Legal & General Property calls for greater inclusion of climate change awareness in investment strategies at first ClimateWise review

Forum for the Future review finds that insurance industry is taking a lead in analysing risks posed by climate change, but more action needed.

At today’s ClimateWise: One Year Review event in the City of London, Bill Hughes, Managing Director of Legal & General Property, will call for greater adherence to climate change issues in both the property and insurance industry’s culture, citing benefits realised through progress made to date within LGP.

The conference is being held to mark the first anniversary of ClimateWise’s foundation, its primary goal being to drive the insurance industry’s performance in the field of sustainability. Joan Ruddock MP, Parliamentary Under Secretary of State for Energy and Climate Change, will discuss the findings of an independent review of progress made in ClimateWise’s first year, which has been undertaken by Forum for the Future, and the significance of the review from Government's perspective. The aim of the review was to assess the compliance of ClimateWise’s 41 members, which includes Legal & General and a number of its FTSE-100 counterparts, including RBS, HBOS, Friends Provident and Aviva.

Bill Hughes is one of five senior directors from among ClimateWise’s 41 members to be presenting at the conference, which is being attended by more than 100 representatives and leaders from the financial services industry.

Legal & General Property has analysed Principle 4 of the report, entitled “Incorporate Climate Change into Investment Strategies”, which reflects its own belief that sustainability credentials will affect future returns for property investment. It believes that the immediate priorities for achieving greater incorporation include: full integration of sustainability impact into asset valuations; continuous benchmarking of portfolios’ [sustainable performance] through Upstream and IPD; ensuring best practice through adherence to EPC and ISO14001 legislation; and continuous improvement in practice across portfolios through production of guides for key activities (purchasing, leasing, development, planning, asset management, property management) and how sustainable measures can be addressed within each.

Of the 28 ClimateWise members that disclosed their approach in this area, 20 reported that they had investment strategies that considered the implications of climate change on company performance and shareholder value. Legal & General has already made significant progress in incorporating climate change awareness into its investment strategies, particularly within its £11 billion property portfolio.

Through the launch of its partnership with the College of Estate Management in July 2008, it committed to educating all of its people on the ‘Sustainability in Real Estate Investment’ qualification so that sustainability and climate change become intrinsic elements of its future investment decisions. This qualification includes instruction in managing risk, Energy Performance Certificates, the physical effects of climate change, sustainability in building design, renewable energy, pollution and contaminated land, green leases, and the global take-up of sustainability.

A number of Legal & General’s partners, including CBRE, DTZ, Jones Lang La Salle and King Sturge, have endorsed this scheme and have signed up key members of their organisations to take part.

Legal & General also believes that all areas of the industry have to work together in order to ensure the continued improvement of sustainable practice and cites the success of its collaboration with the Better Buildings Partnership and Green 500 at its 99 Gresham Street asset in the City of London as a prime example of where a better, closer working relationship between owners and occupiers can raise the sustainable standards of assets. At this asset, a trial showed that by reducing the time the air conditioning system operated by two hours per day, £15,000 savings on the running costs have been identified over the course of a year, with reduction of 134 tonnes of CO2.

Bill Hughes commented:

“Both the successes that we have recorded to date within L&G and the findings of the report provide solid evidence of the benefits that can be realised through enhanced attention being paid to the effects of climate change and the impact that our industry can have on our operating environment. By embedding the right education, knowledge and mindset in our business culture, we can tackle the issues from every angle and in all of our core business areas. It is essential that we continue to work together, through initiatives like ClimateWise, so that ideas, best practice and successes can be shared throughout the industry and beyond.

“In the case of property, specifically, we have an enhanced ability to contribute to improving sustainability standards as the manner in which we invest in and manage our assets has a direct impact on climate change. By working closely with our tenants, partners, agents and supply chain, we can systematically raise our sustainable performance, thereby helping the industry to raise its standards in turn.”

Andrew Torrance, Chairman of ClimateWise, said:

“The ClimateWise Principles are intentionally holistic, and for many members the first step in this first year has been to embed them into their business strategies. They set challenging targets that will make a real difference in how members operate. The focus in the second year is on increasing members’ delivery against all the principles, and extending the reach and influence of ClimateWise to enhance the insurance industry’s contribution to tackling climate change.”

Peter Madden, chief executive of Forum for the Future, said:

“Insurance companies have a vital role to play in responding to climate change, by assessing the impacts it will have on our economy and pricing their products to accurately reflect the real risk it poses. ClimateWise members are playing a leading role, but they need to speed up their efforts to reflect the urgency of the problem.”

ENDS.