Inflation and Investing in Real Assets
PGIM experts explore how real assets can insulate institutional portfolios and serve as a hedge against inflation.
PGIM joined Pensions and Lifetime Savings Association’s (PLSA’s) 2021 ESG Conference for a session on “Returns and ESG Investing, Trade-Off or Trade-Up?” During the discussion, PGIM Real Estate’s Global Head of ESG, Christy Hill, and QMA’s Head of Equity Research, Gavin Smith, shared insights on sustainable investing in today’s market environment. Other topics covered included: the investment challenges associated with ESG indexing strategies; the practical steps investors can take to ensure their ESG investments are both sustainable and profitable; and the “trade-offs” and “trade-ups” of ESG investing across public and private markets, including real estate and equities.
>> Alyshia Harrington-Clark: OK, thank you. Welcome to the Returns of ESG Investing, Trade Off or Trade Up discussion. Today we'll be talking about how ESG investing strategies are popular, but they may be suboptimal for investors. Real estate takes some time to adapt and portfolios with existing assets must defend themselves from value decline. As managers and owners make net return pledges, what are the practical steps for investors to ensure investments are sustainable and profitable. So I'm Alyshia Harrington-Clark, I'm head of Master Trusts and Lifetime Savings here at PLSA. And I'm really delighted to be joined by some very interesting speakers. So we have Gavin Smith, who is the Managing Director, Head of Equity Research at QMA. We have Christy Hill, Head of America's Asset Management and Global Head of ESG from PGIM Real Estate. And we also have Andrew Cole, who you will see has this sort of double line for his jobs. So he's the Trustee Director of Bestrustees Limited. He's also the Investment Committee Chair at Credit Agricole Corporate and Investment Bank Deferred Pension Scheme. So I'm really delighted to welcome them. They're going to take us through this really fascinating topic today. So remember, you can ask the speakers questions just throughout the session, you can jot them in the chat or in the question box at the side of your screen. And also, please remember that you can connect with the speakers both through chat and video functions after this session. So you just go to the speakers tab and send a connection request and they'll get a pop up and then they can chat. Also, to remind you, you can tweet about the session using hash chat -- hashtag ESG 21. But without further ado, let's start the discussion. So the first section of this session we're going to take through -- just walk through a couple of different themes. And what I'm going to do is I'm going to introduce the theme, and then Christy and Gavin are going to provide some comments. So the first theme is really to rip off the title of the session. How does the idea of trade off or trade up relate to your respective asset classes of equities and real estate. So Christy, I'm going to come to you first, and then Gavin, please.
>> Christine Hall: Sure. So when we think about real estate and trade off trade up, we are thinking about new build versus existing product. And when we think about, you know, new builds, you clearly have an opportunity there to take a fresh start and really design buildings in the most efficient ways possible. But when you think about it, all new projects, or at least the vast, vast majority of them are built on existing land. So the challenges and opportunities that extend beyond simply thinking about building design. And they also give us an opportunity to clean up sites that may be impaired or contaminated. And we think taking this approach, you know, it come -- it may complicate or make the development process a little more challenging. But we think it presents a real opportunity, both from an environmental and from an investment perspective. And we think about this, if we can convert land that was previously unusable into a desirable location for an occupier, then we consider that success on two fronts. But clearly, we live in a world of existing stock. So it's not about just focusing on what we can do, this existing stock supports all of our business today and all of our lives today. So to ignore that and only think about making progress on new builds, is really flawed. And again, that's from an environmental perspective, as well as an investment perspective. And from an environmental perspective, if you think about neglecting that existing stock it's just going to fall into disrepair, become less efficient, eventually it's going to be functionally obsolete and ended up -- and end up abandoned. And then you're in a bad spot environmentally. But also from an investment perspective, sort of failing to recognize or realize the highest and best use of that property and site is missing an investment opportunity. So I think a key focus needs to be how we keep this existing stock relevant over time, because that's going to be key to our success. Again, on the environmental front and on the investment front. And I've talked or alluded already to the alignment of interest as it