The Economic Case for Sustainability
Helen Gurfel, Head of Sustainability and Innovation
At CBRE Investment Management (CBRE IM), we seek to maximize returns for our investors by mitigating risk, while preserving and creating value to meet our fiduciary duties. Sustainability can be an important element in that equation. Where consistent with investment objectives, we believe that sustainability considerations are important for our real assets portfolios. Many of our occupiers and portfolio companies have themselves adopted sustainability goals which influence their decision-making criteria. Failure to address physical and transition climate risks can have potentially severe impacts on bottom-line returns, income and ultimately capital values. We can also miss opportunities to potentially enhance value by not considering sustainability initiatives that have the potential to optimize income, reduce expenses, increase market share of absorption or use and/or create secondary streams of income. By managing physical and transition climate risk in alignment with fundamental economic and environmental realities, sustainability practices can potentially help avoid undue risk and create value for our clients.1
This article aims to make the economic case for sustainability in real assets investment, supported by academic research and evidence from our $144 billion global real assets portfolio.2
Evidence From Research on Real Estate
Over the past decade and a half, multiple academic studies have demonstrated the enhanced economic value of sustainable real assets worldwide in comparison to less sustainable assets. The following table summarizes key highlights from academic literature related to real estate and shows that sustainability practices within real estate have, in some cases, led to higher selling prices, rents and occupancy, as well as long-term outperformance.3, 4, 5
A Holistic Approach to Sustainability Has the Potential to Create Value and Mitigate Risk4, 5
In a recent U.S. study from 2020, Leskinen, Vimpariand Junnila4found that certified sustainable buildings commanded substantially higher rents, occupancy and selling prices compared to comparable nearby non-certified buildings.
In Europe, an in-house CBRE IM research report published in April 2022 examined the relationship between energy ratings and investment performance,6 drawing upon data from more than 1,200 industrial, office, retail and residential assets that we managed in Europe. The study revealed that on average, assets with low Energy Performance Certificate (EPC) ratings lagged in performance, with significant underperformance of 18.2% and 13.5% respectively in the U.K. and the Netherlands. Tests were controlled for independent potential return drivers (e.g., building location and age). The study also showed statistically significant outperformance among Dutch offices for assets with A/A+ rated EPC labels. In certain markets, such as the U.K., commercial leasing is no longer permitted if a minimum energy EPC rating is not achieved.
CBRE European Research conducted an analysis of building data from 18 European countries (38 cities) and concluded there was a significant correlation between sustainability certificates and office buildings’ market value. The analysis revealed that a rent premium exists for certified office buildings regardless of building year.7
In a joint 2018 study, INREV and GRESB measured the effects of participation in the GRESB Real Estate Assessment on the financial performance of European non-listed real estate funds in the INREV Annual Fund Index.8 The research revealed the total returns of funds participating in the GRESB Assessment exceeded non-participants, even when controlling for differences in fund size, investment style and leverage.
In Australia, according to an in-house CBRE IM study, sustainability-focused prime offices in the country’s three largest office markets delivered superior investment and operating performance over a 13.5-year period through September 2022, relative to the equivalent broader prime office market segment. Sustainable prime offices, certified with Green Star ratings in Sydney, Melbourne and Brisbane, outperformed both on the full range of operating metrics (i.e., lower vacancy, higher rent receivables, higher net operating income and lower net operating costs) and on investment performance.9
According to research from Deepkifrom November 2022, property values in Europe increased by 16% to 25% due to property green premiums.10 CBRE’s U.K. Sustainability Index 2023 (including 1,000 regularly valued properties in the U.K.), published November 6, 2023, showed that since the start of the index in March 2021, the energy efficient U.K. assets11 in the office and retail sectors experienced higher cumulative total returns (Figure 1) than inefficient ones. However, in the industrial sector, it is important to note that energy inefficient assets outperformed energy efficient assets.
Figure 1: Office and Retail Energy Efficient Assets Outperformed Inefficient Asset Counterparts12, 13
Efficient assets were defined as those with an EPC of A or B. Inefficient assets were defined as those with an EPC of C or lower. This definition is consistent with that used in PAI 18 of the Sustainable Finance Disclosure Regulation (SFDR). For illustrative purposes only.
Evidence From Research on Infrastructure
We are not aware of as much literature on infrastructure as exists for real estate, however, we are sharing certain studies that are available.
