“Green” buildings are better long-term investments than traditional real estate, according to Nuveen, a global investment manager based in New York City that focuses on responsible investing.
A Nuveen report released Monday said “net zero carbon” buildings are easier to sell, more attractive to tenants and less vulnerable to obsolescence. These attributes help protect the investments for the future and ensure the best returns, Nuveen said.
The report explores how to manage the risks of climate change for long-term investments across four asset classes.
For other real assets and agriculture commodities, investors should take into consideration such factors as deforestation. “Managing agricultural assets with climate change in mind is better for the planet and for long-term investors. One key threat to agriculture, and the planet at large, is deforestation, which creates about 15 percent of CO2 emissions globally,” the report said.
Equities that take climate change factors into consideration can reduce investment risk and improve alpha. “Climate-attuned portfolios have the potential to outperform amid tighter regulations, faster technological changes and more frequent catastrophic weather events,” said Nuveen.
Nuveen, which is the third-largest investor in labeled green bonds and the largest investor in U.S. dollar denominated issues globally, “expects to see an expansion of investment opportunities that meets their financial and environmental objectives of competitive total returns, outperformance potential and demonstrable climate-aligned outcomes.”
“For investors, climate change poses both risks and opportunities,” Jose Minaya, president of Nuveen Global Investments, said in a statement. “Based on what we’ve learned over the past 50 years, we believe it’s possible for investors to protect their investments from the negative effects of climate risk while capitalizing on related opportunities that will help them stay on track to meet their long-term financial goals.”
Nuveen said, “Financial institutions and leaders share an important duty to identify and counteract the potential impact of climate change on the global economy and financial well-being of investors. Increasingly, it will be critical to look at investments through the lens of climate change in order to mitigate negative impact and optimize portfolio performance.”