Investors, regulators and other market participants have made Environmental, Social and Governance (“ESG”) factors essential data points in the due diligence process when selecting an investment manager, exponentially so over the past twelve months.
Real estate investors have historically associated ESG with sustainability certifications for buildings. Building owners, operators and investors, however, are acknowledging that ESG is far more nuanced. Understanding moral obligations (part of the “S”) and transparency/disclosure (part of the “G”) are also necessary contributors to understanding any real estate investment’s true risk-adjusted returns. Such disclosures are typically communicated in ESG reports.
With the rise of ESG reporting, the number of frameworks and reporting standards has also liberally expanded:
- Global Real Estate Sustainability Benchmark (GRESB)
- Global Reporting Initative (GRI) standard
- Sustainability Accounting Standards Board (SASB)
- Taskforce on Climate-related Financial Disclosures (TCFD)
- Principles of Responsible Investing (PRI)
It can be difficult to make sense of this ESG “alphabet soup” and determine what disclosures are most meaningful when evaluating an investment manager. Not all disclosures are created equal and not all disclosures are relevant in all cases. That is why the International Financial Reporting Standards Foundation (“IFRS Foundation”) is pushing for a new global standard for ESG reporting. To date, the work of the IFRS Foundation appears to primarily build upon the SASB and TCFD frameworks.[1]
To better guide Crown’s ESG strategy, we completed a materiality assessment in 2020. This involved a review of our peers, alternative reporting frameworks and trend documents, together with feedback from our team and investors. The process helped Crown determine to initially focus on SASB and TCFD alignment. This decision was further reinforced in Nov 2020 when Canada’s eight leading pension plan investment managers announced their support for the very same frameworks.
Our materiality assessment ultimately led us to identify the following as key priorities for our first ESG report:
- Environment
- Community building
- Talent
- Governance
Although we recognise that full alignment takes time, we are committed to laying the necessary groundwork in the coming months and years as a universal standard hopefully emerges. In the meantime, Crown will continue to identify priorities and opportunities to advance our ESG agenda in a thoughtful and measurable manner.
Read Crown’s 2020 ESG Report here.