While sustainable infrastructure can take different forms, over the preceding decade, investment flows were primarily directed to renewable energy generation from solar and wind technologies.14 Using a set of unlisted wind and solar companies (from EDHECinfra’s InfraGreen index) as a proxy for sustainable infrastructure, the Global Infrastructure Hub,15 suggested that there are “signals of superior performance for sustainable investments.” According to Global Infrastructure Hub’s data insights article, unlisted infrastructure equities delivered higher risk-adjusted returns than both global equities and listed infrastructure equities. “Among unlisted infrastructure equities, wind and solar unlisted equities (which account for 90% of renewable energy investment) generated a compound annual return of 16%, outperforming the compound annual return of 12% for unlisted infrastructure equities and 6% for listed infrastructure equities. This superior financial performance correlates with the rapid growth of private investment in renewable energy projects.”14
Academics are beginning to study the financial implications of physical and transition risks related to climate change on infrastructure. A recent study from Stanford University sought to assess climate-related financial risks on energy infrastructure investments (renewables and fossil fuels) using scenario analyses and looking at the potential for credit defaults. The study found that the investment in a renewables project resulted in the achievement of target returns realized over an extended period for all physical risk scenarios that would impact such a project and there would be no credit default. In contrast, fossil-fuel based energy infrastructure investments did not reach their planned return on investment leading to possible shutdown and default on the financial obligations required to build them in the first place.16
Risk Mitigation and Value Creation
Risk mitigation and value creation are important to sustainability. Without incorporating sustainable risk mitigation factors, assets may face devaluation, reduced user demand, refinancing challenges, higher operational costs and the possibility of becoming obsolete.
Obsolescence is a principal threat to achieving long-term, risk-adjusted returns similar to what investors have experienced through real assets over the last decade or more since the Global Financial Crisis (GFC).17 According to CBRE’s office occupier and European logistics occupier surveys, a reasonable proportion of office occupiers consider sustainable building features to be a desirable amenity, and logistics occupiers more likely than in prior years consider a building’s sustainability rating as a factor in warehouse selection.18
Value creation in real assets often begins with energy efficiency and extends to resource optimization. By prioritizing these two factors, investors in real assets can reduce operating expenses, increase net operating income and improve asset values. The financial incentive to develop and acquire sustainable assets is compelling. Certain major occupiers in real estate have made public disclosures that they favor sustainable business practices. Sustainable assets also increasingly align with users’ own corporate sustainability targets.
Global corporations—such as Unilever and E&Y in offices; Amazon and Deutsche Post DHL Group in logistics, and H&M and Marks & Spencer in retail—continue to impress upon landlords their commitment to net zero through energy efficiency requirements, electrification and renewable energy, which are informed by risk mitigation and economic value creation. In EMEA, approximately 60 of CBRE IM’s largest occupiers in logistics, offices and retail have engaged with us on a variety of topics including sustainability.19
In the highly competitive real assets market, institutional investors understand the importance of meeting users’ rising sustainability requirements. Sustainable building design and specifications can add economic value, not just for the asset owner, but for the occupiers as well. We believe that energy efficient, wellness-oriented spaces and features such as electric vehicle (EV) charging, battery storage and on-site renewable energy, help corporations increase productivity, attract talent amid ongoing skilled labor shortages, improve supply chain efficiency and reduce operating costs. While regulatory momentum is further pushing sustainability forward, it is arguably a second-order catalyst in perfect alignment with the economic imperative stemming from occupier demand.
Based on our infrastructure investment experience, we believe that sustainability focused investments, such as availability-based sustainable transport (electric ferries and buses), have the potential to provide attractive risk-weighted returns, downside protection and diversification.20 Within infrastructure, governments that provide availability based payments for the operation of critical transport networks like buses and ferries are increasingly requiring the conversion of fleets to electric-powered vehicles to achieve policy goals. CBRE IM’s research found that onshore wind and solar projects provide diversification which lowers a portfolio’s macro sensitivity.21
Infrastructure assets typically have multi-decade investment horizons and investors need to ensure adequate adaptation and resilience of investments to mitigate climate change related costs. S&P Market Intelligence highlighted the material climate vulnerability of U.S. utilities to events such as wildfires, storms and water stress in the next 30 years.22 They estimate that approximately “19% of utilities' transmission lines face high (unmitigated) wildfire exposure by 2050 under either low-stress or high-stress scenarios.”