relates to sustainability and investment in real estate. And I feel very fortunate in real estate to operate in this space where this alignment is quite real. But that's another reason why the opportunities aren't just limited to building new and starting fresh. And from our perspective, when we think about that existing stock and the opportunities that are presented, we think about how do we improve an existing property's sustainability profile. So whether we're thinking about, you know, retrofitting building systems or installing low flow plumbing or integrating drought resistant, landscaping, so all of these types of projects have, you know, a typically a healthy ROI, a good payback period on their own. So in many ways they're accretive to the underlying investment. But beyond that, by implementing new projects, we're also reducing our consumption in the building, that corresponds to a decrease in cost. And that decrease in cost then gets passed on to our tenants. So not only are we improving the environmental profile of the building, we're also improving the desirability of the asset from the tenant perspective, which we think absolutely underpins value. We kind of think about this approach the same way when we think about resilience and capital upgrades that we want to make to make the property more defensible. And while some of these resilience improvements may not have that direct, immediate payback, with the same timeframes as some of the efficiency projects, we really think that the impact of these improvements is seen through less downtime at the time of a shock, lower remediation and repair costs over time, and improve business continuity for our users. And we think all of these factors combine not only to impact the desirability and marketability of the asset, but the actual implementation of these measures really serve to make the asset itself more durable. And ultimately, you know, we believe that, you know, a more durable asset creates more durable cash flows. And that will absolutely, you know, drive value. So again, when you think trade off trade up, you know, we believe that, you know, by doing this we're getting a return on that -- on the real estate side as well. And clearly, if a -- if I'm supporting the proactive approach to this, I think the owners that don't take this approach are really going to see value dilution over time. And I think it's going to come from some of these same sources. When you think about tenant demand, as tenants and residents become increasingly focused on sustainability, and the health of their workplaces, homes or properties that fail to address this, they're just going to simply be less desirable. And that lack of demand, or that lessening of demand over time is going to impact landlords' ability to hold rents and drive rents. And clearly there's a valuation impact there. I talked about how efficiency projects lower the costs in our buildings, and why that -- why we think that's a smart strategy. But for those owners that don't take that approach, operating costs are going to continue to increase, and is upward pressure, you know, as there's upward pressure on operating costs, landlords don't have the ability to increase rents, base rents, or push those rents. So clearly, you're going to see a dilution in value, if you've got, you know, your expenses are growing and your rents are not. Thinking about the resilience piece, you know, we think taking that proactive approach to resilience is the right approach because it allows us to be strategic versus reactive. For owners that are forced to be reactive, they're going to end up spending more money, they're going to end up with more downtime, and they're going to have more disruption to their tenants. So we think, again, qualitative and quantitative benefit to taking a proactive approach, where owners that don't take that approach we think they're going to see, you know, the negative side of that. And then when I think about value and why, you know, it's important to focus on these, I also think about insurance markets and debt markets. And these are two places where this hasn't really come to surface broadly around the globe. But in reality, I think it -- we're getting very close to that. And I would have to imagine that as, you know, lenders focus more on this space, that properties with a positive ESG profile are going to achieve more favorable financing, which is going to have, you know, clearly a positive impact on your value. And from the insurance market perspective, I think the same is true. Owners that take a really thoughtful approach to resilience are going to benefit from that over time when the insurance industry starts really baking in climate risk into their own underwriting. And properties they can evidence a more defensible position we think we'll be able to take or achieve better premiums. So we don't think it's one or the other. We think, you know, you take this valuable, you know, if you're doing the right thing, ultimately the payoff from the investment perspective as well.
>> Alyshia Harrington-Clark: Thank you so much. Gavin, did you want to comment on this question too?
