Strategy and Materiality Growing Significance of Third-Party Business
ESG in the Institutional Business
Growing Significance of Third-Party Business, and New Stakeholder Requirements
The business with asset management and investment management services for third parties (Institutional Business) quickly gained in significance for DIC Asset AG over the past financial years, and has been gathered into the GEG brand since 2019 (organisational chart).
During the 2019 financial year, the Institutional Business units pulled level with the portfolio business (Commercial Portfolio) as equivalent earnings mainstay for the first time.
GEG is committed to the fiduciary principle, and therefore acts exclusively in the interests of the institutional investors committed in its products. The clients of the special property funds (40%), club deals (15%) and single mandates (45%) are largely German institutional investors, including banks and savings banks (17%), insurance companies (33%), pension funds (40%) or the family offices of high-net-worth individuals (10%) – all percentages quoted representing assets under management as of 31 December 2019. More than half of all investors are already invested in more than one vehicle.
(Percentages in relation to assets under management of EUR 5.7 billion as at 31 December 2019)
- Prioritisation of individual investor interests along the lines of the fiduciary principle
- Inclusion of financial and non-financial parameters as well as ESG guidelines when making investment decisions for the vehicles
- Introduction of internationally comparable reporting structures according to the principles of investor transparency
- Expansion of the reporting activities on the levels of the company and of the vehicles
- Proactive communication of ESG standards and guidelines in the Institutional Business segment
- Integration of the ESG criteria in investment decisions
Expanded Reporting Standards
In addition to the sustainability reporting done by the group parent company DIC Asset AG in accordance with the internationally recognised GRI standards and EPRA sBPR (Sustainability Best Practices Recommendations), reporting on the investment vehicle level is becoming increasingly important. It is planned to expand the reporting on the level of the investment vehicles in accordance with the guidelines issued by the INREV European Association for Investors in Non-Listed Real Estate Vehicles. In response to investor requests, a reporting and evaluation option under GRESB for the investment vehicles is also to be introduced eventually. GEG, under whose brand name the entire Institutional Business of DIC Asset AG has been gathered since the group’s integration in 2019, is also planning an accreditation process for the UN-PRI certification (Principles for Responsible Investment), and will seek to do the same on the level of the group parent company in the next step. Below, you will find a brief introduction to these reporting standards:
In analogy to EPRA (European Public Real Estate Association), which is responsible for listed real estate companies, the non-profit organisation INREV (European Association for Investors in Non-Listed Real Estate Vehicles), based in the Netherlands, represents the interests of investors in non-listed real estate funds. The objective is to increase transparency and comparability through best practice guidelines and the use of professional reporting standards in order to keep enhancing the attractiveness of the asset class. The INREV Standards developed are compatible with GRI Standards and EPRA sBPR, and cover eight subject areas including corporate governance, property valuation, performance measurement, INREV NAV, as well as reporting on fee structures and liquidity disclosures. In addition, members are offered standardised questionnaires as tools for daily operational work, e.g. for due diligence purposes.
The GRESB standard (Global Real Estate Sustainability Benchmark) of the Green Building Certification Institute, an investor initiative based in the Netherlands, aims to make the sustainability performance of real estate portfolios comparable by using a holistic score. To calculate this score, data from all the players involved, including property managers, facility managers, occupiers, tenants or service providers, are entered into a comprehensive questionnaire. The process returns a near-complete snapshot of the portfolio performance because it takes all three ESG dimensions into account.
The overall score is obtained from seven sub-ratings:
- Management: Which role does sustainability play within the framework of portfolio strategy and its implementation?
- Policy & disclosure: In which ways is sustainability made transparent and comparable in reporting?
- Risks & opportunities: What risks and opportunities have been identified in the area of ESG, and what measures are taken?
- Monitoring & EMS: In what ways is resource consumption monitored and managed?
- Building certification: Have certificates been issued by independent third parties concerning the sustainability of individual properties?
- Performance indicators: What performance was achieved in regard to resource consumption?
- Stakeholder engagement: What sort of collaboration with tenants, suppliers, employees and other stakeholders is in place?
UN Principles for Responsible Investment (UN-PRI) is a United Nations investor initiative established in 2006 and launched by the UN Global Compact together with the Finance Initiative of the UN Environment Programme (UNEP). It is mainly aimed at investment managers. This includes organisations who manage or control investment funds, either for their own account or on behalf of others, and who own no more than half of these investment funds. UN PRI signatories agree to implement six principles for responsible investments. The objective is to better understand the impact of investment activities on environmental, social and governance issues, and to integrate these issues into investment decisions.
These are the six principles for signatories:
- We will incorporate ESG issues into investment analyses and decision-making processes.
- We will be active owners and integrate ESG issues into our ownership policies and practices.
- We will seek to obtain adequate disclosures concerning ESG issues from the companies in whom we invest.
- We will promote the acceptance and implementation of these principles in the investment industry.
- We will collaborate to improve our effectiveness in implementing the principles.
- We will report on our activities and any progress made in implementing the principles.