Sustainable ESG Investing: How are REITs adapting to more sustainable practices? New Green REIT Index Launched

  • Post author:

In recent years, ESG (Environmental, Social and Governance) Investing has come into the forefront. As investors become more aware of the impact business have on climate change, so will their view towards businesses with more sustainable practices.

Several Singaporean corporations have already been recognised for their sustainability efforts, including Capitaland Limited and Cromwell European REIT.


MUST Go Green 2021

Manulife US Real Estate Investment Trust (“MUST”) launched its week-long thought leadership initiative on October 5, 2021 to raise understanding of ESG and how mandatory climate-related disclosures for Singapore financial institutions and asset managers from 2022 will impact REITs and investors. The event, titled MUST Go Green 2021, a thought leadership initiative under its Green Dot Series, includes ESG conferences with industry experts, as well as one-on-one meetings with ESG investors. Both conferences today received an eager response and were well-attended by media, analysts as well as institutional and retail investors.

To learn more about ESG Investing, and how MUST is working to achieve net-zero, the recordings to both conferences are now available here:

With regards to the webinar, Kenny Loh, founder of has asked 2 questions on behalf of investors. We thank Ms Jill Smith, CEO of Manulife US REIT for getting back to us on the following questions.


1. What is the financial impact of being green? In the short term vs in the long run? (E.g.  Implementation costs vs cost savings) 

  • With the real estate sector contributing to about 40% of carbon emissions, green buildings need to positively impact the natural environment in their design, construction, and  operations.  
  • When it comes to greening a building or portfolio, there is always the challenge of balancing environmental sustainability with economic viability. The bulk of ESG costs lie in the ‘E’ aspect of greening a building (e.g. improving building energy efficiency through  optimising equipment and processes). On average, construction or retrofitting costs for a  LEED-certified building is about 7% to 9% higher than that for a non-LEED building. 
  • Green buildings run more efficiently, thus lowering operating costs. For MUST, our portfolio has registered lower energy and emissions intensities in 2020 compared to the other U.S. REITs, translating to lower costs and sustainable returns. Compared to  conventional non-green buildings, they usually have higher occupancies, fetch a higher  rental and command a higher selling price. A recent survey by JLL also showed that the value of LEED assets (US$/psf) was 21.4% higher vs non-LEED buildings. 
  • Beyond financial returns, green buildings have health benefits for occupants in terms of  better air quality, accessibility, etc. In 2020, MUST’s Michelson property located in Irvine, California achieved the Fitwel Building certification. Fitwel is the world’s leading certification for healthy building performance based on building features that promote  occupants’ health and well-being. 
  • Green buildings also help us attract and retain quality and ESG like-minded tenants such as government and top-tier corporates in their sustainability journey or their race to Net Zero. In major U.S. cities, only about 14% of buildings are certified green. Since the start of  the pandemic, there is an increased demand for such green buildings by tenants. Within our portfolio, we have also received requests from tenants to discuss the ESG  performance of our buildings to ensure they meet with their own sustainability criteria. 
  • On the operation front, having ‘green’ certified buildings could also lower the REIT’s tax expenses. For instance, in New York, LEED-certified buildings are exempted from a portion  of their local property taxes. 
  • Many U.S. states and local regulators are incentivising energy efficient buildings and  penalising carbon emitters, which means that the cost of owning non-green buildings that do not meet regulatory requirements is going to increase down the road. For example, starting in 2024, New York City has mandated large building owners to drastically limit carbon emissions or pay an annual fine of US$268 per metric ton of CO2 over the limit.  
  • Closer to home, Singapore has also set ambitious targets under its Singapore Green Building Masterplan to green 80% of its buildings and pursue ‘best-in-class’ standards for new and existing buildings.  
  • As recently shared in our MUST Go Green event, net inflows into sustainable funds for  2020 has grown +109% YoY to US$347b. By 2023, 80% of investors intend to incorporate  ESG into their investment strategy. 
  • The cost of ignoring or paying lip service to ESG is high. Not only will we miss this new wave of ESG investors, we will also end up with stranded assets that deplete property values and returns for investors, causing brand erosion.

