When Prologis’s senior teams from around the world gathered in California recently for a leadership summit, the conversation was not what you might expect.
The usual topics, like the state of the markets, rents and cap rates were not on the agenda. Instead, we trained our focus on Prologis’s position in the world, our culture and our commitment to being an excellent global citizen.
I agree with the World Economic Forum’s assertion that “the license to operate in a global market and to make profits entails a responsibility of being engaged in society”.
We strive to have a direct and positive impact on the health of our communities, the strength of our reputation and our financial performance through enduring commitment to the environment, social responsibility and corporate governance.
It is for these reasons that we are proud to be recognised for leading the charge for and developing operationally efficient and sustainable distribution and logistics facilities. Our major customers are unanimous in their commitment to operating in the most sustainable manner possible. Nevertheless, they are cost-conscious and demand transparent cost/benefit analyses from us.
Customers are seldom willing to invest in sustainability if the payback period is longer than their current lease. They want a clear strategy on where we stand. This is valid, because as long-term owners of the property, we benefit most from sustainable investments in terms of building quality, ability to lease, building value and liquidity. I have been encouraged by news in the last three months that investors are beginning to take sustainability seriously. In October, PGGM entered into an exclusive partnership with a data analytics company to map the carbon footprint of its entire property portfolio.
And, earlier this month, 11 Dutch banks and asset managers, including APG, PGGM and MN, established the Carbon Accounting Platform for Financial Institutions to develop a standard to measure the impact of their investments on the climate. They also called on negotiators at the UN Climate Change Conference in Paris to consider institutional investors’ potential role in achieving climate targets.
The Paris conference was also prominent in the thoughts of the White House, which last month announced additional commitments from top companies, including Prologis, to join the American Business Act on Climate Pledge.
By signing the pledge, we joined these companies in voicing our support for a strong Paris outcome and demonstrated our ongoing commitment to taking action against climate change. Prologis’s goals include reducing our corporate carbon footprint by 20% by 2020, connecting 200 megawatts of rooftop solar by 2020 and designing all new development projects to the highest sustainable design standards, with the goal of certification.
So what will it take to encourage landlords across Europe to become even more sustainable? There is no doubt in my mind that customers and investors will continue to ramp up their focus and demands in this area.
In addition, environmental legislation is becoming more stringent. As an example, we can point to the Minimum Energy Efficiency Standards in the UK, where the Department of Energy & Climate Change has confirmed that, from April 2018 onward, commercial properties in England and Wales with an energy performance certificate rating of F or G will no longer meet legal requirements.
Unfortunately, the environment is not going to improve by itself. Regardless of whether such legislation exists across the rest of Europe, Prologis is moving forward with initiatives to improve the energy efficiency of our buildings and in turn make them more sustainable.
We are also increasingly optimistic about the future. Technological developments, combined with the changing mind set of customers and investors, mean that in the long term, going green may in fact enhance profitability.
If we are to achieve this, we must have a clear and strong strategy on how we can deliver sustainable results to our shareholders and customers. We need to communicate this clearly and reiterate our conviction that being green and profitable go hand in hand, and that we will go the extra mile, not just with new sustainable development but also with our existing portfolio.
Being a good corporate citizen should be a business imperative for us all.
Philip Dunne is president of Prologis Europe