Investment Trusts

BMO Commercial Property Trust progresses its strong ESG agenda

How can the sustainability of commercial property be measured?
February 2021

Andrew Szyman

Head of Property Management & Sustainability

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Risk Disclaimer 

The value of an investment is dependent on the supply and demand for the trust’s shares rather than its underlying assets. The value of the investment will not be the same as the value of the trust’s underlying assets.

Income from investments may fluctuate. Income may be achieved by foregoing future capital growth.

The value of property related securities are likely to reflect valuations determined by professional valuers. Such valuations are the opinion of valuers at a particular point in time and are likely to be revised.

Property and property related assets can sometimes be illiquid.

A fund investing in a specific country carries a greater risk than a fund diversified across a range of countries. If markets fall, gearing can magnify the negative impact on performance.

BMO Commercial Property Trust continues to maintain focus on its environmental, social and governance (ESG) strategy, integrating its sustainability ambitions and actions into regular process through each individual property business plan. These plans consolidate an array of metrics, assessments, objectives, and opportunities all designed to improve the environmental and social conditions and characteristics of each asset.

How is sustainability measured in commercial property?

Endorsement of the progress that the commercial property industry is taking worldwide is often referenced through GRESB, the Global Real Estate Sustainability Benchmark, which seeks to explore how individual property entities are addressing ESG issues and how collectively the industry is adopting good practice, achieving aspirations and contributing to universal concerns.

The benchmark has undoubtedly become the de-facto proxy indicator of a property fund’s ESG credentials. Originally a comparison of less than 200 entities, GRESB has evolved to capture over 1200 participant funds worldwide. The annual survey explores ESG characteristics and activity under the key dimensions of management and performance and focuses on aspects such as leadership, policies, reporting, and risk assessments, as well as utility consumption and greenhouse gas emissions associated with the operation of real estate assets.

 

Trust tops its peer group with green star status

BMO Commercial Property Trust has been participating in GRESB since 2018 and has maintained an upward trajectory in scoring in each subsequent year of involvement. This year, with a score of 70, the Trust topped its peer group of UK-listed diversified funds for the first time, being the only entity in the group to achieve three green star status.

 

BMO Commercial Property Trust GRESB score, versus peers

BMO Commercial Property Trust GRESB score, versus peers chart

Source: BMO Commercial Property Trust, GRESB Real Estate Assessment 2020, as at November 2020.

Key points

  • Significant rise within expanding spread of scoring in peer group
  • Improved score in the context of a relative decline in both peer and universe averages
  • Theoretical score of 73 when compared directly to 2019 assessment methodology

Note: The 2020 survey saw the application of a refreshed assessment structure and scoring methodology hence the provision of a re-based score and a theoretical score for comparison.

 

The GRESB score is not without limitations

Applying a single numeric indicator to a globally diverse and heterogeneous asset class with multiple fragmented interests and characteristics in order to reflect a fund’s ESG credentials is certainly a challenge. The underlying narrative becomes equally important. The very nature of property portfolios and particularly the degree of operational control and influence a fund manager can exert acting on behalf of its landlord client, means that opportunities to integrate and pursue ESG aspirations can vary. But there is no doubt that GRESB has helped stimulate the real estate industry into looking at the contribution it makes to environmental and social concerns and how it can contribute towards a more sustainable world. BMO Commercial Property Trust is committed to this agenda and is fully engaged in making its contribution to global sustainability concerns.

 

Our commitment to sustainability

We will continue to act with integrity and to be transparent in reporting the Trust’s ESG activities and performance, principally through our annual ESG Report. In that context, we are pleased that the fund was recognised in GRESB’s separate analysis of public disclosure levels, achieving a score of 93 represented by an A rating. We were equally pleased to have received a gold award from EPRA, the European Public Real-estate Association, for the second year in succession. Whilst there are some significant challenges ahead, notably in respect of controlling and accounting for carbon emissions, we are committed to our policy of disclosing accurately and with authenticity.

Chart showing BMO Commercial Property Trust’s Public Disclosure Level of A at 93 points versus global average of C and comparison group average of B

Source: BMO Commercial Property Trust Public Disclosure Assessment 2020, as at July 2020.

EPRA SBPR gold award logo for BMO Commercial Property Trust

Risk Disclaimer 

The value of an investment is dependent on the supply and demand for the trust’s shares rather than its underlying assets. The value of the investment will not be the same as the value of the trust’s underlying assets.

Income from investments may fluctuate. Income may be achieved by foregoing future capital growth.

The value of property related securities are likely to reflect valuations determined by professional valuers. Such valuations are the opinion of valuers at a particular point in time and are likely to be revised.

Property and property related assets can sometimes be illiquid.

A fund investing in a specific country carries a greater risk than a fund diversified across a range of countries. If markets fall, gearing can magnify the negative impact on performance.

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