Sustainable investments in real estate development and trends. The Fund Manager Perspective

Transcription

1 Credit Suisse Asset Management Global Real Estate Sustainable investments in real estate development and trends. The Fund Manager Perspective Stephan Brünner Senior Portfolio Manager Global Real Estate CSAM Immobilien KAG mbh For Qualified Investors/Institutional Clients Only. Norsif Breakfast Seminar Oslo, November 29, 2017

2 Sustainable Real Estate Real Estate Sustainability Case Study September 14,

3 More than 15 Years of Innovation and Experience Track Record Original signatory (2000) First greenhouse gas neutral (2011) (2013) Original signatory (2003) company in Switzerland (2006) (2008) (2011) (2013) (2014) (2014) (1992) Source: Credit Suisse Co-Founder of responsibility (2002) Capacity Building Initiative in Microfinance (2008) Green Property Seal (2009) Globally greenhouse gas neutral (2010) FT/IFC Sustainable Bank Award (2010 & 2011) 10 years of Microfinance (2012) Systematic reduction of CO 2 -emissions in 1,000 buildings of CS real estate portfolio, Study with WWF, Program with Wincasa and Siemens (2012) Environmental Finance Deal of the Year Award (2014) Impact Advisory and Finance Department (2017) European Climate Value Property Fund (2015) Green Star Award for CS Real Estate Products (2016) September 14,

4 Why Does Real Estate Matter? Real Estate with Significant Impact on Global CO 2 Emissions 30% 40% 50% Impact on global CO 2 emissions from heating Impact on global energy consumption from building technologies Impact on consumption of global natural resources through construction activity Source: International Energy Agency (IEA). Last data point: June 2015 September 14,

5 Return vs Capex Profile of CO 2 Abatement Levers Analyzed Credit Suisse Real Estate Portfolio IRR over lever lifetime 1, percent (graph capped at 100%) Appliances residential Electronics commercial Electronics residential 100 Lighting LED residential 98 Lighting LED commercial Energy supply HVAC Electronics & applicances Envelope Lighting HVAC controls Retrofit HVAC commercial Lighting control commercial 14 Oil to gas heating Lighting control residential Ground floor insulation com. Oil to Heat pump heating Typical return of real estate product: ~5% Solar PV commercial 2011 vs 2020 Solar PV residential 2011 vs Ground floor insulation resid. 100 Wall insulation residential 150 Oil to district heating 200 Rooftop insulation residential Wall insulation commercial 1 Includes fuel taxes. IRR is calculated on the incremental cash flows compared to business as usual for each lever. There are no projection, prediction or guarantee for future performance and there is no certainty that the target will be reached Source: Credit Suisse AG Rooftop insulation commercial 500 Windows residential Windows commercial Total incremental capex CHF mn September 14,

6 Initial Portfolio Analysis to Reveal CO 2 Reduction Potential Decarbonization Strategy of Real Estate Investments in Place Portfolio Analysis to reveal CO 2 reduction potential Real Estate Decarbonization Strategy in place Portfolio Study of Credit Suisse Real Estate portfolio Study addressing CO 2 abatement potential of CS Real Estate As a result, building optimization measures such as HVAC controls, appliances, lighting LED, and electronics reveal the highest return on investment (ROI) and provide the highest impact on CO 2 reduction Since July 2012 collaboration with Siemens Switzerland and Wincasa to reduce CO 2 emissions Systematic CO 2 reduction and enhancement of energy efficiency at some 1,000 properties Comprehensive transparency and binding CO 2 reduction targets Decarbonization Strategy at Credit Suisse Real Estate Investment Management 100,0% 10,6%* 20,0% 85,0% CO 2 reduction targets in-line with regulatory requirements Mid-term target 2020: -20% Long-term target 2050: -85% 15,0% (real) 2020 (target) 2050 (target) 2050 There are no projection, prediction or guarantee for future performance and there is no certainty that the target will be reached Source: Credit Suisse AG September 14,

7 Digitalization of Sustainability Management Transparency with Sustainability Reporting und -Benchmarking Top 10 Properties 1 Property-ID Energy [kwh/m 2 ] CO2 [kg/m 2 ] Portfolio Development No of Properties Sqm (in k) Energy MWh 19,743 22,094 23,269 21,688 26,144 kwh/m² CO₂ Tonnes 5,181 6,048 6,223 5,516 6,698 kg CO₂/m² Energy Emission Diagram Fund average Swiss average Bottom 10 Properties 1 Property-ID Energy CO2 [kg/m 2 ] [kwh/m 2 ] CO2 kg/m Energy kwh/m 2 1 Note: Source: Credit Suisse AG September 14,

8 Sustainable Real Estate Approach Integration of Environmental, Social, and Governance (ESG) criteria Zug, Foyer Zug, Uptown Source: Credit Suisse AG (2017) Decarbonization: In collaboration with WWF Switzerland and McKinsey & Company, Credit Suisse analyzed the CO 2 reduction potential of all Credit Suisse real estate funds (2012) Energy Monitoring and Controlling (EMC): In collaboration with Siemens Switzerland and Wincasa, Credit Suisse systematically reduces CO 2 emissions at almost 1,000 of its properties Reporting: Following the principles of the Global Reporting Initiative (GRI), Credit Suisse integrates Environmental, Social, and Governance (ESG) criteria into reporting Transparency: Increasing transparency using key performance indicators (KPI) to optimize energy and resource efficiency ESG Performance Benchmarking: Credit Suisse participates in the Global Real Estate Sustainability Benchmark (GRESB) with all funds and achieved Global and Regional Sector Leadership For illustrative purposes only Zurich, Prime Tower St. Gallen, Malik Management Center September 14,