2. Given the lack of one consistent ESG rating used across REITs, what will be the outlook and approach for Singapore?

  • A recent Business Times article highlighted that issuers in Singapore grapple with trying to reconcile various ESG reporting standards as well as transparency issues within rating methodologies, among other challenges, within the resource-limited environment where they operate.  
  • ESG-related information that can negatively impact the financial performance of an organisation and its stakeholders are considered material and thus, should be disclosed. We think that this is precisely why the Monetary Authority of Singapore has mandated such reporting according to the Taskforce on Climate-related Financial Disclosures (TCFD)  framework for all financial institutions and asset managers (including REITs) with effect  from 2022.  
  • A common framework will allow for reliable and comparable climate-related disclosures,  leading to better pricing of climate-related risks and more effective risk management and capital allocation towards financing green activities.  
  • A prescribed recommended framework to guide all sustainability reporting will help to streamline the current confusion about ESG ratings and rankings. This will also allow for more comparability of sustainability performance among peers. 
  • Come 2022, MUST will incorporate further disclosures on its climate-related strategy,  targets and performance, in alignment with the TCFD framework. We will also be participating in TCFD-aligned ratings such as CDP and adopting preferred standards such as SASB (Sustainability Accounting Standards Board) which is commonly used in countries  such as the U.S., Australia, Japan and South Korea.
  • Good ratings on notable global sustainability benchmarks will align our sustainability performance to global best practice, and through ongoing gap analyses, we will continue to identify potential risks and opportunities in our pursuit of ESG excellence.

New REIT index: iEdge-UOB APAC Yield Focus Green REIT Index

On October 15, 2021, Singapore Exchange and UOB Asset Management launched the  iEdge-UOB APAC Yield Focus Green REIT Index. Formerly known as the Global Real Estate Sustainability Benchmark (GRESB, this REIT index is weighted based on environmental performance, based on a tilting methodology. Click on the image below to view the factsheet of this new REIT Index.

Kenny Loh is a Senior Financial Advisory Manager and REITs Specialist of Singapore’s top Independent Financial Advisor. He helps clients construct diversified portfolios consisting of different asset classes from REITs, Equities, Bonds, ETFs, Unit Trusts, Private Equity, Alternative Investments, Digital Assets and Fixed Maturity Funds to achieve an optimal risk adjusted return. Kenny is also a CERTIFIED FINANCIAL PLANNER, SGX Academy REIT Trainer, Certified IBF Trainer of Associate REIT Investment Advisor (ARIA) and also invited speaker of REITs Symposium and Invest Fair.  You can join my Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news.

Continue ReadingSustainable ESG Investing: How are REITs adapting to more sustainable practices? New Green REIT Index Launched

Why the hydrogen fuel sector deserves a second look

  • Post author:

ESG, or ethical, social, and governance, investing is increasingly important to many investors who want to fund businesses that match their values and also have growth potential. ESG investing can mean different things, such as avoiding businesses that produce or sell weapons; adult entertainment or gambling companies; or those that take part in human rights oppression. For many ESG investors, improving the environment is another important principle. 

Clean energy ETFs offer a way to potentially increase your assets while encouraging the development of clean fuel that minimizes damage to the environment and reduces pollution. Now hydrogen fuel ETFs are joining them. Here’s why a hydrogen ETF may deserve a place in your portfolio. 

Public opinion supports clean energy

All around the world, people are seeing the effects of climate change. In 2020, 22 natural disasters costing over $1 billion occurred in the US alone, compared with 6 per year from 2002 to 2010. Extreme weather events like avalanches, heatwaves, drought, and hurricanes are killing more people every year, pushing public support for zero-carbon initiatives and clean energy. 

Consumers are also experiencing power failures more often, like the recent massive outage in Texas. Back in 2014, scientists were already warning that outdated power grids and rising electricity use would make blackouts more frequent. 


The US has more power outages that any other developed country (with an annual average of nearly 5 hours in 2019), while China, Brazil, Europe, India, Turkey, and more have suffered serious power failures over the past 15 years. People see the need for more reliable microgrids that use alternative energy like hydrogen, so essential services can continue even during a power failure. 

Governments and businesses need hydrogen fuel 

87 signatories to the Paris climate agreement committed to keeping global warming under 2℃ by 2030, and many countries, cities, and corporations set zero-carbon targets. Planting trees and reducing energy consumption are praiseworthy, but only the adoption of clean energy like green hydrogen can meet these goals, and that means significantly expanding production. We’re going to need another 826 gigawatts of green power production over the next 10 years, requiring an average of $100 billion dollars of investment each year for the next decade, so the sector appears set to grow significantly. 

Green hydrogen power is ideal for these purposes. It’s very energy-dense and has a long-duration discharge cycle, which enables it to store excess energy and release it later at times and places of peak demand. This helps bring down energy volatility, one of the main causes of power failures. Unlike other green fuels, hydrogen is molecule-based, so it can be applied to industrial use cases that aren’t suitable for green electricity. 

