What Are The Key Data Points in ESG in Real Estate & How Are They Measured? with Aleksandra Njagulj & Simon Wallace

In the third episode of season 10 of the Propcast, host Louisa Dickins is joined by Aleksandra (Sasha) Njagulj, Managing Director and Global Head of Real Estate ESG at DWS Group and Simon Wallace, Global Head of Research and Strategy at DWS Group.  They discuss the key data points in ESG in real estate and how and why Aleksandra and Simon have risen to the top of the DWS Group and are focusing their careers within ESG. They share the products that DWS Group has found useful in their workplace and the regulation changes they have seen in the market. Lastly, they discuss how the current market may disadvantage or benefit investment in ESG. Resources: LMRE Global Recruitment and Search Consultancy LMRE YouTube Interviews CRREM   Key Insights From This Episode:   ESG influences a lot of my work nowadays, it’s always been a factor but now ESG touches pretty much every part of the research and strategy that we do. - Simon Whether you believe in climate change or not, if the energy prices continue to rise, tenants are going to want more energy efficient buildings. - Aleksandra I think we are in a market environment in general where we will see less investment in real estate, we got the real capital analytics data for the second quarter for Europe today and year on year investments are down by about 20%. - Simon The current market is accelerating the focus on ESG in real estate, energy prices will favour buildings that are energy efficient. - Aleksandra You can do it because you want to look after the environment, but now you can do it because there is a financial incentive as well. - Louisa   About Our Guests:   Aleksandra Njagulj, Managing Director and Global Head of ESG, Real Estate at DWS Group: Aleksandra (Sasha) Njagulj is the Managing Director, Global Head of ESG (environmental, social, and governance), Real Estate at DWS group. She is responsible for ESG integration across global real estate portfolios. Sasha is an accomplished ESG expert with over 20 years of practical experience in architectural design, design management and the sustainable built environment. In her previous role with CBRE Global Investors, she was Global Head of ESG with overall responsibility for developing and communicating global sustainability priorities and strategies across all business lines. Prior to this, Sasha was head of the Sustainability, R&D and Innovation department at Bouygues U.K. Throughout her career, Sasha has built a reputation both professionally and personally for championing the cause of responsible real estate investment. She received the UK-based edie 2020 Sustainability Leaders Award for Investor of the Year for an ESG programme she designed and delivered for CBRE. In addition, Sasha was awarded the global 2020 GRESB/BREEAM Individual Leadership Award, recognising strong leadership and commitment in the field of sustainable development. In 2021, she won the global Future Proof Real Estate Woman award as a leader in applying digitalisation, technology, open innovation and sustainability to create a better built environment.   A qualified architect, Sasha holds a Master's degree in Architectural Design from the University of Belgrade; a Master's degree in Sustainability Leadership from the University of Cambridge. She is a BRE Academy fellow, sits on the INREV ESG Committee and ULI ESG Council, leads the IIGCC Real Estate Workstream and chairs the GRESB Foundation Real Estate Standards Committee.   Simon Wallace, Head of Research, Real Estate at DWS Group. Simon joined the Company in 2011. Prior to his current role, Simon served as Head of Europe Research and Strategy for Alternatives. Prior to joining, he served as an economist for real estate research at Hammerson. Previously, Simon worked as an economist at the Centre for Economics and Business Research   BSc in Politics and Economics and MSc in Economics from University of Bristol; Investment Management Certificate (IMC)   About DWS Group: DWS Group (DWS) is one of the world's leading asset managers with EUR 902bn of assets under management (as of 31 March 2022). Building on more than 60 years of experience, it has a reputation for excellence in Germany, Europe, the Americas and Asia. DWS is recognized by clients globally as a trusted source for integrated investment solutions, stability and innovation across a full spectrum of investment disciplines.   We offer individuals and institutions access to our strong investment capabilities across all major liquid and illiquid asset classes as well as solutions aligned to growth trends. Our diverse expertise in Active, Passive and Alternatives asset management – as well as our deep environmental, social and governance focus – complement each other when creating targeted solutions for our clients. Our expertise and on-the-ground knowledge of our economists, research analysts and investment professionals are brought together in one consistent global CIO View, giving strategic guidance to our investment approach.     DWS wants to innovate and shape the future of investing. We understand that, both as a corporate as well as a trusted advisor to our clients, we have a crucial role in helping navigate the transition to a more sustainable future. With approximately 3,600 employees in offices all over the world, we are local while being one global team. We are committed to acting on behalf of our clients and investing with their best interests at heart so that they can reach their financial goals, no matter what the future holds. With our entrepreneurial, collaborative spirit, we work every day to deliver outstanding investment results, in both good and challenging times to build the best foundation for our clients’ financial future.   About Our Host Louisa Dickins Louisa is the co-founder of LMRE, which has rapidly become the market leading global PropTech recruitment platform and search consultancy with operations across North America, United Kingdom, Europe and Asia-Pacific. To promote the industry she is so passionate about, Louisa set up the Global podcast ‘The Propcast’ where she hosts and invites guests from the built environment space to join her in conversation about innovation.   