The first investable green property indexes for institutional and retail investors have been developed by FTSE Group, NAREIT and the U.S. Green Building Council (USGBC), the three groups announced today.
"To date, no comparable benchmark has been available," said Mark Makepeace, CEO of the FTSE Group. "We've already received expressions of interest from many large asset owners concerned about their exposure to a rapidly changing sector directly affected by the transition to the low carbon economy."
The new family of green property indexes will be based on the FTSE NAREIT Index Series, a leading benchmark for real estate, and LEED and Energy Star ratings from USGBC, a leading non-profit membership group that developed LEED, a global green building certification program.
Companies will be chosen for the indexes based on an analysis of 13,126 LEED and 18,402 Energy Star projects that have received third-party certification based on their green achievements and performance. These projects represent 4.7 billion square feet of commercial real estate. USGBC certifies an average of 1.5 million square feet of additional property per day.
More investors are interested in reducing risk by evaluating how companies mitigate and adapt to climate change, resource depletion and environmental erosion, the groups' press release said. Global building 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, it added.
"The sector accounts for at least 30 percent of greenhouse gas emissions. Buildings and construction materials use three billion tons of raw materials per annum (40 percent of total global use), and account for 55 percent 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 percent of all CO2 emissions and represent 73 percent of U.S electricity consumption," the release said.
"The new indexes will be a milestone for real estate investment worldwide and will enable more real estate investors and managers to integrate sustainability factors into their strategies -- both as benchmarks and as the basis for investment products," said Steve Wechsler, NAREIT's president and CEO.