As a leading independent investment manager for real estate in Europe, Corestate Capital has experienced substantial growth in recent years. Since 2016, Corestate has brought the total value of its assets under management (AUM) to €26bn, translating to a compound annual growth rate of 110%. And this growth is matched by the scale of its Environmental, Social and Governance (ESG) ambitions. Intending to integrate its ESG framework into its operations, Corestate appointed Justus Wiedemann to lead the charge as Group Sustainability Officer.
The reasons for Corestate’s ESG ambitions are clear. “Investors are increasingly keen to invest in progressive opportunities, particularly as the European Union (EU Green Deal) and United Nations (PRI) have laid out ambitious but vital frameworks for the development of sustainable societies, supply chains and economies,” says Wiedemann. ”From a market potential point of view, there is an apparent demand for authentic sustainable products.” Moreover, ESG criteria are becoming increasingly important for employees. Deloitte’s 2019 Global Millennial Survey found that 74% of those born between 1983 and 1994 would leave their company in the next five years if they hadn’t committed to environmental and social stewardship practices; an attitude reflected by wider consumer attitudes to sustainability in business.
Wiedemann began his time at Corestate in the post-merger integration department. “When we started with ESG, it was part of our wider institutionalisation plan, which also includes reporting standards, compliance and governance on a group level,” he says. Until then, the company had strategically acquired along the value chain. “Corestate started as an asset and investment management firm, and has acquired property management firms such as CRM Students which is a leading provider of student housing in the UK, a mezzanine financing firm HFS which is the market leader in Germany, Austria and Switzerland, and a large institutional asset manager, Hannover Leasing,” he explains. As a result, Corestate now offers the whole investment management chain for real estate, including financing, structuring, asset management and property management.
“Out of our holistic view comes the strength of our ESG integration approach,” says Wiedemann. “We are operatively capable of reflecting what the EU wants in their Green Deal and Action Plan on Financing Sustainable Growth, conforming ESG with sustainable investments to transparently show how we have optimised real estate assets along with reductions in utility consumption and carbon emissions. In the end, we can manage on the ground each and every part of the investment value chain according to our ESG strategy.”
As data forms the backbone of the company’s strategy, Wiedemann’s background in project management and data science is proving instrumental in the rollout of ESG principles across the company’s operations. Particular emphasis is placed on buildings management. “Looking at overall carbon dioxide emissions in the EU, the highest polluting factor is real estate buildings. 36% of CO2 emissions, within the EU, come out of real estate,” Wiedemann highlights. By comparison, manufacturing accounts for 25% of emissions. “We should all have a clear focus on optimising buildings. We see enormous potential in that field because we find so many opportunities that we gain through our data-driven approach. However, data is always just a vehicle that’s not an end in itself.” It does, however, enable operational optimisation on a scale not previously seen.
By acting on the insights that data provides, Corestate is able to amortise a part of the cost of building optimisation with funds saved through reduced energy consumption. A key partner for Corestate’s transformation is ESG software leader Measurabl. On this platform, with around 45,000 assets from a global bank of asset managers, a digital twin of each of Corestate’s property asset is created. Then the platform is fed with utilities and emissions data from myriad sources to maximise its capacity for buildings optimisation. It then enables Corestate to benchmark its buildings’ performance against their peer group of similar structures. By establishing benchmark scores through such means, Corestate circumvents the traditional limits of depth imposed by the labour-intensive nature of data collection.
The result, Wiedemann says, is the revelation of hidden cost drivers across the Corestate portfolio, enabling cost cutting and value creation that would have been far more challenging to realise in a pre-data driven world. As these cost drivers are generally a result of utility management, addressing them with an approach geared towards efficiency simultaneously creates value and minimises the environmental impact of each building. Combining Measurabl’s data with its own utilities and energy consumption information, driven by the proliferation of data points such as smart meters, offers Corestate a powerful capacity to enact changes that empower both its financial bottom line and the environment.
Wiedemann adds that the increased digitalisation of energy data collection in Germany also offers an opportunity for improved vendor management. “We have started a group-wide process with major German operational cost advisory Westbridge to tender out our complete energy consumption of all of our managed assets,” he says. “We will then be left with a very consolidated vendor market, making it much easier to go ahead with smart metering at scale. If you have 33 fragmented energy vendors, you end up with 33 different hardware components to install.” In a consolidated market with fewer vendors to consider, the amount of data noise is reduced significantly, offering higher quality data that elucidates multifaceted opportunities for optimisation. “Seeing what’s happening in each of our buildings on such a granular level is an immense advantage because we’re not in the dark about possible energy waste anymore,” enthuses Wiedemann.
Outside Corestate’s focus on the environment, it is also fostering social change. One broader issue in this area that Wiedemann highlights is the lacking representation of women in management across Germany. Corestate is therefore committed to expanding the representation of women in top-level management, a figure which, according to Wiedemann, stands at only 14.7% in German DAX 30 companies. “Our goal is to attract, retain and develop talented women. As one of the first measures, we have become a sponsoring member of the Fondsfrauen association — a German initiative with over 2,000 female members — the majority of whom hold senior-level positions in the finance industry.” Fondsfrauen offers a mentoring programme which Corestate Women can leverage, providing the opportunity for training, networking and growth, and equipping female employees with the tools to progress within the organisation.
Wiedemann’s passion for these strategies, and indeed those beyond the scope of this profile, is glaringly evident. It is important, he says, for businesses not only to adopt environmentally and socially progressive initiatives but to do so authentically, as it cannot be a simple box-ticking exercise done to reflect the sociopolitical climate of the modern day. “Value creation and trust are becoming more and more important for our clients and the wider stakeholder group of employees and society as a whole,” he says. “ESG is an imminent component of investing which creates value; it’s a holistic and brighter view that is more fitting for today’s and tomorrow's world.”