Nuveen Launches Global Real Estate Carbon Reduction Fund

The strategy is a conversion of the asset manager's existing Global Real Estate fund, which was launched in 2018 and has around $100m assets under management.

The fund will be managed by Jay Rosenberg, head of public real assets, and Ben Kerl, head of listed real estate investments and portfolio manager.

It sits within Nuveen's Article 9 suite, which currently hosts four other strategies: Global Core Impact Bond, US Core Impact Bond, Emerging Markets Impact Debt and Global Clean Energy Infrastructure Impact.

Kerl explained the move to "evolve" the fund into a carbon reduction strategy was the "natural outgrowth" of what Nuveen's recent ESG moves and of where the firm foresees future of the listed real estate industry.

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When asked about the focus on listed real estate, the co-manager said many people may not be aware that buildings are responsible for about 40% of end carbon emissions - 28% from building operations and 11% from building materials and construction.

"It is one of the industries that has the greatest responsibility or obligation to decarbonise," Kerl said.

When the listed real estate team decided to pursue an Article 9 fund, it wanted to find a screening process that had the same "rigour" as financial underwriting, he explained.

"The Paris Agreement is our guiding light here," he continued, and explained the portfolio would comprise of companies which either have a "valid or realistic" policy to get to net zero, or those which have a "track record of decarbonising" over a period of time, as long as it is in line with the Paris Agreement.

"Once we utilise that filter, then everything beyond that is going to be our traditional financial analysis, looking at earnings and discounted cash flows and asset value," he said.

But many companies within the listed real estate universe are not engaged enough with decarbonisation, and Kerl believes his team can act as an educational resource to get such businesses started on their net zero journey.

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There are additional incentives for listed real estate companies to engage with decarbonisation, the co-manager continued. Nuveen's own research revealed businesses which disclose their Scope 3 emissions "actually lower their weighted average cost of capital by 20 basis points".

"That is a material improvement for a public real estate company," he said. "It is a 2.5% improvement in their cost of capital."

As a result, Kerl believes the strategy can help listed real estate businesses reach net zero and at the same time "offer alpha generation and be part of an investor's net zero goal".

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