REIT ASIAPAC
COLUMN
Climatologists have long warned
that one effect of climate change is
that the severity and frequency of
typhoons will increase as the average
temperature of the oceans rises. In
September, Typhoon Mangkhut
became the strongest typhoon to hit
Hong Kong in over four decades.
Since the United Nations drafted the Principles for Responsible
Investment in 2006, over a thousand institutional investors have
adopted the document introducing environmental, social and
governance considerations into their investment framework.
Other related schemes, such as the recently passed UNEP-
Finance Initiatives, target directly environmental issues. In
some economies, these policies have encouraged companies
to proactively mitigate energy consumption, since weakened
support from institutional investors has implications for stock
prices.
While there were no casualties,
economic losses included one Grade
Chief Investment Officer,
A office building, which had at least
Admiral Investment
100 window panels blown out, and
one development project lost its construction crane. Hundreds
of thousands of Hong Kongers also lost productivity over the
following few days as it took time to remove trees and other
debris from roads.
By Victor Yeung,
Column
How the Real Estate Industry
Can Fight Climate Change
Australian and Japanese REITs are adopting solar panels as core to
their investment plans
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G R E E N -T E C H I S F I N A N C I A L LY V I A B L E
After a decade and a half of development, green technology
has advanced so that it is now financially attractive. The most
notable example is solar panels, which in some locations have
a payback period that is as short as five years. This means
At the time, around the world, nine hurricanes
that the rate of return can be as high as 20%,
or typhoons were active, which was an
The fact that some
which is generally an attractive investment
unusually high number. While climatologists
for real estate operators. This is perhaps why
green technology and
have often cautioned the public not to equate
we have now seen Australian and Japanese
techniques are saving
single events to general trends, Typhoon
REITs adopting solar panels as core to their
money and enhancing
Mangkhut and its kind serve as a reminder
investment plans. Shopping mall owner Vicinity
that climate change can have disastrous
Centres, for instance, has embarked on a A$78
equity returns is the
consequences.
nudge the industry needs. million expansion of its solar energy roll-out,
creating the largest such commercial property
On October 6, 2018, the International Panel
programme in the country.
on Climate Change (IPCC) released a special report in support
of a global response to keep global warming to less than 1.5
Some advancement is not necessarily based on technology.
degrees Celsius above pre-industrial levels. Energy production
For example, green features are also being adopted as owners
and use is the largest source of greenhouse-gas emissions,
renovate their assets. A well-designed canopy can bring
and our industry is a significant energy user. According to the
natural lighting in a mall and reduce lighting requirements. Air-
U.S. Environmental Protection Agency (EPA), the sector is
conditioning ducts with a wider diameter reduce air friction and
responsible for approximately 50% of greenhouse gas emissions
thus the energy required to cool a building.
and about 75% of electricity consumption.
Often, these design features do not include additional renovation
costs, so that energy saved is net-positive for the landlord. The
fact that some green technology and techniques are saving
money and enhancing equity returns is the nudge the industry
needs. Events like the nine concurrent hurricanes in September
serve as a reminder as to why green technology is important. The
growing suite of available technology will also improve the cost
structure for those landlords that are willing to invest. This will
ultimately derive financial benefits for shareholders.
HONG KONG’S ENERGY CONSUMPTION
Using Hong Kong as an example, according to the “Hong
Kong Energy End-Use Data 2017” report published by the
Government’s Electrical and Mechanical Services Department,
residential and commercial activities contribute 21% and 43%
of overall energy usage respectively. Of all residential usage,
25% is air conditioning, and 6% is lighting. And of all commercial
usage, 25% is air conditioning, and 12% is lighting. Thus, air
conditioning is approximately 15% of all energy usage.
About the author: Victor Yeung writes regular columns for
various news media in Hong Kong, Singapore and Taiwan, and
he is a co-host of a REIT commentary segment on Hong Kong’s
Now TV. He has written one English and three Chinese books
on REITs and other real estate topics.
Hong Kong is subtropical with temperatures regularly
registering above 30 degrees Celsius during the summer, and
thus some level of air conditioning is desirable. However, well-
designed real estate assets can help conserve energy. In fact,
we are seeing REITs and other real estate investors adopting
strategies to cut energy use.
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