>> Gavin Smith: Yeah, absolutely. Thanks, Alyshia. This trade off trade up, it's a good place to start as we move to equities. And I say that because in equities there is this perception that when you pursue ESG objectives it comes with a cost, if there's performance drag associated with it. But that needn't be the case. And so for us as active investors, as coin investors, there's a more careful approach that we bring to help ensure we don't incur that cost. That investors do actually trade up when they pursue ESG. And so for us, it all starts with how we think about evaluating ESG attractiveness. For us, we focus on those ESG issues where there's clear evidence of those issues can impact the financial performance of a firm. And more so, these issues that we look at are not static through time, they evolve. It's an adaptive framework, which is so important. As well think of how much we've learned about ESG over the last 18 months, as we've navigated COVID. But also, as we're thinking about evaluating ESG, attractiveness, we bring different quantitative tools into the mix here. And these tools help us avoid what we call ESG traps, or that is, corporations engaging in greenwashing. These are low quality ESG companies, they underperform, they introduce a drag on your portfolio. So for us, what we do is we try and evaluate carefully where there's this intent from companies to promote good ESG practices. But then we also look for action, other firms actually delivering on that. And that helps us tilt towards these more attractive, true ESG names. But then what we also do in this ESG investing space that we approach as a real investor, and that is so important. We don't just focus on ESG in isolation, we bring in other fundamental considerations into the investment decision making process. For instance, valuation make sure you don't overpay for ESG. So important in this environment when we're talking about an ESG bubble, for instance. And then lastly, as part of our more careful framework, how we integrate those insights into a portfolio or a strategy to -- it's not just naive exclusion, we're not just knocking out the worst offenders or tilting towards the biggest companies which tend to look more attractive on ESG. We more carefully balance our pursuit of ESG against these different risk considerations. So what this framework allows us to do then is more carefully balance the pursuit of ESG objectives against different return and risk considerations. And ensure there very much is this trade up when you move into the ESG space. But what this does, what we've tried to accomplish is a development of a framework, an ESG capability. And this allows us to integrate ESG into a variety of different strategies. And one area where we've been seeing a lot of interest is more index like strategies. And that's not surprising. Investors have allocated so much to passive over the last decade. And now there's challenges and pressure to incorporate ESG into those allocations. The issue is when there's -- when you look at different alternatives out there, for instance, there are certain ESG indexes, they experience that cost, that performance drag that I mentioned earlier. However, using our framework, what we're able to do is build a strategy which delivers those index like returns, those index like risk. But there's also this significantly improved ESG profile. So it's more of this active approach to ESG indexing, if you like. But that's just one way that we're utilizing our ESG expertise to help investors fulfill their ESG responsibilities. Alyshia.
>> Alyshia Harrington-Clark: Thank you, Gavin. And speaking of ESG, I think we should move on to the ESG theme. So the E of ESG is where investors are largely focused these days. But what about the S and the G? And how does that work? Christy, let's go to you first.
