16 December 2021
Following the release of the 2021 GRESB results, we sat down with Macquarie Asset Management’s Head of Responsible Investment, Mary Nicholson, and some of our portfolio companies to get a sense of how the reporting and benchmarking tool is helping to drive consistent improvements in Environmental, Social, and Governance (ESG) performance.
Over the past year, the number of Macquarie Asset Management funds and investments in the unlisted infrastructure and real estate sectors participating in GRESB continued to grow, while most of those assets who participated in last year’s assessment successfully increased their scores across the board.
“It was particularly pleasing to see 20 of our infrastructure portfolio companies across Asia-Pacific and Europe awarded five-star scores, and for three others to be named as leaders within their sectors,” said Mary Nicholson. “At a fund-level, we saw positive progress across all seven of our participating real estate funds. We were also excited to see two of our infrastructure debt funds complete GRESB assessments for the first time in 2021, and we look forward to building on their sustainability momentum in the years ahead.”
With a growing number of assets and funds being put forward to participate in GRESB, and many continuing to enhance their performance across a range of key ESG metrics year-on-year, a sense of momentum is building. But the most noteworthy change continues to be at the asset level, with Mary noting ESG has risen up the agenda in conversations Macquarie Asset Management is having with teams at its portfolio companies.
“We have been integrating ESG factors into our investment decision-making for more than a decade, but from an asset management perspective we, have seen a real shift in how our portfolio companies are now approaching ESG. Participation in tools like GRESB has encouraged them to focus on a broad range of non-financial performance indicators, and they are increasingly embedding these considerations into their day-to-day operations and business strategy. It’s now very much ‘business as usual’ practice for them,” says Mary.
This shift is reflected in the 2021 GRESB assessment where, alongside long standing focus areas such as decarbonisation and health and safety, Macquarie’s portfolio companies can be seen formulating, delivering, and measuring the impact of targeted initiatives to improve their employee diversity, water consumption, waste and ecological footprints, and more.
At Macquarie-managed Empark, the Iberian car parking operator’s decision to source 100 per cent of its energy needs from renewable sources and start upgrading its fleet to electric vehicles has driven an uptick in their GRESB greenhouse gas emissions and energy performance. Peter Hughes, Empark’s Risk and Compliance Director, explains how the tool now forms a key part of their strategy.
“GRESB has created a roadmap to ensure we’re not missing parts of ESG that may otherwise be deprioritised, and that we are spending the appropriate amount of energy in the more relevant areas. This understanding has helped us shape our delivery and now sits as a key part of our organisational strategy.”
Andrew Schaap, Chief Executive Officer at US data centre company Aligned, agreed that there are lots of moving parts to ESG. “It’s a broad and complex topic,” he said, but the GRESB assessment has provided a structured framework to help enhance their ESG programme. Andrew explains, “The assessment lays out key areas of focus, data points and policy topics that have driven new conversations and cultivated additional meaningful, positive change at Aligned.”
Now in the company’s second year of participating in GRESB, Aligned has marked, measured, and quantified its ESG progress. This has helped their team identify specific areas for continuous improvement. A key focus area has been to reduce the amount of water and energy needed to cool their data centres. “Over the past 12 months, we have continued to invest in purpose-built cooling technologies that enable our data centres to use up to 80 per cent less energy and zero water,” Andrew shares.
Meanwhile in Australia, Port of Newcastle’s ESG Manager Jackie Spiteri finds GRESB to be a valuable tool to assess the port’s performance against its peers. “We have effectively used the assessment process as a gap analysis, alongside other sustainability initiatives, to develop an action plan for ongoing implementation,” she says. “This plan is integrated into our business strategy and is regularly updated and communicated to the Executive Leadership Team.”
Jackie shares this year the port has set ESG-related key performance indicators for all permanent employees that are linked to the company’s GRESB score. “All team members have a critical role to play in improving our performance on important matters such as workplace health and safety. This is now formally recognised as part of our annual performance appraisal process,” Jackie explains. The port is also screening 100 per cent of its suppliers on a range of ESG performance metrics, including supply chain human rights and ethics.
Mary noted that while each company is on its own journey, with bespoke ESG programmes and initiatives, having a consistent framework to track their progress enables Macquarie Asset Management to effectively benchmark its portfolio’s performance year-on-year. It also sets the groundwork for meeting future regulatory reporting requirements, such as the EU’s Sustainable Finance Disclosure Regulation, as well as the recommendations of the Taskforce on Climate-related Financial Disclosures.
“We know businesses that prioritise ESG perform better over the long run. They are better managed, with higher quality and potentially less volatile earnings. Importantly, they are also better at understanding and anticipating the needs of their diverse stakeholders,” says Mary.
“Having GRESB to guide and measure this performance gives us a great advantage as we look to maximise our impact.”