Sustainability is a factor in value preservation of infrastructure assets.23 EDHECinfra compared the baseline valuation for a set of infrastructure companies to their values in the highest physical risk scenario produced by the Network for Greening the Financial System. By combining the probability of an extreme event risk and the cost of the damage, they estimated the impact on infrastructure net asset values by 2050 to range between -0.3% to -26.9% with a mean of -4.4%. When consistent with investment objectives, consideration of sustainability through adaptation strategies and preparedness is, therefore, key to soften the impact from physical climate risks.
Portfolio Evidence: Thematic Innovation at the Intersection of Real Estate and Infrastructure24
Solar roofing is a prime example of how sustainability can mitigate risk and create economic value and how sustainable investments increasingly require expertise across both real estate and infrastructure. This sustainable innovation is particularly popular among energy-intensive modern logistics warehouses. On-site solar installations produce efficient energy that can power building operations and electric truck fleets while at the same time potentially providing additional income. In certain markets, surplus energy can be sold back to energy companies through lease agreements. In some cases, landlords can supply low-cost, clean energy to neighboring communities, supporting decarbonization efforts and creating social impact while increasing an asset’s income and value. Solar-paneled roofs also generally extend the useful life of the roof.
Leveraging its capabilities at the intersection of real estate and infrastructure, CBRE IM has undertaken investments in solar roof installations, including a partnership with Altus Power in March 2022 for rooftop solar projects on logistics assets in Maryland, which are providing renewable energy both to logistics tenants and nearby residential customers. CBRE IM’s U.S.-based strategies launched an on-site solar program to install both behind-the-meter and community solar panels across our portfolios. To date, 17 projects (4 logistics and 13 storage assets) have either been contractually executed, are being installed, or are in operation. In addition to producing a projected $707,000+ in annual rental revenue, potential results may include lower energy costs for tenants, decarbonizing the grid and an estimated $135,900 annual utility cost savings across 11 storage sites.25 In the U.K., CBRE IM refurbished a 120,000 sq. ft. logistics warehouse in Warrington called Solar 120, installing solar panels on the roof, EV charging points, heat pumps, and LED lights that produced an additional 700 kVA26 in energy annually. As a result, the warehouse was able to achieve carbon neutrality and leased quickly. Solar roofs are projected to be one of the drivers of rental growth for modern logistics assets.27
The economic case for on-site solar power expands beyond logistics. In the Netherlands, CBRE IM installed solar panels on the roof of a retail center, SC Alexandrium, in Rotterdam. A 20-year lease agreement was signed with Eneco, a local energy provider, to rent the roof for solar panels and exclusive use of the generated energy, providing a source of additional revenue generation for the retail center. Eneco is re-distributing the on-site energy to its clients, while powering the common areas of the retail center. CBRE IM has several more ongoing solar panel installations on retail roofs, including on Zenia Boulevard in Alicante, Spain, where the solar panels provide almost 30% of the energy within the center’s common areas, reducing asset operating costs.28
Solar Solutions Provider
Green Peak Energy, which we invested in, is a provider of on-site behind-the-meter (BTM) solar solutions to commercial and industrial (C&I) customers in Australia and New Zealand. The company is beginning to work with CBRE, one of the largest property managers in Australia and New Zealand, to offer rooftop solar and storage solutions to CBRE clients. This initiative has multiple benefits for both Green Peak, CBRE Investment Management, our investors and tenants and property owners.29
More broadly in the industry, Amazon and Deutsche Post DHL Group are also investing heavily in electrifying their transportation networks. Amazon has partnered with Rivian to roll out 100,000 electric delivery vehicles by 2030 and plans to invest more than €1 billion over the next five years to electrify and decarbonize its transportation network. Elsewhere, Ford Pro plans to equip Deutsche Post DHL Group with more than 2,000 electric delivery vans worldwide by the end of 2023. Deutsche Post DHL Group plans to invest €7 billion in the current decade on its path to net-zero emissions logistics.
These trends highlight the expanding opportunities in the sustainable transport sector for those investors that have integrated infrastructure and real estate expertise.
