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Asian cities are expected to attract more than $20 trillion in investment in environmental improvements by 2030, according to a recent report by the International Finance Corporation, with sustainable real estate projects being one of the pillars of this green investment revolution.

For one real estate private equity firm, however, this trend for the next decade is not only the future, but just the latest step in a sustainable real estate journey that has prompted the nine-year-old company to incorporate its cultural DNA directly into its name.

After investing in more than three million square metres (32.4 million square feet) of sustainable real estate projects in China and Indonesia since 2010, Diener Syz Real Estate – a FINMA (Swiss Financial Market Supervisory Authority) accredited private equity real estate investment manager focused on emerging Asian markets — has rebranded itself as Asia Green Real Estate, a name that its five partners and management see as a natural evolution and product of the company's philosophy and practices.

Asia Green's investments, in aggregate, have achieved energy savings of 22 million kWh per year, water savings of 370 million litres per year, and carbon dioxide savings of more than 13,000 tons per year.

Emphasizing Green Investment

"It's a natural progression for us," Asia Green partner and Head of China Andrew Goodridge explained to Mingtiandi. "Our investments have always focused on sustainability, and the new name not only explains who we are but also allows us to leverage on what we're doing."

Asia Green, which has offices in Shanghai, Chengdu, Hong Kong, Jakarta and Zurich, has been investing in sustainable real estate projects, first in China starting in 2010 and more recently in Indonesia, where the company made its first investment in 2014.

"Ten years ago some people were reluctant to invest in sustainable real estate projects, because they weren't confident in the returns," said Goodridge, who was responsible for strategic partnerships with Shui On Land in Shanghai before helping to co-found Asia Green. Over time, people started to understand that being green does not necessarily mean being less profitable, and with major investors such as Allianz requiring sustainability as a prerequisite for new investments, Goodridge says that green certifications "have become part of the checklist" for many investors.

In addition, many international corporate giants such as Google, Kering and Unilever routinely require sustainability components on their new office leases. "Multinationals now routinely require sustainability for their headquarters and offices," Goodridge points out, "so by building green, we ensure that our projects are on the list for top tenants." This trend is also gaining traction among domestic companies, as more and more people realize the benefits and impact of sustainable developments.

Achieving Sustainability and Profitability

With sustainability having become a must-have for commercial tenants and for residential buyers, Asia Green sees green design and construction as a necessity for profitable real estate investment in the region.

"Asia Green manages both income and development funds, and we see sustainable projects as a must-have for both strategies," Goodridge told Mingtiandi. While conceding that initial development costs could potentially be a little higher for green projects, the 18-year industry veteran point out that for "commercial projects you will get higher rental rates, lower operating costs and will achieve higher resale values", thus more than offsetting the initial costs.

For residential developments, the company sees that consumers are looking more and more for homes with sustainable components with health benefits, such as building with environmentally friendly materials, incorporating energy and water saving features, and implementing clean air systems, especially in the Tier 1 and some Tier 2 cities. Residential buyers are willing to pay a premium for green-certified developments, as they provide better comfort and wellness for the occupants.

For example, Asia Green invested in a development project in Chengdu with one of China's largest and most sustainable developers. The 350,000 square metre residential project has many green features such as low-e glaze windows, radiation heating/cooling utilizing the ground source pump system, as well as clean-air systems. It has applied for 3-star China Green Star rating as well as EDGE certification, and is a pioneer in green residential projects in the Chengdu market.

Aligning With Government Directives

In China, Asia Green focuses on two main geographical areas – the Yangtze River Delta and the Southwest region – where it has invested in nine projects across five cities. The rapid development and rise of the China's Southwest region is consistent with the government's Go-West, as well as the Belt and Road policies.

In addition, the company's focus on sustainability has kept them tightly aligned with the Chinese government's initiatives, including the country's 13th Five Year Plan, issued in 2016, which requires that 50-percent of all new urban buildings be green certified. To that extent, Asia Green has a partnership with IFC, a member of the World Bank Group, on its sustainability initiatives.

"In China there has been a change in recent years from pursuing fast growth to ensuring quality growth, and the government is helping to ensure that companies are building sustainability into projects," Goodridge explains. "This is changing not only government rules, but also helping to shape corporate and individual priorities."

Over the last few years, Asia Green started to certify its investments using the EDGE sustainable building program for emerging markets developed by the IFC and the Green Building Council Institute. In addition, the company has its own internally developed "ECO-Tool", which measures resource use, health, and comfort.

An example of Asia Green's investment in sustainable real estate is the World Financial Center (WFC) project, a landmark 280,000 square metre transport-oriented mixed-use development (office, retail, parking) in the southern core CBD area in Chengdu (the provincial capital of Sichuan), where the company owns several floors of office space. WFC has been pre-certified as LEED-Silver, and the developer is applying for LEED-Gold for the final certification.

Asia Green has also obtained EDGE certification for the space that it owns and manages in the building. In addition, Asia Green's tenants in WFC and other projects are also planning to apply for additional green certifications, a demonstration of the growing recognition of the importance of sustainable working environments among corporate end-users.

Expanding into Southeast Asia

Confident in the value of its approach to sustainable investments, and having built a team of real estate investment professionals in China and Switzerland, the company began expanding beyond China by taking on its first investment in Jakarta, Indonesia about five years ago.

To date, Asia Green has invested in seven projects in Southeast Asia's most populous nation, including office space in the award-winning 470,000 square metre South Quarter mixed-use project in Jakarta.

South Quarter was built by Indonesian developer PT Intiland Development, and is a combination of office, serviced apartments and a shopping centre. The project has won awards from the Green Building Council of Indonesia as well as grabbing prizes in national and regional design competitions.

For now, Asia Green's leadership say that they will continue their investment focus on China and Indonesia. However, the company is constantly exploring new markets, and anticipates investments in other emerging Asian markets in the future.

"Our focus is very much on other fast growing markets in Asia," Goodridge says. "Indonesian corporates and consumers are beginning to demand more sustainable projects, and as we grow our team we see opportunities to pursue profitable opportunities in more Southeast Asian markets in the next few years."