Read: A day as an Investor by Andrea Palmer

Andrea Palmer (30) joined PGGM in November 2020 to oversee ESG integration for PGGM Investment’s Listed Real Estate Fund. The fund invests in global real estate securities such as REITs and listed property developers in developed markets. Andrea has worked in real estate and ESG investing for nine years, previously at Triodos IM and GRESB. Andrea graduated from Aurora University outside of Chicago with a Bachelor’s in Marketing Research. She holds a Series 7 general securities license (U.S. Financial Regulatory Authority) and the Sustainability Accounting Standards Board FSA Credential. Andrea: ‘The great part about my work is that each day looks different. Most of my time is spent on things such as engaging with management teams to understand and evaluate their approach on managing ESG issues, developing our climate risk and impact management frameworks, and working with various ESG data sources to enrich the team’s investment process.‘

Environmental, Social and Governance

Transition risk

Andrea sees the transition to a low carbon economy as the most pressing ESG risk for real estate over the next five to ten years. In a nutshell, transition risks are the business risks that stem from a transition to a low carbon economy. These manifest through changes in energy efficiency policies, tenant expectations, and investor demand for certain properties. Andrea: ‘We can assess transition risks through various lenses: from a company’s ability (or inability) to collect and report emissions data, to in-house expertise (or lack thereof) for executing decarbonization projects, to the current emissions profile of the property portfolio. We see the full spectrum of performance on these elements: from companies that haven’t collected carbon emissions data, to those with ambitious full decarbonization plans.’

ESG and forward-looking stock valuations

One of the biggest challenges Andrea and her team face with integrating ESG into their investment decisions, is translating ESG information into forward-looking stock valuations. Andrea: ‘As an actively managed fund, our aim is to use ESG information to spot opportunities for alpha generation; however, this is no simple task. This requires ESG data that is high-quality and comparable, though most the data we have available is out-of-date due to rather lengthy lag periods or is simply boilerplate and therefore non-material.’ The team is currently working on better understanding how different ESG issues impact different areas of company financial performance, including the various components of their valuation models as well as overall stock performance.