Energy and Operational Efficiency
We believe sustainability features align with wellness and technology to meet rising occupier expectations across property asset classes. Collectively, we believe these improvements frequently underpin enhanced occupier demand and increased financing availability, helping to generate favorable long-term, risk-adjusted investment returns. Energy-efficient buildings—such as the newly-constructed 156,000 sq. m. Tower 10 office complex in Amsterdam that is owned by one of our real estate strategies—attract high occupier demand and command rents above original projections. For example, within six months of construction completion, the Tower 10 Dutch office campus was approximately 83% leased (including leases in solicitors’ hands), with 80% of leases agreed at rents significantly above original underwriting.
Similarly, we believe refurbishments of legacy office space can deliver similar energy efficiencies and value enhancements. At our investment in the 210,000 sq. ft. 10 Brindleyplace office asset in Birmingham, U.K., several sustainability improvements, including a renewable energy-powered eclectic system, produced an estimated 65% in annual energy savings compared to a typical equal-size office. In Paris, CBRE IM undertook a two-year refurbishment to modernize Marengo, an iconic 19th century building—e.g., installation of ventilation system, LED lighting, district heating, natural light optimization, etc.—and increased rental income by 54% from acquisition. Post-refurbishment pre-lets were secured at rents 8% above projected targets.30
These examples demonstrate that occupier demand for high quality, sustainable, modern office space is high, bucking the trend of the broader office sector demand headwinds associated with long-term hybrid working uncertainties. We believe rents among best-in-class modern office space are increasing meaningfully, while rents for older traditional offices are often decreasing just as swiftly because of a scarcity of resource-efficient and wellness-focused offices. This supply/demand mismatch creates a significant financial incentive to make offices as sustainable as possible.
In CBRE IM’s portfolio, two examples demonstrate this trend: an affordable housing development portfolio in the Bronx, New York and a private rented sector (PRS) apartment scheme near Stockholm, Sweden. In both investments, resident applications outstripped the number of available units by orders of magnitude, while rents achieved for market-rate apartments were considerably above original underwriting. Sustainable buildings, in our view, not only strengthen tenant demand but also contribute to job creation and economic growth in local communities, which can help improve prosperity over time in areas of chronic undersupply.
Banks are motivated by cashflow protection. A study completed by An and Pivo (2020) on commercial buildings found that loans on ENERGY STAR or LEED certified buildings are 34% less likely to default than their non-certified counterparts. The authors provided evidence of a green premium that reduces the default risk of energy-efficient buildings through a green rent component that increases the mortgage debt service coverage ratio (DSCR) and a green value component that increases the owner’s equity position and reduces the loan to value ratio (LTV).31 We believe adopting sustainability metrics in lending decisions helps lenders assess risks on loan repayment and potentially mitigate defaults.
Consequently, refinancing risk when loans mature has become an issue for buildings that cannot or do not become more sustainable. This risk is already evident in the legacy office market, where lending against non-sustainable assets can equate to increased default risk. We believe this trend exemplifies the alignment between the sustainability practices of owners and the financial incentives of lenders.
In a recent academic study,31 building energy efficiency was associated with a lower probability of mortgage default. The research suggested energy efficiency is negatively correlated to a borrower’s likelihood of defaulting. The study showed banks can make superior lending decisions by incorporating energy efficiency ratings alongside borrowers’ credit information, rather than solely relying on the latter. By implication, lower default risk for mortgages on energy-efficient residential buildings could imply differential loan pricing (i.e., lower interest rates).
CBRE IM has issued over $2 billion in green bonds and private placements since 2020, in both Europe and the U.S.32 When issued, our Treasury Department believed that green bonds were 5-10 bps cheaper than regular bonds. The secured discounts are provided with the acknowledgement that the proceeds are directed to finance sustainable projects.
Unrelated to their cost, green and sustainable bonds typically enlarge the pool of capital available to an issuer by investors seeking environmental and sustainable economy benefits. According to a report prepared by the International Renewable Network Association based on data from Environmental Finance, the green bond market grew at a significant rate to $545 billion in 2021 and renewable energy accounted for about 45% of the use of proceeds. Low-carbon buildings follow next with $177 billion of this investment. Low-carbon transport accounts for $90 billion in investment, and sustainable water management $34 billion.33
We believe that sustainability makes sense from an investment perspective. We also believe that sustainability is about mitigating risk and creating economic value and can be a factor in creating long-term, risk-adjusted returns. When consistent with investment objectives, we are of the view that integrating sustainability practices into investments reflects a prudent assessment of the interconnectedness of occupier and portfolio company demands, investor requirements, lender preferences and the real economic risks of obsolescence. Many investors recognize that sustainability factors are material to their investments and to overlook these issues increases risk. We believe investors are more likely to achieve investment outperformance when all relevant and useful information and metrics are incorporated into investment decisions.
