In Conversation: Integrating Sustainability in Listed Real Assets

Sustainable underwriting in listed real assets has evolved significantly over the last decade. In this interview with Ken Weinberg, CIO of Listed Real Estate, and Diane Wade, Head of Sustainability for Listed Real Assets, we review how we integrate sustainability and how our process works for specific clients.

Jon: CBRE IM has been focused on sustainability in real assets for a long time. Diane, can you give us a sense of how the program has progressed through the years?

Diane: It's been an evolution. CBRE IM signed the UN Principles for Responsible Investment (PRI) in 2009 and joined GRESB that same year. We became a founding member of the Institutional Investors Group on Climate Change in 2012, and more recently, we became a signatory to the U.K. Stewardship Code in 2023. Along the way, we have engaged in many endeavors and achieved several milestones.

In the earlier days of sustainable underwriting, many investors used sustainability as a risk screen—a way to exclude companies from consideration. Today, our underwriting can influence both our relative value security rankings and our assessment of intrinsic values. It can contribute directly to integrated sustainable solutions.

Jon: Ken, why do real assets require a specialized approach? How do we consider third-party assessments?

Ken: From a broader real asset perspective, we believe we need specialized underwriting: a utility company, a warehouse REIT, and a cell tower operator are all very different, but a generalist framework may treat them similarly.

Third-party scores can be a useful input, but they're not the full answer. Historically, we've seen low correlations in scores for a given company across major sustainability rating agencies such as MSCI, S&P, Sustainalytics; they can differ materially. This is different than major debt rating agencies, where correlations exceed 0.95.

Third-party ratings also tend to be backward-looking and dependent on simplified company disclosures. A 'yes/no' on a social policy can produce a high social score without any analysis of actual results. We've repeatedly found gaps, errors and dated information in external data that our own analysts have corrected through direct company engagement.

Jon: Diane, can you describe the proprietary sustainability infrastructure we've built and how it works?

Diane: We maintain a sustainability database that today covers over 100,000 distinct data points organized by category across the companies in our universe. With this database, we track emissions and intensity trends, net zero commitments, interim reduction targets, portfolio-level environmental certifications, SDG revenue eligibility assessments, capital expenditures, board composition, and corporate governance policies, among other metrics.

Our analysts—the same people doing fundamental securities coverage—are the ones populating and maintaining that database. They're in regular contact with company management on sustainability topics. When we engage with a company and update our view, it flows directly into our sustainability assessment, which can influence the construction of our portfolios.

Jon: Ken, how does sustainability analysis connect to the investment process day-to-day?

Ken: It depends on our strategies. For our flagship diversified strategies, sustainability makes itself most evident in our assessments of Quality, which includes both management and corporate governance scoring. For customized strategies where clients prefer additional sustainable underwriting, our scoring and analysis can inform the construction of an investible universe that we run an active strategy against. As Diane stated, sustainability can contribute to the scoring of sectors and companies as we consider them with our sector ranking, security ranking, and portfolio construction tools.

Our real assets teams conduct hundreds of sustainability-focused engagements each year.

Jon: Diane, how do you think about our engagement in real assets?

Diane: Engagement is a valuable component of our research, further enhancing and providing clarity to the data that we gather internally or subscribe to. Our real assets teams conduct hundreds of sustainability-focused engagements each year to hear firsthand from the sustainability or operational professionals at the companies about strategies that are resulting in significant efficiencies at the asset level, which translate into meaningful expense savings.

We also discuss pathways for implementing strategies related to cleaner energy. A few examples on that front: In 2025, we engaged a North American utility that had reduced coal-based power generation from 70 percent to less than 50 percent of its mix over 20 years. The conversation focused on the pathway for the remaining coal units, which face constraints from state regulators and strong power demand growth. We also engaged a data center REIT where the company has reported that 96 percent of electricity consumption came from renewable sources in 2025—the seventh consecutive year above 90 percent. The engagement was focused on understanding their pathway toward direct renewable procurement rather than renewable energy credits.

Jon: Ken, let's discuss customization. How do you build sustainability-oriented mandates for investors with specific goals?

Ken: We've been managing listed real assets since 1984. About 30% of our mandates are in customized strategies. On the sustainability side, the range of what we can do is genuinely broad. Some clients want sector-specific exclusions—fossil fuel exposure, certain infrastructure types. Others want mandates optimized around carbon intensity targets or net zero alignment timelines. Still others want SFDR-compliant structures or portfolios explicitly linked to UN Sustainable Development Goals.

Our sustainable listed real assets strategy, for example, invests in companies that have explicit commitments to measurable sustainability; it will exclude companies that are deemed less sustainable. The companies must meet a series of tests to be deemed eligible. The database we've built, the engagement process, the various metrics we track—our platform contributes to such a solution.

Another example is one of our largest institutional real estate separate accounts that over time has evolved from a diversified North America real estate strategy to one more focused on sustainability. The client has asked for specific sustainability scoring, liquidity and leverage constraints, desired sector tilts informed by our public-private data sources, and a forward IRR threshold they needed the portfolio to clear. We built a customized benchmark and eligible investment universe around those requirements. It's been a great relationship.

Jon: Ken, a final thought — how do you see the role of sustainability in real assets investing over the next decade?

Ken: We believe it will remain a key part of listed real assets mandates—particularly those customized to meet the demands of global institutions. We think active management will remain essential to these endeavors. As we work to understand, encourage and assess sustainability at a rigorous level, we're excited to build such portfolios for our investors.