The investment case for energy-efficient and sustainable real estate is the topic of a January 2008 article by Ivo Knoepfel and Gordon Hagart in the Global Pensions Magazine. The authors argue that higher energy prices and environmental constraints will be a powerful source of new opportunities and risks in real estate. They describe how the ability of new building technologies to achieve higher occupant comfort, healthier indoor environments and improved resource efficiency has direct positive impacts on the investment case for sustainable buildings, and how a small number of leading institutional investors are already using these trends to their financial advantage.
Global Pensions Magazine article
Ivo Knoepfel onValues managing director, participated in the 2nd Corporate Responsibility Conference in the context of the 10th Euro Finance Week on 22 November 2007. In his presentation he shared results of an analysis of the growing volume of sell-side and independent research focussing on climate change issues. While most of the research still focuses on impacts from regulatory developments (e.g. risks and opportunities related to the EU emissions trading system), he observed that an increasing body of research assesses business opportunities related to new products and technologies, and risks (and opportunities) related to the physical impacts of a changing climate. Positive is also the fact that the coverage of sectors and regions continues to widen, as well as the time horizons of researchers’ analysis. In the same session, representatives from Germanwatch and the Potsdam Institute for Climate Impact Research presented a stochastic approach based on Bayesian risk analysis that analysts can use to evaluate the impact of uncertain input factors on company valuations.
«Financial analysts‘ coverage of climate change related issues – An update»
For further information: http://www.climate-mainstreaming.net/2007-11-22d.htm
At the event, hosted by Mistra (the Foundation for Strategic Environmental Research) and moderated by onValues, leading institutional investors, asset managers, investment and academic researchers took an in-depth look at key ESG issues at the company and country level in emerging markets, priority areas for engagement with companies and ways in which academic research can support the work of practitioners. The discussions were based on the findings of the earlier ‹Who Cares Wins› event held on 5 July 2007 and were aimed at exploring the issues in more depth and integrating them in investment decisions. A selection of lessons-learned includes (a detailed workshop report will be made available shortly):
- Corporate governance at the company level was seen as the best starting point for integrating ESG issues in emerging markets investments, because of its usefulness as a proxy for overall management quality – not just in dealing with risks but also with opportunitie
- The importance of visiting companies and being able to contextualise ESG information was stressed. Where the investor (or an agent acting on his behalf) is not able to meet directly with companies, the only ESG research likely to add value was found to be basic corporate governance work and checking for major breaches of international norms
- Other important ESG issues highlighted were rising costs and shortages of energy and water (both a source of risks and opportunities)
- Quality of disclosure on ESG issues (particularly voluntary disclosure that goes beyond legal requirements) was seen as a proxy for the company's willingness to be transparent and treat all investors fairly, and for overall management quality
- In conclusion, workshop participants also stressed investors’ increasing exposure to ESG issues in emerging markets through their investments in multinational companies with growing production and sales volumes in those markets.
«Emerging markets investments: do environmental, social and governance issues matter?»
The Swiss market for ESG-inclusive investments continues to show strong growth, according to a biannual market survey produced by onValues. Swiss assets (including funds, mandates and structured products) that are managed with the explicit inclusion of environmental, social and governance issues totalled approximately CHF 25 billion at the end of the first half of 2007. This represents an increase of 39% relative to the volume per end of 2006, and a doubling of ESG-inclusive assets in the past 12 months. Interesting trends observed are the increasing share of private client investments and the strong growth of new products with a focus in sustainable themes such as climate change, water and alternative energy.
Press release (in German)