Hydrogen is the most common element on the planet, so there’s plenty of supply. Converting hydrogen into fuel requires electrolyzers to separate and harvest hydrogen molecules, storing the hydrogen in durable, pressurized containers, and then transferring it to fuel cells for release as energy. The only waste product is harmless water, so when energy from renewable sources is used for the electrolysis, hydrogen fuel causes close to zero emissions or pollution. This is why its called “green” hydrogen. 

International investment in hydrogen fuel is high

Governments are leading the way to invest in hydrogen fuel. The Biden administration announced a $400 billion investment in clean energy development over the next 10 years (of which hydrogen is a part), including subsidizing infrastructure construction and initial rollout

costs. Nations across Asia and Europe are investing over $2 billion per year in hydrogen energy, and China announced more than $17 billion of investments in hydrogen transport  between now and 2023. Politicians are also offering incentives for businesses and industries to cut carbon emissions, and tax breaks for the cost of purchasing and installing green energy equipment. 

Top global investors managing close to $7 trillion of assets are expected to more than double their investment in renewable energy infrastructure over the next 10 years, to approximately $742.5 billion. Investment in hydrogen refueling stations and electrolysis plants rose to $272 million and $189 million respectively in 2020, despite the impact of COVID-19 on the economy.

Hydrogen fuel is already a reality

Green hydrogen fuel isn’t just a theory. The US already has 43 retail hydrogen stations and the UK hosts 7 active hydrogen refueling stations, with more under construction in both countries. The cost of hydrogen electrolyzers has dropped by up to 50% since 2015, and it’s expected to fall by another 40-60% by 2030, helping hydrogen fuel to become commercially viable. 

As the cost drops, we see the implementation of hydrogen in a number of use cases, including microgrids for essential services, transportation, residential heating, aerospace, and industrial fuel and feedstock.  Hydrogen-powered forklifts are in use in warehouses owned by Home Depot, Amazon, Walmart, and BMW; almost 7,000 fuel cell elective vehicles (FCEVs) are on the roads in California, and hydrogen fuel-cell bus fleets and trains are rolling out in Europe and China. 

A hydrogen ETF can be a savvy investment decision

If you’re interested in investing in this growing new energy sector, but nervous about the risk of placing all your eggs in a single new company, a hydrogen ETF may offer a great way to proceed. 

Like other ETFs, a hydrogen ETF would give you broad exposure to a number of companies in the field, thereby mitigating some of your single stock risk.  They generally have holdings in a range of companies in the sector, including power producers, fuel cell manufacturers, fuel cell tech developers, and hydrogen fuel distributors. 

Bear in mind that we believe hydrogen investments should be for the long term, helping to balance short-term, high-growth funds and stocks. A hydrogen ETF adds exposure to what we think could be a strong, long-term trend and rising disruptive sector in the energy market. In our opinion, it represents a long term, steady growth sector, which can be a lucrative part of a diversified investment portfolio. 

Click here for the HDRO Fund prospectus.

Distributed by Foreside Fund Services, LLC.

Investing involves risk. Principal loss is possible. As an ETF, HDRO (the “Fund”) may trade at a premium or discount to NAV. Shares of any ETF are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. The Fund is not actively managed and would not sell a security due to current or projected under performance unless that security is removed from the Index or is required upon a reconstitution of the Index. A portfolio concentrated in a single industry or country, may be subject to a higher degree of risk. Specifically, the Index (and as a result, the Fund) is expected to be concentrated in hydrogen and fuel cell companies. Such companies may depend largely on the availability of hydrogen gas, certain third-party key suppliers for components in their products, and a small number of customers for a significant portion of their business. The Fund is considered to be non-diversified, so it may invest more of its assets in the securities of a single issuer or a smaller number of issuers. Investments in foreign securities involve certain risks including risk of loss due to foreign currency fluctuations or to political or economic instability. This risk is magnified in emerging markets. Small and mid-cap companies are subject to greater and more unpredictable price changes than securities of large-cap companies.

The Fund is new with a limited operating history.

Fund holdings and sector allocations are subject to change at any time and should not be considered recommendations to buy or sell any security. Click here for current holdings information.

Opinions expressed are subject to change at any time, are not guaranteed, and should not be considered investment advice.

Sylvia Jablonski, Chief Investment Officer of Defiance ETFs, manages Defiance’s retail and institutional investment research, capital markets and thematic ETF model portfolios. Acknowledged as a top expert in the ETF space, Sylvia is frequently featured on CNBC, Bloomberg and the Wall Street Journal.

Continue ReadingWhy the hydrogen fuel sector deserves a second look