Commercial property funds throughout Australia are leading their peers globally in terms of social and environmental responsibility and governance practices, the latest rankings suggest.

According to the Global Real Estate Sustainability Benchmark (GRESB) 2017 Real-Estate Assessment involving an assessment of the environmental, social and governance performance of 850 property companies around the world representing more than $US3.7 trillion in assets, funds in Australia and New Zealand achieved the highest average score of any region in the world for the seventh year in a row.

All up, the 66 Australian and New Zealand funds came in with an average score of 73 – well above the global average of 63.

The performance of Australian funds was particularly high when it came to management (94), risks and opportunities (80), stakeholder engagement (80), monitoring and energy management systems (79) and policy and disclosure (77).

In terms of environmental performance, the 66 Australia/New Zealand funds across their portfolios:

  • Slashed their carbon dioxide emissions by a total of 96,520 tonnes throughout the year – equivalent to the average emissions of 20,135 passenger cars or 4.7 per cent of their overall emissions. This compared favourably with the global average of 2.2 per cent carbon emission reductions.
  • Diverted 57.1 per cent of waste (or 44,946 truckloads) from landfill, against 52.9 per cent worldwide
  • Had data coverage for energy monitoring of 67.1 per cent of their properties – well above the 59.7 per cent globally.

Australian funds also excelled at stakeholder management practices.

On average, property funds in Australia engaged more actively with their employees compared with their peers on any other of the four regions considered (North America, Europe and Asia).

Australian funds were also second behind North American ones in terms of their engagement with their supply chain, tenants and the community.

They also had a strong focus on social and governance considerations.

All up, 97 per cent have a policy on diversity and equal opportunities, 94 per cent include sustainability-specific requirements in their lease contracts with tenants, and 89 per cent have a community engagement program in place.

As much as 94 per cent of the 66 Australian funds disclosed their sustainability performance to stakeholders.

Australian funds did, however, slip in terms of energy and water consumption.

Whereas their peers globally slashed energy and water consumption across their portfolios by 1.1 per cent and 0.5 per cent, the energy and water consumption of the portfolios of Australian funds edged up by 0.2 per cent and 0.7 per cent respectively.

This means that energy and water consumption across the assets of Australia’s 66 funds increased by the equivalent of 687 homes and 61 Olympic sized swimming pools.

Ruben Langbroek, head of Asia Pacific at GRESB, said the push for corporate real estate sustainability was being driven by investor behaviour.

“Investor demand for transparency will further enhance how ESG-related risks are managed by Australian and New Zealand property companies and fund managers, empowering them to adopt leading sustainability practices,” Langbroek said.

“Transparency on ESG performance of property companies and funds supports investors, such as superannuation funds, to make better informed decisions on where and how to allocate their capital. Importantly, it also enables them to identify material topics for engagement with their investment managers, with the aim of enhancing and protecting shareholder value.”

In efforts of individual Australian funds:

  • Lendlease’s Australian Prime Property Fund Commercial was ranked number one of all 850 companies and funds globally. This is the third time Lendlease’s fund has claimed the top spot, having achieved the same result in 2015 and 2014.
  • In addition, Lendlease International Towers Sydney Trust and Lendlease One International Towers Sydney Trust were jointly named the most sustainable development funds globally, and the Asian Retail Investment Fund 1 recognised as the regional leader for the retail sector in Asia.
  • Stockland was ranked first globally among listed companies for the diversified office and retail sector.
  • Dexus Wholesale Property Fund was named a global sector leader for diversified office and retail groups.

Brandon Vigon