Interview: Stefan Mächler, Swiss Life Asset Managers | New

Swiss Life Asset Managers manages more than 80 billion euros of real estate investments across Europe, half of which is held by the insurance group Swiss Life. If you add its third-party property management and facilities business, the company has nearly €112 billion in property assets under management (AUM) and administration.

It therefore has the capacity to contribute substantially to the decarbonisation of the built environment across Europe. Last year, the company announced plans to reduce the CO2 intensity of its directly owned real estate portfolio by 20% by 2030, based on 2019 levels.

But Swiss Life AM says it is already ahead of the curve. Its starting point for 2019 – 26 kg of CO2 equivalents per m² of floor space – is already well below the global net zero target for the real estate sector. It aims for a carbon intensity of 20 kg per m² by 2030 and will invest around 2 billion Swiss francs (2.05 billion euros) by then to achieve this goal.

Group CIO Stefan Mächler joined the group in 2014 and has helped to make Swiss Life real estate – and asset management more broadly – ​​the business it is today. He now has the challenge of continuing to grow the business while meeting increasingly pressing net zero goals.

Swiss Life AM real estate net zero path

“We are committed, with our owned real estate portfolio, to reducing the carbon footprint by 20% by 2030,” he says. “Now you’ll say it looks like a small number, [but] as we have already invested heavily in our real estate portfolio, the starting point is much lower. As the chart shows, the energy intensity of Swiss Life’s own real estate portfolio is well below the 1.5°C trajectories for the global real estate sector and the benchmark index based on its specific real estate allocation.

The move is part of Swiss Life AM’s broader three-year sustainability strategy launched late last year. The real estate portfolio, which accounts for nearly half of Swiss Life AM’s €266 billion total, has been identified as an area to focus on to have a significant impact.

“Everyone is doing ESG now and [claims to be] the best,” says Mächler. “But the difference is that we made a decision, saying, looking at our real estate business – which is very large with around more than 100 billion euros in assets under management and advice – the biggest impact we can [have] really invests in our real estate… by reducing the CO2 footprint.

“It’s much more effective than going after the securities industry,” says Mächler. There you can have an impact, he says, but in real estate you can “have a direct impact.”

Swiss Life’s substantial real estate business has indeed increased tenfold over the past decade. Swiss Life is considered Switzerland’s largest real estate owner, but since 2009 Swiss Life AM has expanded its real estate business beyond its home market, largely through corporate acquisitions.

In 2011, it bought Viveris REIM in France. “It has grown significantly. We are one of the largest fund managers in France,” says Mächler. “In 2014, when I joined Swiss Life, we made the strategic acquisition of Corpus Sireo in Germany, where we have immediately [a share of the] market of about 4%”. This acquisition also increased the workforce of Swiss Life Asset Managers by more than 40%.

“Then it was a geographic decision to go into the largest, most liquid real estate market,” he says. “We found that we were one of the biggest [real estate fund managers] in Europe, but we were not present in the UK.

Development in duo

In 2016, Swiss Life AM acquired the British real estate fund manager Mayfair Capital. Two years later, another German specialist in industrial real estate, BEOS, was recruited. In 2020, the acquisition of the real estate activity of Ness, Risan & Partners enabled a presence in the Nordic countries.

Swiss Life AM has long wanted to expand into the Nordic countries. “It just took time to [find] the right target in the Nordic countries,” says Mächler. “Inorganic growth should accelerate our organic growth.”

Now, Swiss Life AM is tasked with ensuring that its real estate portfolio – managed by subsumed organizations at different times over the past decade – can meet the net zero challenge. But Mächler also sees an opportunity for growth in this challenge.

Swiss Life AM, which has a large real estate business and a fast-growing €7 billion infrastructure arm, plans to enter the emerging energy-as-a-service (EaaS) sector, which involves managing end-to-end energy on behalf of customers, such as companies occupying buildings.

This will allow Swiss Life to better manage net zero targets in its real estate portfolio. “Between infrastructure and real estate, the major combinatorial part is energy. We are going to get into this business,” says Mächler.

“Others will also follow.” For example, Partners Group recently acquired EaaS provider Budderfly, but Mächler says it’s still “a big untapped market right now.”

Mächler expects there to be a race to acquire the abilities and expertise. “It’s not the traditional real estate industry,” he says.

In addition to enabling Swiss Life to better manage its own net zero objectives, EaaS is also an investment in its own right. “We see a business opportunity that we would like to cover ourselves as a service – not only for our own needs, but also in order to offer other market players,” he says.

“We decided to go for a mix of that,” says Mächler, and “to offer it to third-party customers in the future. I think there is big potential.”

It will also be important for the real estate development activity of Swiss Life, which, among other projects, is building an energy-efficient urban district in Griesheim, Frankfurt, and a 120,000 m² development in the Klybeck district of Basel.

“The development of real estate projects is an important part of our business,” says Mächler. “There you also need the energy part, because you are building whole new city districts. So what do you do with the waste? What do you do with water, with energy in general, and things like that,” he says. “We are looking to buy the know-how in-house.”

These are all examples where the lines between real estate and infrastructure are blurring. For large investors like Swiss Life, it can be advantageous to be in both asset classes and, in some cases, to combine the disciplines. In 2019, Swiss Life acquired renewable energy fund manager Fontavis, merging it with its existing infrastructure team.

“I honestly believe it will actually merge,” says Mächler.

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