Singapore-based real estate investment manager CapitaLand Investment (CLI) has introduced the “Return on Sustainability (RoS) framework,” designed to quantify the financial value of green capital expenditure. This initiative comes as the focus shifts from climate commitments to tangible outcomes.
Featured in CLI’s Global Sustainability Report, the framework leverages financial models from the company’s selected commercial assets across the Asia-Pacific region. It evaluates eight key variables impacting financial performance: green capital expenditure (capex), utility costs and savings, carbon cost reductions, rent premiums, leasing durations, interest rate savings, reduced insurance premiums, and enhanced asset valuations.
According to CLI, these evaluations will guide investment decisions in asset enhancement initiatives, redevelopments, and other projects, serving as a capital allocation guide for assessing the return on investment (ROI) for sustainability initiatives.
Vinamra Srivastava, CLI’s Chief Sustainability and Sustainable Investments Officer, stated: “CLI’s RoS framework bridges environmental responsibility with financial accountability, ensuring sustainability decisions are grounded in environmental and commercial outcomes. This framework, using first-party data drawn from six existing assets owned and managed by CLI, answers questions such as ‘Does going green pay off?’ and ‘If so, by how much?’”
In optimal scenarios, CLI indicated that the RoS framework could enhance the Internal Rate of Return (IRR) for many assets and safeguard asset value against risks like carbon taxes and rising insurance premiums.
Additionally, the framework introduces a portfolio-wide breakeven model, allowing fund managers to evaluate the feasibility of green capex investments through projected long-term savings. CLI has applied an internal shadow carbon price since 2021 to quantify climate-related risks and opportunities in new investments. The RoS metric complements this effort by providing a comprehensive view of financial and environmental outcomes, directing capital towards lower-carbon projects and enhancing operational resilience.
Other highlights from CLI’s sustainability report include an increase in renewable energy use to 7.3% across its portfolio, a 17% rise in green leases, and over $4.3 billion raised in sustainable finance. Since 2019, CLI has reduced its energy consumption intensity by 11% and achieved significant green building certifications.
The company also reported that women constitute 30% of its board and 37% of senior management. CLI plans to continue refining its RoS framework while exploring new metrics to measure climate-related risks and long-term opportunities.
Lee Chee Koon, CLI’s Group CEO, commented: “As a responsible global real asset manager, CLI remains steadfast in integrating sustainability and ESG considerations across every stage of our fund and asset management life cycle. We continue prioritising solutions that balance environmental impact with financial feasibility while leveraging innovation and technology to accelerate our transition to a low-carbon future.”