Australia leads the way in sustainable buildings
When considering environmental, social and governance (ESG) issues we often focus on downside risks, but given the season it is a good to time to reflect on some ESG opportunities and good news stories from 2011 on the climate change and energy front:
Sustainable Property
- The Building Better Returns report showed that green buildings really do pay, achieving 9% premiums for 5 star NABERS (National Australian Built Environment Rating) rated buildings, along with higher rents and occupancy rates;
- Still on buildings, the global GRESB report (The Global Real Estate Sustainability Benchmark) found that Australian property groups are leading the world in sustainable buildings.
Climate Change
- China, California and Australia have either legislated or announced emission trading schemes starting by 2015;
- Whilst arguably still not adequate, the Durban Climate Change Conference made some important progress;
- firstly 194 countries agreed to start negotiating on a new agreement which, for the first time, would include targets for large developing countries like China and India,
- governance arrangements for the US$100bn green climate fund that was agreed at the Cancun meeting last year ago,
- progress was made on the REDD+ mechanism which will reward developing countries for reducing emissions from deforestation and forest degradation.
Renewable Energy coming of age
- After a shallow patch during the GFC, renewable energy investment has rebounded strongly, with the US and China dominating,
- Solar PV (solar panels) prices fell between 30%-40% in 2011 with similar reductions in 2010. Solar PV has hit grid parity pricing (where the cost of electricity produced over the life of the panel is the same as the retail energy price) in some areas of Australia, and will be in other parts of the world from now to 2020,
- Solar thermal technology can now provide base load power due to energy storage, and following the construction of several plants in Spain, the largest ever plant is currently being built in California with a capacity of 354MW.
These are just 3 areas where this 'good news' opens the way for investment opportunities in green buildings, forestry, government supported debt financing and renewables (although until grid parity is reached equity investments in renewables will remain difficult, particularly domestically). In Australia the Clean Energy Finance Corporation, if properly managed, could unlock tens of billions of dollars in private sector clean energy and infrastructure investment. The carbon price will catalyse investment in energy efficiency including upgrades in plant and equipment, while our property sector will continue to lead the world in sustainable building practices, which the Building Better Returns report shows has both financial and environmental benefits.
This information has been prepared by Perpetual Investment Management Limited (PIML) ABN 18 000 866 535, AFSL 234426. It is general information only and is not intended to provide you with financial advice or take into account your objectives, financial situation or needs. You should consider, with a financial adviser, whether the information is suitable for your circumstances. The views expressed in this article are the opinions of the author at the time of writing and do not constitute a recommendation to act. Any information referenced in the article is believed to be accurate at the time of compilation and is provided by Perpetual in good faith. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. No company in the Perpetual Group (Perpetual Limited ABN 86 000 431 827 and its subsidiaries) guarantees the performance of any fund or the return of an investor's capital.

