Aleksandra Njagulj
Global Head of ESG for Real Estate
Sasha joined DWS in August 2021 as an accomplished ESG expert with over 20 years of practical experience in architectural design, design management and the sustainable built environment. In her previous role with CBRE Global Investors, she was Global Head of ESG with overall responsibility for developing and communicating global sustainability priorities and strategies across all business lines. Prior to this, she was head of the Sustainability, R&D and Innovation department at Bouygues UK.
In 2020 she won the UK-based edie Sustainability Leaders Award for Investor of the Year and the GRESB/BREEAM Individual Leadership Award, and in 2021 the global Future Proof Real Estate Woman Award as a leader in applying digitalization, technology, open innovation and sustainability to create a better built environment.
DWS Group
DWS Group is a global asset manager with more than €880bn in assets under management, around €70bn in real estate. The firm invests across all major asset classes, and has a presence in 22 countries. DWS was one of the early signatories of the Principle for Responsible Investment, and keeps sustainability at the core of its investment process.
“The true nature of sustainability is changing something into something better, changing brown assets into green assets, and especially when it comes to buildings that is what we really need to do.”
We can’t predict 2050 we can only work individually and professionally towards change.
Sasha says forecasting is for politicians. “Where we are going to end up really depends on policymakers, and that goes into politics which is not my field. I think about and work within what is my sphere of influence, both in my personal and professional life. I believe that is the way to change the minds of policymakers too.”
Recalling attending a week of presentations from scientists about the permafrost, the Arctic ice shelf, nitrogen flows, and biodiversity collapse, she says it’s easy to feel pessimistic. “I don't think we will preserve our current way of living, it’s going to change and we will need to adapt. Some small islands are likely to disappear, and some places will become uninhabitable. I don't think we can prevent any or even significant change, dire as it sounds. It’s really about how we can best survive as a species, , and that is what we need to work on.”
Adaptation and mitigation must go hand in hand.
In due diligence, Sasha says, the business will look at the twin strands of energy efficiency and physical risk, both of which are not completely new for real estate investment.
Flood risk always has long been a standard part of real asset management, whereas overheating is a relatively new consideration. “The main change is really looking at how fast or how often these things might happen and then adjusting your underwriting accordingly. I would say that chronic heat stress is a relatively new consideration for the upper end of the northern temperate climate zone, the overheating aspect is not something that's traditionally looked at in those regions”.
Buildings can’t be looked at in isolation, as their viability might depend on the outlook for the city as “your little “island” building isn't actually going to perform on its own”. There are national, city and building level risks to consider. “The problem is that asset managers generally don't really have much influence on what the city does to make itself more resilient. We can advocate and so on, but ultimately there’s usually no direct connection with city government. So we monitor, for example we use the European Environment Agency’s “Climate ADAPT” website to track all the various initiatives of the countries and cities to make themselves more resilient.”
Sasha is sceptical that modular or super-green buildings can have enough effect.
“About 80% of the buildings we already have are going to still be around in 2050. This construction of really green buildings or modular buildings is nice to have, but it's not actually addressing the problem of having a massively inefficient, existing building stock. We can't just raze it all to the ground and build new buildings. Even in carbon terms it would be ludicrous to do that, all that embodied carbon wasted. So, the real challenge is fixing the existing buildings and it's not only about carbon, it's about making them resilient and liveable in the climate of the future.”
In real estate it’s about fixing otherwise stranded assets.
Real estate is illiquid, Sasha notes. “You can't just say well, all of these buildings are energy inefficient so we’ll sell them off and buy shiny new ones, that is not a realistic proposition. With real estate therefore, and this is something that's not very well recognised in SFDR, it's all about transformation. It's all about renovation, and performance improvement. And I think this is the true nature of sustainability, changing something into something better, changing brown assets into green assets. When it comes to buildings that is what we really need to do. We don't just demolish or sell them, we improve them.”
There are limitations, due to regulations or listed buildings for instance, but in general DWS’ buildings are continually being improved. Fossil fuels will very likely eventually become uninvestable, Sasha says. “But at the same time, we need to keep people's lives going. If you switched off gas right now it would be a huge problem for the UK for example. So there are those grey areas and incremental progress we have to accept during the transition to “fully” green civilisation, which is what we should all be striving towards.”