About LMRE LMRE is globally recognised for leading the way in Real Estate Tech & Innovation talent management. From the outset our vision was to become a global provider of the very best strategic talent to the most innovative organisations in PropTech, ConTech, Smart Buildings, ESG, Sustainability and Strategic Consulting. At LMRE we are fully committed at all times to exceed the expectations of our candidates and clients by providing the very best advice and by unlocking exclusive opportunities across our global network in the UK, Europe, North America and Asia-Pacific. Timestamps: [1:44] Aleksandra: What initially sparked your interest in sustainability within real estate? Originally I was an architect so my primary expertise is in real estate, I know how it is designed, constructed and managed. I discovered the issue of sustainability when I was working as a design manager for the Building Schools for the Future Program. One of the requirements of the funding was that it had to achieve a sustainability certification to a certain level. I feel sustainability is a primary issue so if I can contribute to it using my primary expertise then I will. [3:54]  Simon: How did you get into this role in ESG? I started off my career as an economist working for a very small economics consultancy in London and then moved to DWS Group 11 years ago. ESG influences a lot of my work nowadays, it’s always been a factor but now ESG touches pretty much every part of the research and strategy that we do.  [7:47] Simon: Are there any key data points and trends you can show us from your research? We still struggle for data in this area and there is a lot of noise around it so it is important that the more data points we get, the better the analysis.  I think we will be moving from a world of green premium to a world of brown discount. I think the industry will in time all have high levels of environmental credential sustainability and the buildings that don’t will be at a discount rather than the market average. [9:26] Aleksandra: How do you tie the live data into your strategy? The critical point is your due diligence when you’re making the acquisition decision and getting the actual performance data from the building. It is still not practised in the market to provide full information of how the asset performs to the potential buyer. Historically we used energy performance certificates which are not reflective of reality, they are a theoretical model which only looks at regulated energy. The live data for both the asset management and acquisition management process is incredibly important. The issue is that a huge number of assets have old meters, therefore smart solutions are really important to help digitise the data on those buildings. [13:10]  Simon: Do you think the rising interest rates, inflation and geopolitical uncertainty will affect the investment and adoption of ESG? I think we are in a market environment in general where we will see less investment in real estate, we got the real capital analytics data for the second quarter for Europe today and year on year investments are down by about 20%. ESG strategies will not be fully immune to what is going on but the trend towards ESG based strategies will continue to grow and accelerate. I think there are some positives to be taken from the price correction going on. The buildings today that are of poor quality and low environmental standards are likely to reprice at more than the market average, allowing opportunities for repositioning and impact. [15:45] Aleksandra: In terms of rising interest rates, inflation and geopolitical uncertainty, what is affecting your strategy and investment decisions? Some of these aspects are actually accelerating the focus on energy usage. Energy prices rising will definitely favour buildings that are energy efficient and give tenants a financial incentive. These measures are payback to sustainable buildings either in low utility costs or higher tenant demand. Whether you believe in climate change or not, if the energy prices continue to rise, tenants are going to want more energy efficient buildings. [18:58] Simon: Have you got any data points about how much money people could save if they used a certain technology? Given the rise in gas, carbon and energy prices, those buildings with low energy ratings are susceptible to rental declines and rental underperformance. Looking at it from a risk perspective, if you come into conflict with regulation and you’re no longer able to lease that building because it is not meeting the standards then you have an obsolete building. [20:28] Aleksandra: What changes in regulations have you seen in your career and how do you collect data on it? We are assessing the risks accordingly, we use a tool called CRREM which is based on real life data to help assess stranding risks of these assets. That then directly has an impact on our investment and asset management decisions. Regulations will have to deal with existing building stock if we are to achieve net zero carbon goals. Therefore, some of the regulations that come in will need to regulate private house owners, not just commercial landlords. [25:25] Simon: What do you have to say about regulations? I think we should see regulations as a part of life not as a negative or a risk from an investor perspective.When regulations are well specified and known in advance then we can respond accordingly. In terms of collecting data on regulations, it is important to have people on the ground engaging with local bodies and the government, in order to understand how that regulation will impact upon your investment. [27:20] The ‘LMRE’ part, Louisa asks the guests to talk about;  L – Touch on the main lessons you have learnt throughout your career. Aleksandra: Flexibility and being open for opportunities, if you want to be successful in your career then being flexible and open-minded is the best advice. M - Please give a mention to anyone / product / service. Aleksandra: IOT solutions and the geniuses that are coming up with them around the world are resolving real problems and issues within real estate. R – What has been the most  rewarding  aspect of working within the ESG space? Simon: Being a part of the solution on the quality of affordable housing, through ESG we can certainly make a positive difference. E - What are you excited about in the future of ESG? Aleksandra: ESG and sustainability as a whole is seen as added value, as something that should be embedded throughout the business to make it better.   Sponsors Launch Your Own Podcast A Podcast Company is the leading podcast production and strategic content company for brands, organisations, institutions, individuals, and entrepreneurs. 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