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Green buildings outperform, shows MSCI

Africa Global Funds
Oct. 10, 2017, 11:02 p.m.

Word count: 420

MSCI has recently released its IPD South Africa Annual Green Property Index, which supports the investment case for green buildings in the commercial property sector.

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MSCI has recently released its IPD South Africa Annual Green Property Index, which supports the investment case for green buildings in the commercial property sector.

For the year ending December 2016, Green Star Certified buildings delivered a total return of 11.8% against the balance of the sample which delivered a 5.9% total return. 

This outperformance was driven by superior capital growth, lower vacancies and higher net income growth. 

In addition, Green star certified buildings used less water and electricity than their non-certified counterparts.

Sponsored by Growthpoint Properties, the IPD South Africa Annual Green Property Index, in conjunction with the Green Building Council of South Africa (GBCSA), is released annually and tracks the benefits of green buildings to investors. 

It compares the investment and fundamental performance of certified green buildings to the rest of the IPD sample by sector.
MSCI announced a change in methodology for the index in 2016, aligning the green property index production practice with other country markets. 

Index inclusion is now determined on the basis of the availability of green building certificates as opposed to the previous determination, which was based on the level of energy and water usage. 

The increased availability of certified green buildings enables a more objective assessment of the comparative than the level of energy and water consumption used previously, as this varied with asset occupancy and tenancy behaviour.
In December 2016, the IPD South African Annual universe consisted of 1,450 properties valued at more than R296bn, of which the Green Property Index considered a subset of 240 Prime and A-Grade offices valued at over R47bn. 

The Green Star rated subset consisted of 49 buildings with a combined capital value of R13bn.
Phil Barttram, Executive Director, MSCI, said: “The 2016 results provide a different perspective from what we have been able to show in previous years. The methodology change to consider green star certified assets was an essential evolution in our approach and continues to reinforce the growing body of evidence that shows green buildings provide better investment returns.
Dorah Modise, CEO, GBCSA, added: “The IPD South Africa Green Property Index remains a valuable tool for us to understand the proliferation and impacts of green buildings within the commercial property sector. The GBCSA and its partners uses this data as an input in building the business case and advocating for a wider adoption of green building practices both within the commercial sector and in other sectors that are beginning to gain traction.”

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