Moreover, public disclosures by certain major occupiers indicates a preference for sustainable practices, including sustainable buildings. We believe that a focus on sustainable infrastructure investments increases the opportunity set available given user demand and policy incentives for sustainable infrastructure.
The only alternative to a sustainable real assets market is an unsustainable one, which can result in obsolescence and underperformance. Markets and investors are of course free to make their own choices about how sustainable investment is embedded within their activity. However, we believe the evidence suggests that the free market has spoken—and chosen a sustainable future.
1. It should not be assumed that any sustainability principles, initiatives, standards or metrics described herein will apply to each investment strategy or asset in which CBRE Investment Management invests or that they have applied to each of CBRE investment strategy or asset in which CBRE Investment Management invests or that they have applied to each of CBRE Investment Management's prior investments. Anticipated benefits, developments and/or value enhancements are based on CBRE Investment Management’s subjective view, are inherently uncertain and subject to change.
2. As of Q3 2023. Assets under management (AUM) refers to the fair market value of real assets with respect to which CBRE Investment Management provides, on a global basis, oversight, investment management services and other advice, and which generally consist of investments in real estate; equity in funds and joint ventures; securities portfolios; operating companies and real estate related loans. This AUM is intended principally to reflect the extent of CBRE Investment Management's presence in the global real estate market, and its calculation of AUM may differ from the calculations of other asset managers.
3. Value creation and risk mitigation examples are for illustrative purposes only and based on CBRE Investment Management's subjective views and subject to change. There can be no assurance that any value creation or risk mitigation examples will apply to any CBRE IM investment or, if applied, would result in the outcome described herein. Future outcomes are inherently uncertain and subject to change.
4. Niina Leskinen, Jussi Vimpari and Seppo Junnila, A Review of the Impact of Green Building Certification on the Cash Flows and Values of Commercial Properties. 2020.
5. Green Credentials Raise European Asset Values, data as of November 22, 2022.
6. CBRE Investment Management, Do sustainable assets generate sustainable outperformance, April 2022.
7. CBRE Europe Research, Is Sustainability Certification in Real Estate Worth it? November 2022.
8. INREV and GRESB, ESG Insights in Non-listed Fund Performance, May 17, 2023.
9. Padilla, Taylor, Theebe, Boing, CBRE Investment Management, Australia’s green performance, October 2022.
10. Lovelyn Tagalag, Green credentials raise European asset values, REACT news, November 22, 2022.
11. The CBRE U.K. Sustainability Index is an analysis of 1,000 regularly valued property data in the U.K. that CBRE has access to and is used to create an index of investment performance based on their energy efficiency ratings. Efficient assets were defined as those with an EPC of A or B. Inefficient assets were defined as those with an EPC of C or lower. This definition is consistent with that used in PAI 18 of the SFDR.
12. CBRE U.K. Sustainability Index 2023, November 6, 2023. Please refer to the previous footnote.
13. For illustrative purposes only. Past performance is not a guarantee of future performance.
14. Global Infrastructure Hub, Data Insights: Is sustainable infrastructure’s financial performance attractive enough to entice private investment? June 22, 2022.
15. Global Infrastructure Hub (GI Hub) is a not-profit organization formed by the G20 to advance the delivery of sustainable resilient and inclusive infrastructure.
16. Young In, Manav, Venereau, Cruz R and Weyant, Stanford University, Climate-related financial risk assessment on energy infrastructure investments, June 5, 2022.
17. Past performance is not necessarily indicative of future returns of any current or future fund or program.
18. CBRE Research, 2023 Office Occupier Sentiment Survey: Global Summary, September 2023. CBRE Research, European Logistics Occupier Survey 2023, July 2023.
19. CBRE Investment Management, November 2023.
20. Based on CBRE Investment Management's subjective views and subject to change. There can be no assurance that any such sustainability characteristics will apply to any CBRE Investment Management investment or, if applied, would result in the return, downside protection or diversification outcomes described herein. Future outcomes are inherently uncertain and subject to change.