9 Does It Pay off? A Multitude of Benefits Are Related to Sustainable Real Estate Higher Returns Lower Risks ESG Further Amenities Higher and more stable returns Stable occupancy Increase return on assets (RaO) and equity (RoE) Enhance higher cash flows Attract more tenants Achieve longer lease contracts Less exposed to macroeconomic cycles Lower volatility of market performance Lower operating costs Lower vacancy Hedge against volatile energy prices Integrate Environmental, Social, and Governance into investment strategy Exhibit responsibility for future generations Address climate change Be well ahead of regulation Increase reputation and image Increase employee productivity and wellbeing Reduce absentees due to sick leaves Attract prospective employees Source: Credit Suisse September 14,

10 Does It Pay Off? Research Studies Confirm Sales and Rent Price Premiums Empirical research studies investigate Energy Star premium prices Sales prices premium in % 0 0,05 0,1 0,15 0,2 0,25 0,3 0,35 Fuerst McAllister (2009) Fuerst McAllister (2011) 2,5% 31,0% Eichholtz et al. (2010) 19,0% Fuerst McAllister (2011) Jafee et al. (2011) 11,6% Eichholtz et al. (2011) Fuerst McAllister (2008) Miller et al. (2008) 10,3% 4,0% Fuerst et al. (2012) Wiley et al. (2010) Reichardt et al. (2012) 6,0% 0 0,02 0,04 0,06 0,08 0,1 0,12 0,14 Rent price premiums in % sales premiums in % rent premiums in % Source: Credit Suisse Research 2015 September 14,

11 Sustainable Real Estate Real Estate Sustainability Case Study September 14,

12 Example how the Energy can be managed Controlling and Optimisation Measures (Office Europe) Investment plan ca. 45k EUR Investment plan ca. 100k EUR Type Office Building Office Building Identified Efficiency Measures Year of construction/ Rentable area Savings Green Premium Source: Credit Suisse 2017 Optimisation set points heating / cooling Replacement heat distribution system Predictive heating / server room temperature Replacing pumps 2012 / sqm 1956 (refurbishment 2017) / sqm kwh (13%) / EUR/a 13% savings of electricity cost p.a. 1.5 EUR/sqm savings of utility costs Exp. IRR increase up to 17 bps p.a kwh (20%) / EUR/a 20% savings of electricity/heating cost p.a. 5.4 EUR/sqm savings of utility costs Exp. IRR increase up to 45 bps p.a. For Illustrative proposes only September 14,

13 Example how the Energy can be managed Controlling and Optimisation Measures (Shopping Centre Zurich) Type Shopping Centre Efficiency Measures Optimisation of heating curve and heating limits Optimisation of interval timer Intensifying use of heating pumps Development of Heating Consumption Outcome Simplification of energy generation process Reduction of maintenance costs Year of 2003 constructio sqm n Market Value 841mn CHF (as of ) Savings Heating Cost kwh/a (58%) CHF/a (0.10 CHF/kWh) 13% Savings of heating cost p.a CHF/sqm savings of utility cost Source: Siemens Schweiz AG, Credit Suisse 2015 For Illustrative proposes only September 14,

14 Example how the Energy can be managed Controlling and Optimisation Measures (Office Zurich) Type Efficiency Measures Office Building Optimisation of interval timer and volume flow of ventilation Outcome Reduction of maintenance costs (acknowledging very demanding tenants and a very complex building technology) Development of Heating Consumption Year of constructio n Rentable area Market Value sqm 543.9mn CHF (as of ) Source: Siemens Schweiz AG, Credit Suisse 2015 Savings kwh (14%) CHF/a (0.15 CHF/kWh) 14% savings of electricity cost p.a. 2.0 CHF/sqm savings of utility costs For Illustrative proposes only September 14,

15 Important Information General disclaimer: The information provided herein constitutes marketing material. It is not investment advice or otherwise based on a consideration of the personal circumstances of the addressee nor is it the result of objective or independent research. The information provided herein is not legally binding and it does not constitute an offer or invitation to enter into any type of financial transaction. The information provided herein was produced by Credit Suisse Group AG and/or its affiliates and subsidiaries (hereafter CS ) with the greatest of care and to the best of its knowledge and belief. The information and views expressed herein are those of CS at the time of writing and are subject to change at any time without notice. They are derived from sources believed to be reliable. CS provides no guarantee with regard to the content and completeness of the information and does not accept any liability for losses that might arise from making use of the information. If nothing is indicated to the contrary, all figures are unaudited. The information provided herein is for the exclusive use of the recipient. Financial instruments mentioned in this document could be considered complex products and therefore may not be suitable for retail clients. The key risks of real estate investments include limited liquidity in the real estate market, changing mortgage interest rates, subjective valuation of real estate, inherent risks with respect to the construction of buildings and environmental risks (e.g., land contamination). When the fund is distributed from the United Kingdom and in Norway, it is distributed by Nordlink Capital Limited which is authorised and regulated by the Financial Conduct Authority. Copyright 2017 Credit Suisse Group AG and/or its affiliates. All rights reserved. September 14,