In some instances, such audits have helped them identify those properties where efficiency upgrades should be prioritized. They also enable BlackRock to collate detailed information on energy and water efficiency, which they use to target efficiency and retrofit opportunities.
BlackRock Real Estate strive to include ‘Green Clauses’ in all new lease agreements across their direct real estate portfolios to improve the environmental performance of those properties and encourage collaborative sustainability opportunities. They aim to develop clauses around the responsible operation of an asset, including tenant cooperation, to drive best practice and share data and information on asset-level sustainability performance.
Green financing opportunities
The manager alo recently secured a ‘Green Loan’ and sustainable finance package for one of their European real estate developments. The mechanism led to loan margin discounts in return for the achievement of certain sustainability objectives. Given the growth of the green loan market, and the increasing emphasis on sustainable construction and development, they continue to explore future opportunities for green financing initiatives.
Where possible, BlackRock aim to engage actively with their tenants to better communicate, and further progress, sustainability performance across their assets. They have some great examples across their global portfolios, ranging from energy ‘switch-off weeks’ to recycling campaigns, tree planting, pond dipping, and the establishment of tenant yoga classes and cycling clubs.