Schemes urged to challenge property managers over environmental issues

The survey of unlisted UK and continental European property funds - conducted with the help of financial research provider Innovest - found 95% perceived there to be a link between environmental practice and financial returns.

The survey also found 91% of funds used environmental consultants and 91% evaluated flood risk exposure - with 36% of these funds saying they would invest in flood plain areas.

Despite this, the survey found that, while 95% of the fund's parent companies held a broad social responsibility policy, although only 23% provided a policy targeted at a fund level.

And it said emissions data reporting by funds was only in the early stages of use - with 59% of funds reporting they did not collect CO2 emissions data.

Aviva Investors managing director of UK real estate Richard Jones said: "Buildings are responsible for almost 50% of the UK's energy and carbon emissions, and with the introduction of increasingly stringent and ambitious targets for carbon reduction by governments in both the UK and Europe, it is essential that real estate companies do their part to actively manage and reduce carbon emissions.

"Encouragingly, this survey shows that the vast majority of funds believe there is a link between environmental performance and financial returns.

He added: "The challenge is that despite this awareness, both actual performance and demonstrable commitment remain low, and few funds disclose, monitor or report environmental performance to investors.

"This is a situation that will need to change if government targets are to be met. Furthermore, pension fund trustees have an important role to play by challenging their property managers to ensure environmental issues are considered in managing their portfolios."

Environment Agency Pension Fund manager Howard Pearce stressed the importance of the survey as part of a wider responsible investment strategy. He said: "We are committed to responsible investment across all asset classes and with potentially significant financial impact of climate change and other environment issues on property, this is not an area any investor, especially those in for long term, should overlook."