The Ascending Prominence of ESG + Resilience in Investment Strategies
As we traverse through the contemporary global investment landscape, a resonant theme emerges – the integration of Environmental, Social, Governance, and Resilience (ESG+R) factors into investment and management strategies. ESG+R not only encapsulates the ethical and sustainable aspects of investing but also ensures that investments are fortified against various risks, thereby securing a resilient future. The importance of ESG+R is, therefore, not only in navigating through the current landscapes but also in carving out future pathways that are economically viable, socially responsible, environmentally sustainable, and resilient against the multifaceted challenges that lie ahead.
A Quadrant of Sustainable Investing
Environmental (E): This pertains to the ecological impact and sustainability of investments, with an emphasis on reducing carbon footprints and ensuring the responsible use of natural resources.
Social (S): This encompasses the social implications and contributions of investments, which includes focusing on employee welfare, community development, and adherence to ethical practices.
Governance (G): This involves the management and oversight practices of an investment, ensuring transparency, ethical practices, and adherence to regulatory frameworks.
Resilience (R): This represents the capacity to anticipate, prepare for, respond and adapt to events, disturbances, or long-term changes, ensuring sustainability and minimising impact.
AEW Case Study: Pioneering the Path
towards Integrating ESG+R
AEW, one of the world’s largest real estate asset managers, serves as a beacon in the adoption and execution of ESG+R strategies. With a commitment to future-focused investment decisions that harbour benefits for clients, employees, and global communities, AEW has woven ESG+R into the very fabric of its investment processes.
AEW’s ESG Journey: Setting an Example for the Industry: AEW's ESG journey over the last decade is highlighted by several milestones, such as adhering to the Global Real Estate Sustainability Benchmark (GRESB), calculating the carbon footprint of institutional portfolios, and achieving high scores in the UN Principles of Responsible Investing (PRI).
Resilience: A Forward-Looking Approach: In the realm of resilience, AEW identifies and mitigates climate-related physical and transition risk from acquisition through to disposition, and evaluates and mitigates potential future risk due to climate change, thereby safeguarding investments against unforeseen eventualities.In Summary: Elevating ESG+R to New Heights
The rising notion of ESG+R is not merely a trend but an essential evolution in investment strategy, ensuring that profitability and growth do not come at the expense of our planet and societal values. AEW stands as a stellar example, demonstrating that a committed, strategic approach towards ESG+R not only bolsters investment portfolios but also significantly contributes towards a sustainable and equitable future.
Investing in a Future Prepared for
In the modern narrative of climate discussions, resilience has emerged as a pivotal theme, ringing alarms and signalling a clarion call for immediate and robust action. The tales of climate shocks are no longer isolated events but an almost daily news fixture, whispering the urgent need for adaptation and resilience in our strategies and investments. From the realms of corporate finance to asset management, the trajectory towards incorporating resilience into financial frameworks has been both enlightening and challenging.
A mere decade ago, discussions on environmental regulations, flood, and coastal erosion risk management were confined to specialised agencies and boards. However, as the world witnesses the tangible impact of climate change on the real economy, the discourse has evolved. The Resilience Evidence Forum Report unveils that approximately 50 billion dollars a year is targeted towards resiliency, albeit without precise definitions. This finance aims to ready communities and cities for impending climate shocks, yet the actual annual requirement to adequately prepare the world for climate shock dwells in the realms of trillions.
In the contemporary and future landscapes of the construction sector, Environmental, Social, Governance, and Resilience (ESG+R) principles emerge as paramount. They pave the way for sustainable, equitable, and resilient building practices, ensuring that developments are not only economically viable but also socially responsible and environmentally friendly. The incorporation of ESG+R becomes especially vital in crafting a future where constructions are not mere physical structures but epitomes of sustainable, ethical, and resilient practices.
As we sculpt the skylines and infrastructures of tomorrow, ESG+R stands firm as a cornerstone, ensuring that the built environments are not only reflective of today’s norms but are also fortified to withstand the future’s uncertainties and challenges, thereby safeguarding investments and ecosystems against the evolving global scenarios. This integration is not just a strategic move but a requisite in constructing a future that is stable, sustainable, and inclusive.
Call to Action
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- AEW. (2021) 'AEW’s ESG+R Strategy', AEW Corporate Report.
Available at: https://www.aewukreit.com/~/media/Files/A/AEW-UK-Reit/documents/aew-esg-flyer.pdf
- World Economic Forum. (2021) 'ESG is missing a metric: R for resilience', World Economic Forum.
Available at: https://www.weforum.org/agenda/2021/06/esg-resilience-investment-environment-social-governance/
- New York Life Investments Real Estate Investors. (2023) Commitment to ESG+R.