Responsible Property Investing with M&G Real Estate

M&G Real Estate is the property investment unit of M&G Investments and has £29.5 billion of assets under management globally (as at 30th of September 2017). It has had an active Responsible Property Investment (RPI) programme for over a decade and is widely regarded by industry stakeholders, with whom it engages regularly on a range of environmental, social and related governance matters, as an international market leader in this regard.

Report: Responsible property investing 2017

The recent publication of its 2017 Responsible Property Investing report follows a comprehensive review of its ESG activities, and sees the launch of a new vision and updated set of priorities for its responsible investment activities across the globe.

Hillbreak was pleased to advise M&G Real Estate throughout this process. We worked in close partnership with its exceptional team of RPI specialists to engage and support the Board and senior leaders to explore, define and substantiate a new vision centred on enriching the lives of people and communities by creating and managing world-class places, in turn delivering positive value for investors, society and the environment.

The new RPI Strategy includes a focus on four themes, which according to Hillbreak analysis, stakeholder feedback and wider market insights, are considered ESG priorities because of the risks they pose to financial markets generally, and the resilience and social utility of the built environment. These are specifically:

• Socio-economic benefit – creating positive socio-economic outcomes by developing high quality places where people want to be and, through proactive participation in communities, supporting jobs, skills development and economic growth. 2025 targets for this theme include 100 places globally having benefitted from community programmes delivered by M&G Real Estate.
• Environmental excellence – delivering environmental improvements at assets to reduce operating costs, carbon emissions and the use of natural resources, thereby helping to attract and retain occupiers and ensuring that environmental risks are managed. 2025 targets for this theme include securing green building certification for 50% of assets (by value) globally and realising a 25% reduction in energy intensity and associated greenhouse gas emissions based on an index trend for all landlord procured energy.
• Health, wellbeing and occupier experience – considering health wellbeing and experiential factors in how buildings are designed and managed so that occupiers have happy and productive employees, retail destinations attract customers and homes are places where people want to live. 2025 targets for this theme include reaching 10 million people through health, wellbeing and inclusivity programmes, and measuring and improving the satisfaction, happiness and wellbeing of occupiers.
• Smart, secure and connected – implementing connectivity solutions to harness opportunities and future proof investments in a world where smart physical and digital infrastructure is crucial to competitiveness. At the heart of this theme is the 2025 target to deliver enhanced digital and physical connectivity across the asset base through a framework of activities underpinned by thought leadership.

The new strategy is underpinned by a series of ‘strong foundations’. These are the corporate and investment management fundamentals, such as encouraging occupiers to sign up to our green lease clauses and the integration of material RPI issues into the acquisition due diligence process, which M&G Real Estate believe must be in place before it can deliver its RPI objectives. Two key principles guide the overall approach:

• Enhance and Transform – being at the forefront of identifying and influencing the drivers of change shaping our investment strategies accordingly, we will continue to deliver strong returns for our investors in the long term.
• Safeguard and Future Proof – combining innovation with best-in-class management will set the bar for exceptional workplaces homes and leisure destinations which have enduring appeal and benefit local communities and economies around the world.

In Hillbreak’s view, the new RPI Strategy reflects positively M&G Real Estate’s rigorous house-wide approach to its fiduciary responsibilities and will further consolidate its position as a leading responsible manager of non-listed real estate funds globally.  In particular, the focus on embedding tailored ESG principles and objectives into individual fund strategies sets an important tone for the wider market; it is only through this type of bespoke integration, with individual fund managers having ownership of their approach, that the global responsible property investment agenda will move forward effectively.