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PwC Director Says Institutional Investors Influencing Sustainability

01/31/2014 | By Sarah Borchersen-Keto

Cope Willis, director at PricewaterhouseCoopers, joined REIT.com for a video interview at NAREIT’s 2014 Leader in the Light Working Forum in San Francisco.

Willis commented on the impact that large institutional investors are having on how REITs and real estate companies address and report sustainability issues. Willis said large investors are having an impact in three main areas: direct engagement, engagement with stock exchanges and shareholder proposals.

“A lot of our real estate clients’ investor relations are receiving an increasing number of questions from investors on sustainability… Executive leadership is really taking notice because, obviously, these institutional investors are pretty big shareholders,” Willis said.

Meanwhile, roughly a dozen institutional investors engaged with large stock exchanges around the world last year about making sustainability reporting a listing requirement, according to Willis. “We don’t know where that’s going to go, but if that does happen, REITs may face some mandatory sustainability requirements,” he said.

Willis noted that in the past three years, REITs and real estate companies have received about 21 shareholder proposals regarding sustainability.

“About half of those have been withdrawn, but only after the company agreed to address the concern. 2014 proxy season is here, so it will be interesting to see what happens,” Willis said.

Willis also discussed the impact of state and municipal governments on company behavior.

“Cities and states have a growing number of laws around building energy disclosure… There is a lot of variation in these laws in terms of the size of the buildings they impact, or whether it’s public disclosure or just to a potential lender, buyer or tenant. Fund managers are realizing that this increased transparency can really impact asset performance,” Willis said.

Looking across all sectors, Willis observed that increased sustainability goals have led to tenants asking for more infrastructure to help them better manage their utility expenditure. Meanwhile, in the hospitality sector, he noted that corporate customers are increasingly including sustainability criteria as they negotiate corporate travel with large hotel brands.