The latest MSCI South Africa Green Annual Property Index was released in April 2022. The Index supports the investment case for Green Buildings in the commercial property sector. Green features help reduce operating costs for landlords and tenants (lower utility consumption). These buildings also have lower vacancies due to the growing demand from tenants looking to benefit from the lower operating costs, improved indoor air quality and to reduce their own carbon footprint. Green certified properties are protected against rising utility costs and emissions resulting in a lower discount rate (proxy for risk) for these properties and a lower capex requirement. The index showed that certified green, Prime, and A-grade offices outperformed non-certified assets of a similar quality by 170bps during the 2021 calendar year.
Comparison of Green Star Certified vs Non-Certified Buildings in 2021
|1||Total return (%)||2.2||0.5|
|2||Vacancy rate (%)||15.6||16.3|
|3||Net operating income per m²||144||111|
|4||Capital value per m²||20.998||16.226|
|5||Valuer discount rate (%)||13.2||13.7|
|6||Total operating costs as % of gross income||35.6||39.8|
|7||Water usage (m³ per annum)||0.5||0.7|
|8||Electricity usage (kWh per annum)||138||156|
At Catalyst, we aim to invest responsibly. We believe that companies which incorporate the three core factors of ESG into their strategy and implement demonstrative changes within their business, tend to outperform their counterparts over the long-term. Companies integrating an ESG assessment into their long-term strategy should make better-informed decisions and provide stakeholders with a more comprehensive view of risk and opportunities in their individual investment case.