Simon Martindale: Large property portfolios will struggle to meet net zero targets

The following article and video was first published in Portfolio Advisor on 28th October 2021. Read the article below or access their web based version here.

Simon Martindale: Large property portfolios will struggle to meet net zero targets | Portfolio Adviser (portfolio-adviser.com) 

If a property portfolio is too large then it is likely to face a tough time in delivering on its net zero targets, says Advent Capital Investments Ltd portfolio manager Simon Martindale.

In the latest Portfolio Adviser video interview, Martindale, manager of the £660m Advent Capital Investments Ltd Property Income Trust for Charities (Pitch), says with 40% of all global carbon emissions coming directly from commercial and residential property, it is vital that property portfolio managers take all necessary steps to address decarbonisation.

“We recognise the significant duty and responsibility we have as managers on behalf of our investors to bring that down,” he says.

Martindale says portfolio size is important here because it determines how well the team knows the underlying tenants and, in turn, affects the ability to work with them to help reduce carbon emissions.

“It is increasingly important to know the tenants well and have a manageable size of tenants to allow that collaboration to have maximum benefit,” he says. “If your portfolio is too large, you are going to struggle to deliver on your net zero targets.”

Pitch has had an ethical policy since it launched in 2004 and as such, underlying tenants cannot operate in sectors like defence, gambling and tobacco. It also applies a rigorous vetting process to properties before buying them to determine the environmental credentials.

The team also encourages carbon reduction strategies in properties, including working with tenants to capture data on energy use and adding on-site renewables to properties such as PV panels.

Elsewhere, Martindale explains how certain property sub-sectors have seen a rebound in valuation growth since the pandemic. This is especially true of warehouses, which have been among the portfolio’s top performing assets.

But he describes how the yield on warehouse assets is becoming less attractive and has led him to look at other sectors, including prime office locations. For diversification, Pitch is also adding to the hotel and residential property sectors.

Martindale also makes the case for property in an inflationary environment.

Watch the video above for more and you can find other PA videos here.