ASX-listed Centuria Capital Group is driving sustainability and ESG values deeper into its operations and culture, as it develops and invests in greener buildings across the country.

“We have taken enormous steps in sustainability over the past year, so our focus is on continuing that growth and making sure that every single employee at Centuria understands the value proposition of ESG,” Centuria’s General Manager of Sustainability Clint Wilson (pictured) told ANZPJ.

The real estate investment manager, with $20.6 billion in assets under management, has taken a range of steps during the past year to improve the sustainability of its property portfolio, comprising office, retail, industrial, healthcare, agriculture and more.

The company has made improvements on a number of fronts, including climate change risk management, green building ratings, energy and emissions.

The big changes can be seen in their office and industrial portfolios, however Centuria has also made some significant commitments behind the scenes that will shape how they acquire and build assets into the future.

Take Centuria’s industrial business, for example.

Centuria Industrial REIT (CIR) partnered with supermarket business Woolworths to install 2.5 megawatt (MW) of solar across two locations in Queensland and New South Wales during the past year.

The ASX-listed REIT installed a 1MW solar system at their 21 Jay Street, Townsville property, and installed 3,300 solar panels at the 2 Woolworths Way property in Warnervale.

Wilson said they weren’t just upgrading warehouses though, they were also building warehouses and distribution centres of the future.

This year, the business committed to targeting a minimum 5-Star Green Star rating for all of its industrial developments.

The Green Star rating is a sustainability-focused rating system for buildings administered by the Green Building Council of Australia, which Centuria became a member of this year.

Its industrial REIT completed its first, and one of Australia’s first, 5-Star Green Star industrial developments in Ipswich, Queensland earlier this year.

To reduce its environmental footprint, the new warehouse was built with a 99kw solar panel system, a recycled watering system and a new concrete system using steel fibres that removes the need for steel reinforcement.

“We have the largest pure-play industrial REIT on the ASX, so we feel that we have responsibility to our stakeholders, both our tenants and our investors, to take a leadership position in this space,” Wilson said.

42 Hoepner Road, Bundamba in Ipswich

42 Hoepner Road, Bundamba in Ipswich

Centuria also took part in a pilot program with NABERS (National Australian Built Environment Rating System) this year for a sustainability rating system tailored to warehouses and cold store sheds.

“We were proud to participate in the NABERS Accelerate Program for Warehouses and Cold Stores because we have the ability to not only collaborate with wider industry but set the benchmark of what a sustainable warehouse and cold store asset looks like,” Wilson said.

“The lessons have been very valuable, and we’ll apply those learnings to our future industrial assets.

“Over time we expect that the NABERS warehouse and cold storage rating tool will grow in popularity, and you’ll start to see that duality between Green Star and NABERS ratings that you see in the office asset class.”

On the office front, the Centuria Office REIT lifted its NABERS energy sustainable portfolios index rating from 4.7 to 4.8 through improvements.

It’s a meaningful move in an index made up of 53 major property portfolios in Australia with ratings ranging from just 3.3 to 5.6 at the time of publication.

“To improve our rating, we upgraded assets through initiatives such as replacing retired gas boilers and equipment with more efficient heat pumps,” Wilson said.

“We looked at feasibility assessments for on-site roof solar where we could sustain our own base and common area electricity from renewable sources.

“We also looked at smart metering to dive deeper into the mechanics of our buildings and understand where there were opportunities to improve them.”

A case in point was the company’s 8 Central Avenue office building in Sydney’s inner south suburb of Redfern.

As its first office to have on-site solar installed, Centuria has been planting 710 solar panels onto the 11-storey property, with construction on track for completion in early FY23.

The company expects to reduce emissions by 355 tonnes per annum, the equivalent of taking 147 cars off the road.

“This installation means the asset is more self-sustained and will be more resilient to energy price shocks,” Wilson said.

“We’re also reducing our Scope 2 and tenant Scope 3 emissions by being able to generate on-site solar as a renewable source, and that in turn helps us improve our NABERS rating for that asset and respective portfolio.”

8 Central Ave, Redfern

8 Central Avenue, Redfern

Centuria’s sustainability journey is not without challenges though.

While assets held across Centuria’s portfolio are relatively young, the company does hold some older assets that can’t go green overnight.

“Historical assets can be amazing opportunities but also present lots of challenges,” Wilson said.

“A challenge that a lot of these assets have is that they weren’t built to easily integrate with the new technologies that we’re seeing come to market.”

Wilson pointed to the challenging task of replacing gas boilers with heat pumps in older commercial buildings.

“Heat pumps are more efficient and they’re fully electric, so if you power them from renewable source, you have zero emissions through operations,” he said.

“The difficult part with that sort of technology is they often require a lot of ventilation because they generate a lot of steam.

“Now gas boilers are often in the basement, so you have to start looking at ventilation options where you haven’t had ventilation before.

“Sometimes these emerging technologies aren’t fit for purpose with the asset as it is, so then there’s a large cost to retrofit the property.”

However, Wilson said there were other opportunities to add real value quickly to these older assets.

“You could take a low performing asset with a 3-Star NABERS rating and complete LED and HVAC upgrades, as well as other low hanging fruit,” he said.

“You will consume less energy that will lower your energy bills, but you will also increase the value of your property given more and more institutional capital are looking at sustainable assets.”

Wilson said Centuria was focussed on embedding sustainability and ESG deeper into the company culture and its daily operations.

For example, this year the company integrated climate change considerations into its asset acquisition process.

As a result, all asset acquisitions will require a mandatory physical climate risk assessment, irrespective of asset class.

Wilson said Centuria took transparency and accountability seriously, having published their annual sustainability report and their second disclosure under the Task Force on Climate-related Financial Disclosure (TCFD) this year.

“When it comes to our sustainability strategy, we want to continue that growth and make sure that we don’t drop our standards,” Wilson said.

“One of our challenges will be continuing the high standard that we’ve set for ourselves, so that’s going to be a real focus for us next year.”