12/14/2018 | By Calvin Schnure and Fulya Kocak
Investors with an interest in ESG and sustainability have a new tool, the FTSE EPRA Nareit Green Real Estate Index Series that allows investors to integrate ESG considerations in their portfolios of listed real estate. These new investment benchmarks “tilt” portfolio weights up or down according to the portion of the company’s net leasable area that has an eligible green building certification, and according to estimated energy efficiency, resulting in a portfolio with significantly higher energy efficiency and lower carbon emissions.
The FTSE EPRA Nareit Green Indices deliver a similar return to broad industry benchmarks with low tracking errors, showing that it is possible to incorporate climate objectives in portfolio allocations without sacrificing returns. Representatives from FTSE, EPRA and Nareit discussed how the indices are calculated and their relevance for investors recently in a webinar.
U.S. REITs are among the leaders in U.S. real estate in reducing energy use and carbon emissions, and in setting ESG goals and reporting on their progress towards those goals. For more information on sustainability initiatives in the U.S. REIT sector, see the Nareit ESG Dashboard.