WEBVTT 00:00:00.000 --> 00:00:01.908 align:middle line:90% [SQUEAKING] 00:00:01.908 --> 00:00:04.293 align:middle line:90% [RUSTLING] 00:00:04.293 --> 00:00:05.247 align:middle line:90% [CLICKING] 00:00:05.247 --> 00:00:10.320 align:middle line:90% 00:00:10.320 --> 00:00:13.260 align:middle line:84% SIQI ZHENG: So today is our second lecture 00:00:13.260 --> 00:00:18.810 align:middle line:84% on how to finance sustainable real estate. 00:00:18.810 --> 00:00:21.540 align:middle line:90% A very quick recap-- 00:00:21.540 --> 00:00:25.210 align:middle line:84% Tuesday, on Tuesday, we talked about asset level. 00:00:25.210 --> 00:00:27.670 align:middle line:84% We talked about building level, basically. 00:00:27.670 --> 00:00:34.030 align:middle line:84% Then we talked about both, both the equity side, 00:00:34.030 --> 00:00:37.060 align:middle line:90% the private equity introduced-- 00:00:37.060 --> 00:00:40.900 align:middle line:84% his private equity, that's last year's best team in Charles' 00:00:40.900 --> 00:00:42.650 align:middle line:90% class final project-- 00:00:42.650 --> 00:00:44.390 align:middle line:90% and also the mortgage side. 00:00:44.390 --> 00:00:45.350 align:middle line:90% That's an asset level. 00:00:45.350 --> 00:00:51.070 align:middle line:84% Today, we move on, and we talk about this portfolio level. 00:00:51.070 --> 00:00:54.350 align:middle line:84% So basically, that's the structure. 00:00:54.350 --> 00:00:59.800 align:middle line:84% Then next session on this topic will be global level. 00:00:59.800 --> 00:01:03.320 align:middle line:84% This global sustainable real estate market. 00:01:03.320 --> 00:01:09.790 align:middle line:84% So still, go back to our diagram, this big picture, 00:01:09.790 --> 00:01:11.410 align:middle line:90% as I always show. 00:01:11.410 --> 00:01:13.570 align:middle line:90% We have the sandwich structure. 00:01:13.570 --> 00:01:18.490 align:middle line:84% We have these individual end users in this physical space 00:01:18.490 --> 00:01:21.220 align:middle line:84% market to choose whether to live, work, 00:01:21.220 --> 00:01:24.170 align:middle line:84% play in green buildings and green cities. 00:01:24.170 --> 00:01:27.700 align:middle line:84% Then we also have these individual investors put money 00:01:27.700 --> 00:01:29.470 align:middle line:84% in pension fund, insurance companies, 00:01:29.470 --> 00:01:32.320 align:middle line:84% and then they become big investors to invest 00:01:32.320 --> 00:01:34.000 align:middle line:90% in sustainable real estate. 00:01:34.000 --> 00:01:37.530 align:middle line:84% And then we have equity and debt. 00:01:37.530 --> 00:01:40.790 align:middle line:84% So now, today, we are going to talk about these big guys. 00:01:40.790 --> 00:01:44.710 align:middle line:84% These are small guys, last class, individuals, 00:01:44.710 --> 00:01:45.740 align:middle line:90% and the private equity. 00:01:45.740 --> 00:01:48.880 align:middle line:84% Now we are here, rates and the big companies, 00:01:48.880 --> 00:01:50.420 align:middle line:90% now on the equity side. 00:01:50.420 --> 00:01:56.070 align:middle line:84% And then the mortgage-backed securities and the green bonds. 00:01:56.070 --> 00:01:57.340 align:middle line:90% So that's for today. 00:01:57.340 --> 00:02:01.630 align:middle line:90% They're both this public market. 00:02:01.630 --> 00:02:05.120 align:middle line:84% So basically, we will talk about, first, still, 00:02:05.120 --> 00:02:06.270 align:middle line:90% equity level. 00:02:06.270 --> 00:02:08.030 align:middle line:90% That's basically rates. 00:02:08.030 --> 00:02:10.900 align:middle line:84% And then that will be green bond. 00:02:10.900 --> 00:02:13.550 align:middle line:84% So that's basically the vehicles, some investment 00:02:13.550 --> 00:02:16.640 align:middle line:84% vehicles on public market that target 00:02:16.640 --> 00:02:18.440 align:middle line:90% at sustainable real estate. 