​Desire for profitability is the ‘biggest problem’ for sustainability finance, says alstria

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Based in Hamburg, Olivier Elamine is chief executive of alstria, Germany’s first and only office REIT. Spread across five different cities, alstria caters for “any kind of tenant within the economic sphere”, from start-ups, to finance, to life science companies.

Despite the rise of working from home, Elamine is convinced that offices still have their own role to play. “If there is one thing the pandemic has taught us, it is that you don’t come to the office because you want to have a desk and a chair, because you have that at home,” he explains.

“There is something else that the office is bringing to the equation. That something else, I don’t think anybody can define it properly, call it collaboration, teamwork, is where the value of offices is. I do believe there’s going to be bifurcation between the buildings and the offices that are able to deliver this added value, and buildings that are not.”

Asked about his experiences with flexible tenures in Germany, Elamine responds that “a tenant doesn’t necessarily want to commit for 20 years, but they still want to commit for some time because human beings like to be in their cave. You don’t want to be changing offices every other day.

“We actually see that in our coworking business. The same people go to the same spaces - although we have spaces in the same cities - and within that space, they tend to sit at the same desk.”

Elamine predicts that in the UK, there will be “more and more fully-serviced buildings which require a completely different kind of know-how and skills than delivering a building core and shell.” The former are the norm in Germany, and form the bulk of alstria’s €4.7 billion (£3.9 billion) portfolio.

At alstria, Elamine has been inspired by his ESG background first developed during his time at Ernst & Young. In May last year, alstria’s shareholders backed what is likely the world’s first green dividend, with a portion of the payout dedicated to decarbonisation projects like carbon capture initiative Project Vesta.

“Our argument is that if helping the environment and making money were two things that would go hand-in-hand we wouldn’t have a problem to start with, because everybody would be piling onto that,” he remarks. “The fact that we have a problem tends to show that there is a cost involved.”

“You can see that in real estate with all the companies asking for subsidies. Why would you need subsidies if the thing makes a lot of sense economically speaking?”

The amount paid is matched to what alstria calls its ‘carbon accounts’, or “how much carbon we have been using in a given year”. Explaining why alstria uses the EU’s Emissions Trading Schemes (ETS) market price, Elamine points to the fact that this has “increased by more than 50 percent year-on-year. When I speak to my shareholders, if they see that the price of carbon is still the same this year as it was last year, then they don’t need to worry about it because it’s not changing. If they see it increasing by 20 percent, then they’re going to start asking questions.”

But Elamine remains sceptical of using carbon offsetting to claim net zero. “Offset is an easy answer to a complex solution. You can’t privatise a forest and say whatever is coming out of a forest is offsetting my carbon emissions, that’s not how it works.”

You can listen to this podcast via Apple Podcasts or Spotify or SoundCloud or listen to it through the player above.