Dialling up ESG Integration with Aberdeen Standard Investments
Hillbreak has advised Aberdeen Standard Investments (ASI) on the development of an enhanced global Real Estate ESG Strategy. This builds on the respective strengths of the approaches to responsible property investment of the ASI heritage organisations, Aberdeen Asset Management and Standard Life Investments, and addresses evolving client expectations and long-term trends that are likely to shape how business is done in the future.
Our analysis identified several opportunities for ASI to fulfil its ambition of cementing its position as an industry leader on ESG across the full spectrum of its real estate investment management platforms, covering direct, indirect, listed and debt funding activities.
With the visible leadership and strong support of the ASI RE Investment Management Committee (RE IMC) a constant feature of our engagement, the resulting Strategy presents a cogent vision and long-term approach to ESG matters that is firmly embedded within the fund development and execution process. Outcomes and features of particular note include:
- An investment-specific approach to materiality, underpinned by a consistent house-wide framework of global drivers of change, with topics ranging from urban air quality to Modern Slavery to affordability.
- A sophisticated but practical approach to embedding material ESG factors into each stage of the investment process, including underwriting decisions, supported by a unique tool, the ESG Impact Dial. The ESG Impact Dial supports strategy, decision-making and client engagement by fund and portfolio managers to tune the approach to ESG for each product and asset, whilst enabling the business as a whole to set future minimum standards targets for all assets under management.
- Appointing the Head of Real Estate ESG to the direct real estate Investment and Investment Strategy Committees, with voting rights, ensuring enhanced expertise is deployed to fund strategy and underwriting decisions.
- Establishing clear responsibilities for the effective implementation of the new ESG Strategy across the business, with specific and coordinated central support roles defined for Investment & Product Strategy, Real Estate Research, Fixed Income, Marketing & Communications, the Real Estate ESG team and the central ASI ESG team.
- In addition to instigating independent verification of ESG data, bringing the application of the ESG Impact Dial into the scope of the investment governance and oversight.
Our work involved extensive collaboration and engagement with the RE IMC, the Real Estate ESG team, key stakeholders across the wider investment management business, as well as an extensive group of ASI’s investor clients from all major capital markets geographies. Although client strategies and expectations on ESG vary considerably, the rise in appetite for impact investing solutions, outlined in this recent ASI article, coupled with a demand for more effective ways of measuring risk, performance and outcomes beyond the limitations of global benchmarking systems, has become a feature of client feedback.
Remarking upon our role, David Paine, global co-head of Real Estate, said: “Our drive to be an industry leader on ESG factors is central to our investment philosophy. It’s an ambition that requires clarity of foresight, investment discipline and constant innovation. We are grateful to Hillbreak for the insight they brought to our understanding of both clients expectations and best practice enabling us to further enhance our approach and embarking on a new and exciting phase of responsible and impactful property investing at ASI”.
Pertti Vanhanen, global co-head of Real Estate, added: “We selected Hillbreak to work with us because of their reputation as the leader in their field for providing constructive, strategic and commercially-attuned advice on ESG. They more than lived up to our expectations, with their collaborative and engaging approach a stand-out feature of their way of working”.
Jon Lovell, who led Hillbreak’s input, commented: “It has been a real pleasure to support ASI in further developing and expanding its strategic approach to ESG across its real estate platforms globally and to help unify the distinctive elements of its heritage approaches. We were delighted to have the opportunity to work so closely with its highly regarded Real Estate ESG team, as well as the extended leadership group, to guide things on to the next level”.
A new video outlining the approach has been launched on the ASI website here.
Hillbreak provides training and strategic advisory services for organisations seeking purpose and competitive advantage in a changing urban world. Its mission is to expedite the transition to a sustainable policy, business and investment environment by bringing intelligence, challenge and inspiration to its clients and stakeholders.
About Aberdeen Standard Investments
ASI is the investment arm of Standard Life Aberdeen plc and manages £557.1bn* of assets, making it the largest active manager in the UK and one of the largest in Europe. A global portfolio of £44.0bn of property assets under management**makes it the second largest real estate investment manager in Europe.
* at 30 June 2018
** at 31 March 2018