>> Christine Hall: No, you're exactly right. The E definitely is -- has been the most prominent, I think for the longest standing time. But I think a lot of that is because that's the component that people understand the best. But certainly, it isn't just about the E anymore. And you have to focus on the S and the G to have a true comprehensive ESG strategy. And -- but while equally important, I think they're challenged in different ways. And that's why their adoption maybe has been a little bit slower paced. So when I think about the social component, one challenge is simply definitional. When we talk about greenhouse gas emissions, or we talk about utility consumption, we all know what we're measuring, we all know what we're talking about. When you think about the social component of ESG, it means different things to different people. And it means -- and it can even vary from region to region. So if you think about it in some countries the social component is really correlated with affordable housing and community development. In other regions it's focused on working conditions and living conditions. And in other regions, it's diversity, equity and inclusion. So I think, you know, getting some harmony, again, around the thoughts around ESG and what does it really mean is -- will certainly accelerate its adoption. But I think that definitional challenge is actually also complicated by the fact that it's really harder to isolate and quantify efforts around the social component. As investors, we're all sort of programmed to run the math and to run the numbers and deliver the return. And it's just much harder to correlate this one thing that you did equates to this. Where I can measure my -- I can measure my greenhouse gas emissions, I know when I'm reducing them. We can engage with our tenants a lot. But it doesn't -- we don't -- we can't necessarily say it was that one action that drove that one outcome. So I think as an industry, that's something that we need to focus on and try to improve going forward. That said, for us at PGIM Real Estate, we absolutely believe that that same correlation between sort of sustainable investing driving returns, that alignment exists on the social side as well. And here, it feels obvious when I say it out loud, but I really point to our stakeholder engagement. And when I think about our tenants and our residents, our goal here is to just create a very quality experience for them in our properties. And we do that by driving connection between us and them, between them and each other, and between them and the broader communities that we invest in. And we think if you do that, and you create that sense of community, it elevates their experience, but it also makes them not want to leave the property. And so as a result, there is a financial correlation to having less downtime between leases. And if people don't want to leave your property, you do have the ability to hold and drive rents, in a more pronounced way. But I also think stakeholder engagement, when you think about the social component, can so often be focused outwardly. We think it's really important to take an inward look as well. And that social component also deals with stakeholder engagement with our own employees. And we believe very firmly that driving, you know, a culture where, you know, it is a dynamic culture where no matter who you are, what you look like, what you believe in, you have a path to a productive, successful career is really critical. And we think creating this culture really maintains, you know, it helps us to drive retention among our employees. But it also drives creativity and productivity. And that's really what underpins, you know, our business broadly. So stakeholder engagement, critical for when you think about the social component, you know, internally and externally. But more broadly, I think we need to work on quantifying that. On the governance front, I think we're definitely all grappling with the tsunami of regulation that is coming out around the world. And transparency and disclosure are absolutely critical. But I think the challenge that we're facing at the moment is really a lack of harmonization around a lot of the governance efforts, or a lot of the regulatory efforts that are ongoing at the moment. And what we're really seeing is a lot of governments and governing bodies. It feels like a little bit trying to play catch up, as this topic has become more prominent. And as a result, it feels a little bit like we're trying to build Rome in a day. And certainly that's really important and we need to get this information together. But I am hopeful as we move forward that we find a way to make these for all of these varying frameworks as complimentary as possible, as opposed to conflicting. Because I think there's probably general consensus that the regulatory street is a one way street as it relates to ESG. And that those demands are only going to continue to grow versus going backwards. But the same way when I talk about social being internal and external, I think it's really important to note that governance isn't just about regulatory reporting. It's also about creating internal frameworks that support transparency and best execution. So for us, whether we're thinking about our investment committee structures, our peer review structures, the standardization of our documentation, governance is really about paving the way for our team to execute in an ethical, frictionless, transparent, systematic way. And so, you know, the E definitely has been prominent for a long time, but I think, you know, we're seeing the catchup of the S and the G in real time. And I think it's going to -- it's only going to be a short time before they're side by side. And so I think as an industry we, you know, in real estate, certainly we need to really be focused on how we think about them and how we define them so that we can continue to get the engagement and the end, the option what we're searching for.
>> Alyshia Harrington-Clark: Fantastic, thank you. So Gavin more S and G in your university, less E?
