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August 24, 2022updated 25 Aug 2022 3:54am

Q&A: Allianz’s UK CIO on cutting real estate emissions

The investment chief of the German group’s British insurance arm outlines its strategy for decarbonising property assets, including by addressing tenant-generated emissions, in the second article in a Capital Monitor series on this topic.

By Joe Marsh

Ying Ye, UK CIO at Allianz, says she is working to identify the key property assets for a net-zero audit in the coming year. (Photo courtesy of Allianz)
  • Allianz’s UK insurance business is increasing its focus on reducing greenhouse gas emissions in its real estate investment portfolio in line with group net zero targets.
  • The firm’s CIO says it signed up to sustainability reporting benchmark GRESB last year so that it could track its progress on this front.
  • Allianz UK is working to address the twin challenges of both operational carbon and embodied carbon, including tenant-generated emissions.

German group Allianz, which owns Britain’s biggest general insurance business after Aviva, has been stepping up its efforts to measure and manage the greenhouse gas (GHG) emissions generated by the companies in its investment portfolio. Fixed income accounts for most of its roughly £5bn ($5.89bn) of assets, but they also include a “sizeable” allocation to real estate, says Allianz UK’s chief investment officer (CIO), Ying Ye, though she declined to put a number on it.

Improving the sustainability of those property assets, which are managed externally by London-based DTZ Investors, has become a bigger focus for Ye in the past year or so.

After all, real estate is by some measures the most-polluting of all sectors, accounting for an estimated 30-40% of GHG emissions and 40% of energy usage. That covers both ‘embodied carbon’ (emissions arising from the manufacturing, transportation, installation, maintenance and disposal of building materials) and ‘operational carbon’ (emissions from a building’s energy consumption).

And yet investors typically tend to pay property assets less attention than perhaps they should when it comes to reducing pollution in their portfolios, especially as retrofitting buildings is seen as a relatively quick and simple way of cutting energy usage and thus emissions, as Capital Monitor reported in the first part of this article series.

A trickier way of decarbonising one’s real estate portfolio is to ‘manage down’ the emissions from property tenants, which form part of the sector’s Scope 3 emissions – those created by a company’s activities but over which it has no direct ownership or control. They typically account for at least 85% of a commercial property company’s entire emissions footprint, according to the UK Green Building Council.

Addressing this issue is a key component of Allianz UK’s portfolio emissions-reduction target and in line with the group’s global net-zero strategy, as Ye told Capital Monitor during a recent interview.

Capital Monitor: Allianz has set net-zero emission targets for both its operating business and its investment portfolio. How does real estate fit into that strategy?

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Ying Ye: Ultimately, Allianz [as a group] is looking to achieve net zero in our proprietary portfolio by 2050. We are committed to a few interim targets for that in other asset classes. As for real estate, we just announced that we aim for our direct real estate portfolio to be in line with 1.5°C [Carbon Risk Real Estate Monitor, or CRREM] pathways by 2025.

As part of this, I am working with our asset manager to identify the key property assets for a net-zero audit in the coming year. Over the next three years we will assess the whole property portfolio.

What sort of property assets do you hold, and how big is that portfolio?

The majority of our portfolio is in fixed income but we also have a sizeable allocation in real estate. All the property assets are in the UK. We use the All Property Total Return MSCI quarterly universe as our performance benchmark. We have a relatively large weighting in industrial property.

Sustainability reporting on real estate is presumably now more important than ever given the rising focus on ESG and particularly climate issues. To what extent is that the case for Allianz UK?

It is a very important topic for us. I took over as UK CIO in 2015 and in 2017 hired a real estate asset manager, DTZ Investors…. Shortly afterwards, we put in place a dedicated responsible strategy for property investment.

A key part of this is the ‘green lease’ policy. The new leases include energy consumption guidance and landlord’s right of entry to review or measure environmental performance and install sub meters [additional meters ‘downstream’ from the main utility meter that allow businesses to monitor individual areas of buildings, equipment and even individual tenants].

Another example is the responsible principles we follow in respect of refurbishment projects. We look at different areas.

For example, selection of materials is important. Understanding the provenance of materials chosen and sourcing locally [helps ensure our buildings have] low embodied carbon and [are] aligned with environmental product standards.

We also consider resource efficiency – reducing wastage in construction, with effective disposal and recycling of construction materials – and energy efficiency, such as by incorporating efficient technology across lighting and heating, ventilation and air-conditioning.

Also important is health and well-being. We ensure lighting, provision of biophilia [such as natural lighting and ventilation and natural landscape features] and air quality standards are aligned to [the International Well Building Institute’s] Well Building Standards. This includes encouraging sustainable transport options by providing quality bike storage and changing facilities.

Sustainability reporting standards such as GRESB (formerly known as the Global Real Estate Sustainability Benchmark) have become more important and more widely adopted. Do you use GRESB or other such benchmarks?

Yes, standards have become more important. We registered with GRESB early last year. Prior to that, Allianz UK wasn’t using a dedicated real estate sustainability reporting benchmark.

We wanted to understand where our portfolio was against a reputable reporting benchmark so that we could track our progress. GRESB is one of the well-known measurements in the real estate space and we have seen a growing number of users since then.

What benefits have you seen from GRESB? Is it worth the cost involved in registering?

It is worth the cost, especially when the benchmark peer group has comparable assets. Already after making our first report, we have been able to identify the areas where we could make improvements in terms of sustainability.

Based on the asset mix of our real estate portfolio, we focus on the management module and performance module in GRESB. The management score covers leadership, policy, reporting, risk management, etcetera (see chart below for GRESB’s own scoring breakdown). The performance module includes elements like risk assessment, GHG levels, energy consumption and water use, and is typically data-intensive.

Our management score was very high, but our performance score could be improved – we can do that by obtaining more data from the building tenants, especially on their energy usage. The challenge is that we have a higher-than-average number of single-let properties [that is, properties rented to single tenants]. In such cases, traditionally the tenant is not required to disclose data such as energy consumption.

How have you addressed the challenge of data collection?

We asked our asset manager to start a new round of engagement with the tenants to request the property performance data. It is usually easier to include the green lease clause when there is a lease event [that is, a change in the lease – typically the start of a new lease]. [At that point] the manager will negotiate with the tenants over the amount and type of data they need to provide.

We have included more requirements and best practices in the green lease when engaging with new tenants.

Not everyone agrees to provide the data. It is a process of continuous engagement and improvement. Compared to last year, we have seen a major improvement when it comes to data collection for our GRESB submission this year.

Even if you can get the data you need, it must be difficult to get tenants to be more responsible with their power usage. How do you address that?

In our updated green lease, we include core clauses such as "tenant to use ethically/responsibly sourced materials and energy-efficient fittings", as well as best-practice clauses such as "tenant to use reasonable endeavours to procure renewable electricity" and "landlord and tenant will co-operate to identify strategies to improve environmental performance".

I believe that engaging with the tenants helps them improve their sustainability strategies. With tenants becoming greener, our portfolios will also be greener.

Capital Monitor is hosting the Webinar series, Making Sense of Net Zero. Find out more information on

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