“Much remains to be done to achieve our sustainability ambitions. We are continuing our efforts in this direction,” commented Amanda Blanc, Group Chief Executive Officer, Aviva plc.
Aviva Investors has published a report on the progress made by its £47 billion property portfolio department in its efforts to improve the sustainability criteria of new and existing buildings and help investors make the transition to a low-carbon future.
Last year, Aviva Investors presented an ambitious plan to reduce net-zero emissions by 2040 across the property platform, and Aviva plc announced plans to become a net-zero emissions company. 2040, the most ambitious goal of any major insurance company in the world.
The details update relates to five milestones that Aviva Investors has committed to achieving by 2025, five points that prove that performance is measurable and ensures the achievement of its pledges with measurable and meaningful actions. This update follows the recent statement that the industry has gone beyond its commitment to invest €1 billion in dedicated sustainability lending, which will enable it to meet its three-year-earlier target of intended. Progress against these commitments and targets shown in the report includes:
- Direct investment and financing of £1.4 in low-carbon, renewable energy infrastructure and real estate, which corresponds to 56 per cent of the amount equal to £2.5 billion pounds sterling by 2025;
- Expanding total renewable energy capacity to 1.1 gigawatts (GW), which is 48 percent of its commitment to reach 1.5 GW by 2025;
- Issuing £1.04bn of energy transition-focused property loans, which is 100 per cent of its 2025 target;
- Introduction of a climate transition strategy in response to its commitment and in accordance with Article 8 of the Financial Services Sustainability Disclosure Regulation (SFDR);
- 25 percent reduction in carbon intensity and six percent reduction in energy intensity for direct investments, compared to 30 percent and 10 percent targets by 2025
“As a major investor in Britain’s infrastructure and property, Aviva has significant opportunities and is committed to securing funding for projects that help achieve zero emissions targets in property. says Amanda Blanc, Group Chief Executive Officer, Aviva plc. “We are therefore pleased to communicate this progress, but there is still a long way to go to achieve our sustainability ambitions. Our investors and clients expect excellent results, and we are continuing our efforts in this direction”.
“Zero emission targets should no longer be pledges to attract capital from investors, but anchor themselves in the real estate sector in order to be able to develop their potential and tackle the climate crisis”, adds Daniel McHugh, CIO, Real Assets at Aviva Investors. “The five milestones presented in our plan are the most important aspect of our commitment to zero emissions. They are five measurable proofs of our progress and are intended to give clients confidence in the investments we are making on their behalf and their impact in transitioning to a low carbon future”.
In this update, Aviva Investors also highlights several factors that will make zero-emission plans more attractive to investors. These include significant differences in the level of information offered for the different asset classes, for example in private credit where it is unusual to provide ESG and impact data to the lender. , and in real estate where very little ESG data is available at the point of sale.
“The demand for detailed sustainability information has increased markedly, and even high-quality buildings in prestigious neighborhoods are likely to become vulnerable to sustainability-induced obsolescence,” added Daniel McHugh. “The importance of refurbishing and retrofitting existing heritage assets in favor of energy-efficient materials and cleaner energy sources cannot be underestimated. Persistent variations and discrepancies in the quality of ESG data will lead to a polarization of property performance, making investment expertise and rigorous analysis particularly important.”
Other challenges noted in the report relate to a “green premium” for existing assets that reflects the accelerated pace of the race to zero emissions. Core and core+ assets with excellent sustainability characteristics are most likely to face increased competition, pushing lesser quality assets to the back burner. The report also uncovers a growing trend seen among investors regarding the prioritization of renewable and already green assets over impact-focused investments that improve underperforming existing buildings and can be more effective in transitioning to a greener future. lower carbon emissions.
“As our recent study of real estate values highlights, the focus on net-zero emissions targets has resulted in significant investment in renewable assets with attractive decarbonization plans as investors try to promote short-term reductions in carbon emissions. carbon footprint of their equity portfolios,” concludes Ed Dixon, Head of ESG, Real Assets, at Aviva Investors. “There is also too much reliance on energy performance certificates and green building certifications, neither of which is linked to energy and carbon intensity. However, while capital from institutional investors is an effective way to support the transition to a low-carbon future, it should be directed into more targeted investment operations such as upgrading existing buildings and infrastructure that underperform in terms of energy efficiency and carbon emissions.