>> Gavin Smith: Yeah, that is the case. So echoing Christy, there has been that big focus on E for so long and you are seeing things start to shift now more interest in S. And that's really been over the last 18 months, because of the COVID crisis of more of this focus on how corporations are treating their employees, how they're managing supply chains, and so forth. And I'm going to say for me personally, I think S is the most important dimension of ESG. And I say that because for me S is all about trying to evaluate the quality or the strength of relationships with customers, employees, suppliers. These are some of the key stakeholders for a company. These stakeholders can contribute to so much value creation for a company. So I see that as really being one of those critical areas of ESG. But it's important to recognize, despite that importance, that growing interest in S, as Christy was saying in her space, it's not with its challenges in terms of how you utilize the social insights within a portfolio. And one of the biggest challenges relates to data. I'd be remiss if I didn't come to data, as a quorum. Very challenging working with data when it comes to the A issue. When you look at ESG as a whole, the worst data relates to S. Corporations disclose the least amount of social data. And you can also just look across the different data vendors out there. Look at their social scores. It's the least level of agreement in those social scores across vendors, illustrating just some of those problems. But for us what we've been trying to do, we're finding there's some encouraging signs from utilizing, say natural language processing techniques to look to capture these social insights from information sources beyond what companies disclose themselves. And this has been looking more encouraging, particularly over the last 18 months. There has been so much more visibility into the social practices of an organization. So despite challenges in terms of what companies disclose, there are other techniques out there to help you collect these social insights from other sources. Now the second challenge or issue that I wanted to touch on that is important when thinking of incorporating social insight into a portfolio, is that you have to be much more targeted in terms of how you implement these exposures. And let me use an example to illustrate this point. Think of workplace diversity as one social issue. Diversity is obviously positive, brings different perspectives to a problem, improve problem solving and helps improve innovation. However, we don't want to just use these diversity insights blindly across all firms. We want to use these diversity insights where they are most valuable. And where is that? It's in firms who are more innovative. They're spending more on research and development. Those firms producing most patents. It's here that diversity is going to have the biggest impact. So for us, we believe by taking these more targeted approach, when you look to utilize these social insights, you can end up with a portfolio that does tilt towards these social attributes. But it also increases the likelihood that you can see some positive impacts on portfolio performance as a result. So we are seeing this growth and interest in social issues. But there are some of these challenges that need to be cognizant of. But just before finishing, I wanted to go back to the E issue. That yes, for so long there have been that interest in E. There's actually a really narrow focus within E. Focus really on carbon emissions. So what we need to do and what we need to see moving forward as well is a focus on broader issues. Other greenhouse gas emissions are critical, other environmental issues such as water usage, as well. And so we really need to broaden the scope of ESG, if ESG is really going to fulfill it's potential. Alyshia.
>> Alyshia Harrington-Clark: Thank you. Thank you so much. I'm going to come to Christy in a second to answer this question. But I have to comment on the beautiful sunrise that's happening behind Christy at the time. I just had to mention it, because it's so distracting to me that you're having a gorgeous sunrise behind you. So the final theme that we wanted to talk to were managers that are beginning to sign up to net zero targets. So it's clearly a long term goal. What are the practical steps does this entail, what are they for real estate manager, first, and then how would a sort of quantitative manager look at it too, Christy?
>> Christine Hall: No, thank you. It's -- I always noticed that -- I did just notice that in the background when you pointed it out. But, you know, I love that question, because we're very proud. We've -- we actually made the net zero commitment through ULI this past March. So we're signed up for the net zero carbon by 2050. But I think actually where Gavin ended was the perfect segue into this. Because it, you know, it is about data. And it's not just about one data set. For us it's really looking at, you know, data comprehensively, making sure it's accurate, collecting it more broadly. Because tactically, we're building a baseline, you know, we are a large company, we have many holdings, and we have to understand, you know, exactly where we sit today to know how we're going to get to that net zero goal. And there's a complication in our business that our baseline is changing every day. We're in the business of buying and selling real estate. So we can set a baseline today but the minute we transact on a property or a portfolio, that's going to change. So we need to really stay focused on that data. We need to be nimble. We need to be creative. We know right now that we've got a sort of a bucket of tools that we can use to get to that net zero point. But we also know that we're probably going to have to leverage technology that isn't even out and available readily yet. And I think that's where we just also need to be, feel cutting edge. So I -- for us that commitment is real. We certainly want to exceed that 2050 date. But it's going to be a learning and growing process every day until we get there.
>> Alyshia Harrington-Clark: Thank you, Gavin. Want to tell the manager?
