GLOBAL -The Institutional Investors Group on Climate Change has issued a report encouraging pension fund trustees to seek advice on ways of reducing the negative impact of climate change on property values.
According to the report entitled ‘A changing climate for property Investment: a trustee's guide', the major risks to property values and investment performance are more frequent extreme weather conditions, the UK government's decision to implement tighter regulations to reduce carbon dioxide emissions and a shift in occupier sentiment towards more environmentally-acceptable buildings.
Paul McNamara, head of the IGCC Working Group and head of property research at PRUPIM, said: "Property investments face a climate change double-whammy in the years ahead as global warming affects assets both physically and financially."
"The changing environment will be more destructive to buildings, potentially shortening lifespan and making maintenance more costly, while choosier tenants are less likely to occupy unsustainable buildings, lowering returns as a result."
The report encourages pension fund trustees to consult their property fund managers and advisers on ways to reduce the effects of climate change through stock selection or careful asset management.
"Pension fund trustees should be asking property fund managers difficult questions about the extent to which they are addressing climate change issues when making investment decisions," said McNamara.
The report claims ignorance on climate change matters might lead to property assets suffering further devaluations or becoming illiquid, and re-enforces the fiduciary responsibilities of property owners and fund managers.
"Institutional investors and trustees have crucial parts to play in this arena as they have the capacity to select and influence the way their fund managers administer their commercial property assets," suggested Andrew Szyman, sustainability manager at F&C REIT Asset Management and member of the IIGCC.
"By highlighting the risks and opportunities of climate change within a property investment context, the aim of this report is to stimulate interest and generate clear and authoritative mandates for action," he added.
The UK government's Carbon Reduction Commitment comes into effect in April 2010 and is expected to produce a new income stream for the most energy-efficient buildings.
Surplus carbon credit will be traded back to the government under the new ‘cap-and trade-schemes' - a move which campaigners save could help property owners and users generate as well as save money.
The trustee guide was produced by the IIGCC's Property Working Group and written by Paul McNamara and Andrew Szyman.
The IIGCC is made up by a group of European pension funds and institutional investors with a combined value of around €4trn in assets under management.
Members of the IIGCC include, among others, PRUPIM, Hermes, the Environment Agency Pension Fund, Grosvenor and Henderson Global Investors.
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