news

FTSE Group, NAREIT and the U.S. Green Building Council (USGBC) recently announced that they have jointly developed the first investable green property indexes for both institutional and retail investors. The indexes, currently in the final stages of implementation prior to customer use, will give investors a structured and disciplined way to measure and model the risk and reward profile of green property, using the first codified, transparent definition of listed green property. They will also provide investors with new ways to incorporate principles of sustainability into their property selections and portfolios, and access this investment theme through index-linked financial products.

The new family of green property indexes will be based on a benchmark for US real estate, the FTSE NAREIT Index Series, using green data (LEED & Energy Star ratings) from USGBC.

The green property indexes are based on the analysis of over 14,300 LEED and 18,400 Energy Star projects that have received third-party certification based on their green achievements and performance. These projects represent over 5 billion square-feet (465 million square-meters) of commercial real estate. USGBC certifies an average of 1.5 million square feet of additional property per day. 

Mitigating and adapting to climate change, resource depletion and environmental erosion are some of the biggest challenges for the 21st century and will be major structural drivers of economic change. In the years ahead, these issues will be central to our economies and the foundation for global growth.  Real estate investors are seeking to understand how their portfolios can capture superior economic returns while managing risk and contributing to practical solutions to societal challenges.

The global building and construction sector is a good example of this change. It consumes a significant proportion of the world’s key resources, making it highly exposed to the risks and rewards associated with the transition to the low carbon economy. The sector accounts for at least 30% of greenhouse gas emissions. Buildings and construction materials use three billion tons of raw materials per annum (40% of total global use), and account for 55% of the wood cut for uses other than fuel. Buildings are one of the heaviest consumers of natural resources and account for a significant portion of the greenhouse gas emissions that affect climate change. In the U.S., buildings account for 38% of all CO2 emissions and represent 73% of U.S electricity consumption.