21. CBRE Investment Management, Re-evaluating the investment characteristics of unlisted renewable energy investments, May 19, 2023. https://www.cbreim.com/insights/articles/re-evaluating-the-investment-characteristics-of-unlisted-renewable-energy-investments.
22. S&P Global, Keeping the Lights On, September 11, 2021.
23. Based on CBRE Investment Management's subjective views and subject to change. There can be no assurance that any such sustainability characteristics will apply to any CBRE IM investment or, if applied, would result in the value preservation outcomes described herein. Future outcomes are inherently uncertain and subject to change.
24. Examples in this document are for illustrative purposes only and based on CBRE Investment Management's subjective views and subject to change. Examples herein do not represent all CBRE Investment Management investments. There is no guarantee that any CBRE Investment Management investment will exhibit characteristics that are consistent the examples, principles, initiatives or standards described herein. It should not be assumed that any of the examples discussed were or will be profitable.
25. CBRE Investment Management. There can be no guarantee that such savings will occur.
27. Based on CBRE Investment Management Insights & Intelligence projections.
28. There can be no assurance any ongoing projects are ultimately completed.
29. Anticipated benefits, developments and/or value enhancements are based on CBRE Investment Management’s subjective view, are inherently uncertain and subject to change.
30. Projections are inherently uncertain and subject to change. Actual results may vary.
31. Billio, M., Costola, M., Pelizzon, L. et al. Buildings’ Energy Efficiency and the Probability of Mortgage Default: The Dutch Case. The Journal of Real Estate Finance and Economics 65, 419–450 (2022). https://doi.org/10.1007/s11146-021-09838-0.
32. $1.3 billion of green bonds issued in Europe and $1.45 billion of green bonds issued in the U.S.
33. International Renewable Energy Agency, Green Bonds for Renewable Energy, May 2022.
Past performance is not indicative of future results. The value of investments and the income from them can go down as well as up and an investor may not get back the amount invested. These investments are designed for investors who understand and are willing to accept these risks. Performance may be volatile, and an investor could lose all or a substantial portion of its investment. Prior to investing in an investment vehicle, prospective investors should consult with their own investment, accounting, regulatory, tax and other advisors as to the consequences of an investment in the investment vehicle.
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Statements contained in this Presentation that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of the investment vehicle’s manager. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. Additionally, this Presentation contains “forward looking statements.”Actual events or results or the actual performance of any investment vehicle may differ materially from those reflected or contemplated in such forward-looking statements.
Certain economic market and other information contained herein has been obtained from published sources prepared by third parties and in certain cases has not been updated through the date hereof. Neither CBRE Investment Management, any investment vehicle, nor their respective affiliates nor any of their respective employees or agents assume any responsibility for the accuracy orcompleteness of such information.
It should not be assumed that any sustainability principles, initiatives, standards, or metrics described herein will apply to each investment strategy or asset in which CBRE Investment Management invests or that they have applied to each of CBRE InvestmentManagement's prior investments. While CBRE Investment Management considers sustainability in connection with pursuing the investment strategies described herein, sustainability is only one of the many factors that CBRE Investment Management will consider in making an investment, and other considerations can be expected in certain circumstances to outweigh sustainability considerations. There is no guarantee that CBRE Investment Management will successfully implement and make investments in companies that are sustainable or that otherwise create positive environmental, social or governance impact while enhancing long-term shareholder value and achieving financial returns. The information provided in this presentation is intended solely to provide an indication of the sustainability principles, initiatives and standards that CBRE Investment Management applies when seeking to evaluate and/or improve the sustainability characteristics of an asset as part of the larger goal of maximizing financial returns on reinvestments. Accordingly, certain investments and strategies may exhibit characteristics that are inconsistent with the principles, initiatives, standards, or metrics described in this material.
It should not be assumed that the successful implementation of any individual sustainability initiatives will have any positive impact on financial performance of any fund or account sponsored by CBRE Investment Management. Considering sustainability qualities when evaluating an investment may result in the selection or exclusion of certain investments based on CBRE Investment Management’s view of certain sustainability-related and other factors, and while CBRE Investment Management believes considering these qualities will lead to maximizing long-term returns of its clients, this approach carries the risk that the strategies described herein (or other strategies that incorporate sustainability factors) may underperform strategies that do not take sustainability-related factors into account because the market may ultimately have a different view of a particular investment’s performance than that anticipated by CBRE Investment Management.