>> Gavin Smith: Yeah, I get involved in this net zero discussion, really via clients looking to decarbonize their portfolios. That -- that's where I get involved in this. And they're really interesting discussions that I have. And they're interesting because finding so many varied preferences when it comes to de-carbonization, different preferences in terms of the speed and magnitude of de-carbonization. So for some clients and investors, they're wanting to see a reduction in carbon emissions in their profile, say 50%, which is comparable to a Paris aligned portfolio. Others want to be more aggressive, 70% decrease, others less aggressive 10% to 30% save decrease in those carbon emissions of their portfolio relative to a benchmark. But what I'm saying is really driving to those different preferences around de-carbonization. One relates to the active risk budget of the investor. So the investor who is willing to take on more active risk or has more of an active risk budget, you tend to see these investors wanting to decarbonize more aggressively. And that makes sense. If you're going to decarbonize the portfolio more aggressively, you're going to be deviating from that parent benchmark more. that requires more active risk. Now another area which I'm finding helps explaining different preferences when it comes to the de-carbonization are expectations around the return of a portfolio. So for investors who may be experiencing a funding gap or funding shortfall or are just generally more sensitive to the performance of their portfolio, tend to find these investors are more conservative in terms of the magnitude of de-carbonization. So just really, because there is that concern that it may challenge a portfolio performance. But what we're trying to do to help investors navigate this and accommodate these different preferences towards de-carbonization, is we've tried to develop what we call a frontier of portfolio solutions. And so what we're doing is, at different active risk levels, we look at what's possible in terms of portfolio de-carbonization. How much you can actually decrease down the carbon footprint of the portfolio, those different active risk levels. And then illustrating what the performance expectations are. And so by doing this, we can really help better inform investors, allow them to weigh out their de-carbonization objectives against risk and return. And we think this more custom approach is so important in this space because it allows investors to get that solution which fit's their need. And we think by doing this, you can really help get more investors on this journey towards de-carbonization -- decarbonizing their portfolios. Alyshia.
>> Alyshia Harrington-Clark: Thank you, Gavin. So I fear that we've been neglecting Andrew throughout all of this discussion so far. So I'm very tempted, Andrew, I mean there's lots of things in there, there's durability of assets and cash flows, greenwashing, we had isolating components of the S components of measuring the de-carbonization where COVID, there are all sorts in there. I mean, Andrew, I don't know if you want to sort of introduce your schemes and yourself, and then also pick up a few of those trade up or trade off questions. I'd be fascinated in your thoughts.
>> Andrew Cole: Sure. I think that it's, I mean clearly it's a very challenging world for trustees at the moment. I represent the creditor call pension scheme, which is a relatively small scheme in comparison to some that I'm sure are watching. So it's under one billion Sterling in assets. And I think that there's a number of, you know, both Christy and Gavin has said, it's very much for us as part of the journey. And I think that we also have to take a slightly longer term approach and not be, as Gavin said, get caught up in the ESG bubble. And the trustees in both the creditor call scheme and the other schemes that I'm part of, I find it challenging to keep up with what's going on. I, you know, particularly I think what's interesting when one looks at real estate, is clearly from an ESG perspective, it's quite a challenging sector. And I think Christy was -- made some excellent comments. But one has to remember that, you know, almost 39% of emissions worldwide come from the building construction sector. So it's clearly a challenged sector. And I think it's very interesting to hear about what Christy is doing in order to try and improve that in assets that meet, that she may own on behalf of others. It's, you know, when one looks I think in in detail, it's very easy to get confused for trustees. So it's about, for us, it's about having a clear path if we can possibly get there. And I think that what trustees are looking for is, or certainly what I'm looking for from asset managers, is to have some clear reporting, and unified reporting across different asset managers and different schemes. I think real estate is quite interesting. It's something I know probably I'm in danger, because I know a little about it, partly because my son has just written a dissertation on, who's an architectural student, on the environmental impact of architecture. And in the UK, there is an instinctual Breen [phonetical], which is an entity that rates different buildings. And I think even with Breen, which is a sort of a standard in the UK, and I think is moving out worldwide, it's still very difficult to find a consensus on how buildings are rated. So I think it's just, it's a challenging area for us. And clearly, we need to, you know, as trustees, we need to spend more time and be better educated which is obviously, what's great about this PLSA session.
