From an investment perspective, we have always viewed ESG initiatives of REITs as important factors for long-term value creation, hence incorporating a REIT’s ESG profile (especially Governance) in our investment analysis and decision-making processes. Our portfolio construction is a bottom-up, index agnostic, and best-in-class stock picking process. To properly assess a REIT’s ESG profile, we combine qualitative and quantitative data from both external and internal sources.
Regarding the external sources, B&I Capital is a member of Global Real Estate Sustainability Benchmark (GRESB) for investors. GRESB specializes in assessing and benchmarking the ESG of real assets with a very close focus on environmental and social factors. As members, we have access to their detailed data, scorecards, benchmark reports, etc. It also enables us to track the REITs’ ESG improvements on YoY basis. Complementary to GRESB, we subscribe to Green Street Advisors, a specialist in assessing of corporate governance of individual real estate companies. They provide their own proprietary evaluations and rankings of corporate governance using a set of factors focusing on board make-up, compensation, anti-takeover weapons, and other conflicts of interest.
Regarding the internal sources, we gather ESG data via our proprietary B&I Capital ESG questionnaires, open dialogue with company managements which includes face to face meetings, conference calls, property visits, conferences, etc. We have developed a quantitative scoring methodology reflecting the questionnaires which evaluates the ESG performance of individual REITs.
Not all REITs or RE companies (typically small caps and/or specific geographic regions) are covered by GRESB or Green Street Advisors and thus we have created our own internal assessment procedures reflecting the ESG factors we believe are most material for REITs. The comprehensive ESG overview of individual companies that we are invested or might invest in is part of the B&I research and analysis process. We put a lot of emphasis on the development of each individual company over time. We look for an improving trend rather than just investing in REITs that are already highly ESG rated.