François Trausch
CEO and CIO PIMCO Prime Real Estate
Raphael Mertens
CSO PIMCO Prime Real Estate
Leadership perspective
A message from the CEO and the CSO
At PIMCO Prime Real Estate, we tailor our approach based on clients’ targets. We currently manage more than 50 clients with strong ambitions to reach net zero by 20501 and understand the role that their real estate portfolio can play in achieving that goal. To deliver positive results, we align our approach for them to the latest Carbon Risk Real Estate Monitor (CRREM) version 2 GHG pathways, which are science-based and follow best practice carbon reporting principles to monitor progress over time.
In 2018, PIMCO Prime shifted its focus to developing expertise to select and transition assets to enable one of the world’s largest real estate portfolios to reach net zero by 2050. In 2022, that portfolio – which is global in scale, includes a broad range of asset types and covers both equity and debt – had already met its interim goal of reaching 25% of CO2 reductions by 2025, as per the early version of CRREM, and is on track to meet the stricter CRREM V2 GHG pathway.
After designing and rolling out our global sustainability framework, we focused on assessing the portfolios under our management and developing a path to net zero for the individual assets at different points in their investment cycle. A quick win has been to implement smart features and introduce green energy, but that is not enough. And while our starting point was decarbonization, we are currently focused on energy efficiency through a global program of redevelopments and technological improvements. Alongside that we are refining our approach to climate resilience and biodiversity which will likely become the next priorities for many investors. This playbook showcases those areas of expertise that we have developed in this area and explains how we apply them into sustainability-driven actions and how we measure progress in support of our clients’ varying sustainability commitments.
Throughout this document, we describe our strategies to evaluate and identify environmental risks within our clients’ portfolios. While we implement change to individual buildings, and in accordance with local regulation, our approach is integrated on a global scale and adopts a data-led strategy focused on evaluating and enhancing assets during their lifecycle. We will keep evolving as this important part of our industry develops, and look to work with our partners to meet tomorrow’s challenges.
Our Journey
Since 2018, PIMCO Prime has been adapting clients’ real estate portfolios to respond to dynamic market changes. We have invested in building a strong sustainability foundation, prioritizing our people, processes, and systems to enable us to embed sustainability across the asset lifecycle through established global processes. We designed our framework to consider both equity and debt as well as all sectors and regions and developed robust data programs that support every aspect of decision-making. We will continually assess and evolve our approach to provide market-leading value to our clients.
Framing our approach
Drivers
The continuously evolving market landscape is being defined by regulation, occupiers, and investors. These drivers have profound implications for the real estate industry, presenting both risks and opportunities for investors.
Regulation
Increasingly stringent financial disclosure and building performance standards are having material impacts.
Occupiers
Demand for sustainable buildings is growing rapidly, creating a shortfall in the market.
Investors
Net zero compliance remains top of the agenda for many investors and impacts liquidity.
Our expertise
In this dynamic operating environment, real estate players are evolving their approach by adjusting investment practices and policies. PIMCO Prime began developing the expertise to adapt our clients’ real estate portfolios in 2018 and continually evolves with the ambition to remain a market leader in this area.
To deliver resilient returns, on a product-by-product basis we prioritize key areas for action which are supported by robust data collection. We focus on carbon and energy performance as we see this as the most critical issue from a regulatory and market perspective.
PORTFOLIO MANAGEMENT
• Operational carbon
• Energy performance
• Renewable energy
• Energy reporting
• Monitoring and optimization
INTRINSIC ASSET RESILIENCE
• Climate risk mitigation and adaptation
• Embodied carbon
• Biodiversity
SUSTAINABLE MANDATES
• Sustainable investments
• Capacity to align to sustainable regulations, such as Sustainable Finance Disclosure Regulation (SFDR), alongside initiatives as EU Taxonomy
Our delivery model
Our integrated, disciplined, and data-driven approach, guided by a proactive and continually evolving philosophy, enables us to deliver at scale. We do this through three important actions: evaluating our assets and partners; enhancing the performance of our portfolio; and engaging with our partners and industry bodies to drive progress in sustainable practices.
EVALUATE
Measuring the sustainability impact of investments, we develop and maintain a comprehensive understanding of intrinsic asset resilience throughout the investment lifecycle.
ENHANCE
Delivering material performance enhancements on a global scale, we use data to shape our decisions.
ENGAGE
Driving positive change throughout portfolios, we proactively engage with our tenants, partners, and industry bodies to educate and influence adoption.
1 As of Q3 2023
2 As of Q1 2024.
3 Managed assets excludes clients’ own use buildings.
4 Portfolio of €35.8B AUA (assets under administration) was on target when audited in 2022, this includes all direct investments excluding own use and special assets, Switzerland, and Spanish legacy assets as well as indirect investments.
5 As of 1 January 2024, €18B under implementation.
Disclaimer
The sole purpose of this presentation (“Presentation”) is to provide information on a non-reliance basis. In this Presentation PIMCO Prime Real Estate GmbH and PIMCO Prime Real Estate LLC, their subsidiaries (including PIMCO Prime Real Estate Asia Pacific Pte Ltd, PIMCO Prime Real Estate Japan Gk, PIMCO Prime Real Estate Shanghai Co Ltd), branches and affiliates are jointly referred to as “PIMCO Prime Real Estate”.
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