As the new year 2023 has started, we are reflecting on the challenges faced, celebrating achievements made and laying the foundations for the new year. In our recently published Sustainability Report for our grocery-retail fund Greenman OPEN, we outline the progress in initiating our Net Zero Pathway.

In an exclusive Interview with Thorsten Müller, chief editor of Handelsimmobilien Heute, Greenman’s CEO Johnnie Wilkinson gives a deep insight into the foundations of the plan and the strategy behind it:

 

Mr Wilkinson, you have recently published a Sustainability Report. Why does Greenman follow a Net Zero Pathway?

“We started this project several years ago by re-evaluating the future prospect of our real estate portfolio. Several key drivers were decisive for the recently presented net zero plans: on the one hand, there was the increasing performance of online retail, which was already growing faster than the overall retail sector long before the pandemic. Especially during that time online delivery services in the food sector seemed to pop-up everywhere. On the other hand, the bigger sentiment of customers and tenants becoming much more aware of sustainability issues. Nowadays customers are interested a lot more in healthy food and regional food production.

Furthermore, there were changing needs of tenants, especially discounters, for larger rental spaces to be able to offer more fresh food in their product range. Regardless of changes to that tenant’s store concepts and operational strategy during and beyond their existing lease we analysed how we can improve the condition of the portfolio in a way that the properties remain viable for the current occupiers. This has resulted in the Net Zero Pathway.”

How does the Net Zero Pathway fit into Greenman’s strategy?

“We follow a buy & hold strategy. On this basis we committed to the “5 by 25” concept, setting a target that by 2025, at least 5 percent of the fund’s annual revenue will be generated from non-rental income initiatives.

As part of this concept, numerous ideas emerged on how we can make our assets future proof. Through SFDR and the classification as an Article 8 fund, we committed to, among other measures, improving the energy efficiency of buildings, planning energy generation infrastructure, creating sustainable food production infrastructure, and supporting non-profit organisations that are raising awareness around healthy food.

The EU Taxonomy regulation now defines targets for sustainable investments and gives us a clear path to follow in becoming more climate-friendly and achieving our environmental goals.”

How are you going to achieve Net Zero across the whole portfolio?

Our fund’s portfolio of properties emits c. 116,400 tonnes of carbon emissions annually. With the Net Zero Pathway we committed to reduce the carbon footprint of our portfolio to the extent that by 2050, the combined net carbon emissions shall be zero and the fund will be 100% taxonomy aligned.

Greenman’s target for each property is that it generates more energy than it consumes. We aim to achieve this by installing photovoltaic panels on the roofs and parking spaces of our properties. Our portfolio currently has a roof space with the potential to generate approximately 13.7 GWh of electricity. We are aligning with our tenants and both them and their customers want green energy. So everybody will benefit from net zero.”

I imagine the implementation will cost a lot of money. Is this going to impact the fund’s performance?

“Any fund capital that Greenman commits to achieving a fund’s sustainable goal should also generate positive financial returns. In principle, every activity we do to reach net zero will be generating additional income for the fund either directly, have a directly positive impact on the funds NAV, or indirectly via other value addition mechanisms.

We know that investors support us and recognise our expertise. Greenman and its Joint Ventures have collected extensive skills and experience in photovoltaic systems, electric vehicle charging infrastructure, and vertical farming.  Demonstrating that the interests of the Greenman Group are aligned with those of the funds and their investors, we commit a min. of 25 percent of the equity requirement that is needed to fund the initiatives.”

Can all properties of the portfolio be aligned?

“We follow the approach “Convert not Demolish”. One of the biggest issues in reconstruction of buildings is that the properties are largely made of cement. In knocking them down and rebuilding it, you would release a massive amount of embodied carbon emissions, which are often 20 to 50 percent of the whole life carbon emissions of a building. It is therefore incumbent upon us to ensure that any property which fails to consistently meet our performance expectations will be repurposed and recycled to be used in a manner, in which it can more easily meet our performance expectations.

Therefore, we will set annual performance targets for each property and report the actual results on a yearly basis. Moreover, the EU taxonomy includes the principle ‘Do No Significant Harm’. So, if it becomes apparent that a building does not meet the targeted criteria, we will develop an alternative concept.”

 

Read the German version here.