FTSE partners with NAREIT and US Green Building Council to develop investable green property indices

Nov 15th, 2012 | By | Category: ETF and Index News

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FTSE Group, NAREIT and the US Green Building Council (USGBC) have teamed up to develop the first investable green property indices for both institutional and retail investors. This collaboration brings together the global market leaders in US real estate indexing, REIT market expertise and environmental building standards.

FTSE partners with NAREIT and US Green Building Council to develop investable green property indices

FTSE, NAREIT and the USGBC have collaborated to develop the first investable green property indices.

The indices, currently in the final stages of implementation prior to customer use, will give investors a structured and disciplined way to measure and model the risk and reward profile of green property, using the first codified, transparent definition of listed green property.

They will also provide investors with new ways to incorporate principles of sustainability into their property selections and portfolios, and access this investment theme through index-linked financial products such as exchange-traded funds (ETFs).

The new family of green property indices will be based on the market’s leading benchmark for US real estate, the FTSE NAREIT Index Series, using green data (LEED & Energy Star ratings) from USGBC. The USGBC is a leading non-profit organisation known for its development of LEED, a global green building certification programme, and its large diverse member community.

The FTSE global REITs universe represents $1.07 trillion today. US REITs account for 48% of this universe, valued at $512bn.The green property indices are based on the 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 (440 million square-meters) of commercial real estate.  USGBC certifies an average of 1.5 million square feet of additional property per day.

Mitigating and adapting to climate change, resource depletion and environmental erosion are some of the biggest challenges for the 21st century and will be major structural drivers of economic change. Because of this, a growing number of investors are seeking to understand how their portfolios will be affected and how they can reduce their risk.

The global building and construction sector is a good example of this change. It 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. The sector accounts for at least 30% of greenhouse gas emissions. Buildings and construction materials use three billion tons of raw materials per annum (40% of total global use), and account for 55% 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 US, buildings account for 38% of all CO2 emissions and represent 73% of U.S electricity consumption.

Mark Makepeace, CEO, FTSE Group said: “To date, no comparable benchmark has been available. 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.”

Steve Wechsler, President and CEO, NAREIT, added: “We are delighted to extend our successful relationship with FTSE by coming together with USGBC on this exciting initiative.  USGBC has an unparalleled reputation for excellence in green real estate research.  The new indices 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.”

Meanwhile, USGBC’s President, CEO & Founding Chair, Rick Fedrizzi, said: “Green building is a win-win, offering both environmental and economic opportunity. Greater building efficiency can meet 85% of future demand for energy in the United States and a commitment to green building has the potential to generate 2.5 million jobs. The sector has seen incredible growth and is projected to add $554 billion to the US economy each year. This partnership creates significant investment opportunities for those ready to participate in this growing market.”

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