>> Alyshia Harrington-Clark: Thank you, Andrew, I might, if I may, just ask you a question that's come in from the audience. So I want -- I'll start with you, and then Gavin and Christy may also want to comment. But the question asks, are we too broadly -- I'm going to summarize what the question asks. Are we too narrowly focused on making as much money as soon as possible as a sort of investment industry? I wondered, Andrew, to your comments, do you think that's the case? Or do you think, you know, in your experience, that's not really what trustees are trying to do and what managers are trying to do?
>> Andrew Cole: I think trustees have if -- hopefully, what trustees have is a clear investment strategy. And to ensure that the -- we have a diversification of assets around what their strategy is, and what the effective expected return is going to be. So I'm sadly an ex-investment banker. So if I was putting my investment banking hat on I would say, absolutely, we're there to make money quickly. As a trustee, I have a much longer term view on things. And I think what we're looking for is more sustained returns over a longer period of time, and we're willing to take, you know, some of the ups and downs. But it's moving in the right direction. That's me, it's important.
>> Alyshia Harrington-Clark: Thank you, Andrew. Gavin, Christy, did you want to comment on that too? Are we too narrowly focused?
>> Gavin Smith: And we are probably quite short term focused. I can just point to how we, you know, as a quorum we do have our back testing with, you know, one month returns. There is a very much that no short term horizon to what we do. And in fact, that comes into, you know, the performance reporting cycle. We report quarterly in terms of our performance. Clients want to see that performance, consultants want to see our performance as well on that quarterly cycle. So there is going to be a reset across the whole system changing expectations to try and elongate that performance horizon. Try and do it in one area or another is going to be very challenging without taking that complete approach.
>> Christine Hall: Yeah I think in real estate certainly, you know, we're obviously focused on delivering those returns. But we do have, I think the nature of our business lends ourselves to a longer term view as well. I mean we own buildings for decades, we sign ten year leases, we're always considering the impact down the road of the -- that risk. We sign a lease and we know how it's -- or we think we know how it's going to impact value ten years later. But going back to Andrew's point, you know, the way we think about ESG and those returns is that you start with the investment strategy and then you need to have a corresponding ESG strategy. And so you may have different approach for shorter term holds versus a longer term hold. But one thing that -- one question I often get asked is, if you're a short term buyer, or a value add buyer, does ESG matter? And I think my answer to that is always yes, because if you're a value buyer who is just targeting a quarter exit, it's going to be meaningful to that next buyer. So I think in real estate, we're always thinking about that next buyer and what -- how they're viewing our investment because that's the perfect driver of our value.
>> Alyshia Harrington-Clark: Fantastic. Thank you. The questioner has pointed out that I have missed a part of their question, which was about the diversity of decision making. I mean Gavin mentioned this earlier in terms of being a sort of a key measure and potential indicator, and a long term proxy for value, I guess to summarize what Gavin sort of said. So if I've butchered that Gavin. But I just wondered if others had comments. Andrew, Christy, did you also have comments on diversity and decision making?
>> Andrew Cole: I think from my perspective, diversity is super important. It's -- there's a couple of schemes that I'm on where I, as sort of an ex-investment banker, perhaps a lot of the responsibility falls on me. Which I have to say I hate, because I like to hear other people's views, particularly those that don't come from an investment background. Because I think it's, you know, it's very easy to think one knows everything and one thinks one knows the right answer. So, you know, when you're talking to a fireman at an airport, will have a very different view than myself. Or somebody that is, you know, works in an iron and steel foundry. So for me the diversification of thought is particularly important.
>> Christine Hall: You know, I absolutely concur. And I think we bring that to life in our business in a number of different ways. I mean when I think about our investment committee and the composition of our investment committee, there's clearly diversity there. We are very focused on peer review internally. Because I agree wholeheartedly with Andrew, to me diversity, in a very simple way, is about covering your blind spots. If you -- if everybody thinks the same way you're going to -- everybody thinks the same way, and getting all of those different, you know, all of those different opinions is just about kind of checking all of our own blind spots and making sure we're thinking about a problem as holistically as we possibly can. Because the more thoughtful you can be, the better your outcomes.
>> Alyshia Harrington-Clark: Thank you. Thank you so much. I'm going to ask you another question and very brief answers to this. I'm sorry, because we're running out of time. But one of the other questions that has come through is about COP 26. So whether any of you had any sort of expectations or wishes I guess, as a result of upcoming COP 26. I know we talked about E a little bit in connection to S and G, but any wishes or thoughts? Not a desperation to comment. Gavin, please.
>> Gavin Smith: I guess, you know, just wanting to see broader acceptance and alignment towards moving towards this net zero and the 1.5 degree scenario. You still are seeing and not everybody on board with this. In different countries, different types of investors, I'd love to see just, you know, further consolidation behind that. So we've got that uniformity, we've got that alignment. Because if we all get behind that then, this is where these different ESG initiatives can have that impact. But again, as I commented earlier, trying to recognize that there are different investors, different preferences out there to trying to accommodate those preferences to help people get on this journey. But it really just comes down to hoping we just, you know, move towards all getting on board and making more progress towards this.
>> Andrew Cole: Yeah I would sort of concur with what Gavin is saying. I think the key thing is clarity in terms of governmental leadership. You know, what's been interesting from a UK perspective is there is a clear drive by the UK government to move forward in sort of climate change and reduce carbon emissions. I think what we would all hope is that there is consistency across the globe, from, you know, the superpowers, to those countries that are perhaps much more challenged in it. And for me it's, you know, it is a journey. But I think it's very important for, you know, from a global perspective, that there's a clear message of where we should be going rather than perhaps what's happened, you know, over the recent years.
>> Christine Halle: And maybe this is a bad answer, because I'm kind of tapping into both what Andrew and Gavin said. But, you know, I would -- I hope that it's just again, an alignment so that more people can commit. Like that, I think if anything, it's how can we throw out a challenge, you know, whether it's through advisors, you know, or to businesses and to the world in general, how can we all get -- how can we get more people to get engaged? How can we broaden that adoption? And I think we can do that through harmonization and clarity. If -- people need to know what it is they're signing up for before they can sign up. And maybe a little bit more of that clarity and an effort to broaden adoption and maybe even, you know, throw a towel in -- through a challenge out to our industry so that we can get more people involved and onboard.
>> Alyshia Harrington-Clark: Thank you, thank you so much. And gosh, we've run out of time already, just as the sun has come up Christy, but we've run out of time. So I am sorry, I'm going to have to cut it short. And I know I haven't got to all the questions or the comments in the chat. These guys are still being around on the platform and that sort of thing. So you know, if you have any questions, please do raise them. I think the other thing that I'll just note is that you may -- since we were just talking about sort of Paris agreement, COP 26, all these sorts of good things, you may be interested in tomorrow's keynote, which is Paris Aligned Investing Explained. We also have a session with John Glenn, coming tomorrow who's going to discuss the government's Green Gilts Initiative, which would have been good if we could have talked about that, but we never got there. And all these sessions alongside this one will be available on demand until the 28th of July, so you can watch back to your heart's content. Just to extend my sincere thanks to the speakers, really, really interesting session. Like I said, it so many different topics there that we didn't get to discuss at all, unfortunately. But really, really good, really good session. And thank you, audience for watching and participating. If you'd like to provide any feedback, please do just fill in the survey. There's a little box that you can tick and it takes you to the survey pops out. But thank you all, from me and the speakers, and thank you for your participation. I just wish you the best in the conference. Thank you.