00:02:18.440 --> 00:02:20.750 align:middle line:84% Then we talk about the benchmarking 00:02:20.750 --> 00:02:25.760 align:middle line:84% and disclosure, some basic tools and what's going on, 00:02:25.760 --> 00:02:27.860 align:middle line:90% all the data. 00:02:27.860 --> 00:02:32.510 align:middle line:90% So that's the 4 times 4-- 00:02:32.510 --> 00:02:35.570 align:middle line:90% 2 times 2 matrix of this. 00:02:35.570 --> 00:02:36.540 align:middle line:90% Then we are here. 00:02:36.540 --> 00:02:39.140 align:middle line:84% So basically, I'm not sure whether you 00:02:39.140 --> 00:02:41.990 align:middle line:84% are familiar with the concept of REITs. 00:02:41.990 --> 00:02:45.360 align:middle line:84% Who are-- don't know what REITs is? 00:02:45.360 --> 00:02:47.600 align:middle line:90% Could you raise your hand? 00:02:47.600 --> 00:02:48.980 align:middle line:90% So everyone knows. 00:02:48.980 --> 00:02:53.150 align:middle line:84% So I think that's already being taught 00:02:53.150 --> 00:02:55.440 align:middle line:84% in the finance and other classes. 00:02:55.440 --> 00:02:59.010 align:middle line:84% So basically, this is real estate investment trust, 00:02:59.010 --> 00:03:02.020 align:middle line:90% so that's a special stock. 00:03:02.020 --> 00:03:03.980 align:middle line:90% It's a company. 00:03:03.980 --> 00:03:06.150 align:middle line:84% A real estate investment trust is a company. 00:03:06.150 --> 00:03:10.260 align:middle line:84% It's a publicly traded listed company on stock market. 00:03:10.260 --> 00:03:13.410 align:middle line:84% So they are mainly investment in real estate. 00:03:13.410 --> 00:03:15.950 align:middle line:90% So that's called REITs. 00:03:15.950 --> 00:03:20.810 align:middle line:84% And REITs, since REITs is a company and mainly equity rates, 00:03:20.810 --> 00:03:26.840 align:middle line:84% and then they are here public, trading every day. 00:03:26.840 --> 00:03:29.610 align:middle line:84% So one example is Boston Properties. 00:03:29.610 --> 00:03:32.690 align:middle line:84% So yes, so that's basically here, and we have 200, 00:03:32.690 --> 00:03:36.270 align:middle line:84% like 250 REITs right now in the United States. 00:03:36.270 --> 00:03:38.590 align:middle line:90% So they are big companies. 00:03:38.590 --> 00:03:41.540 align:middle line:84% And since they are a company, they can do all kinds of things. 00:03:41.540 --> 00:03:45.430 align:middle line:90% That's why they can do-- 00:03:45.430 --> 00:03:48.640 align:middle line:84% so this is a public company trading. 00:03:48.640 --> 00:03:51.430 align:middle line:84% And then they can do their equity investment. 00:03:51.430 --> 00:03:56.230 align:middle line:84% So they reinvest their money, or they raise new capital 00:03:56.230 --> 00:03:58.810 align:middle line:90% by issuing new stocks. 00:03:58.810 --> 00:04:02.100 align:middle line:84% So that's basically their equity money and invest in. 00:04:02.100 --> 00:04:05.140 align:middle line:84% And as a company, they can also go to the bank-- 00:04:05.140 --> 00:04:07.270 align:middle line:84% because it's a company, we can go to the bank-- 00:04:07.270 --> 00:04:09.630 align:middle line:90% to borrow a loan from the bank. 00:04:09.630 --> 00:04:11.890 align:middle line:90% So they can go to the bank. 00:04:11.890 --> 00:04:16.010 align:middle line:84% And then they can also issue corporate bonds. 00:04:16.010 --> 00:04:19.600 align:middle line:84% So basically, although it is REITs, it itself is here. 00:04:19.600 --> 00:04:23.230 align:middle line:84% But it can do so many things because this is a company. 00:04:23.230 --> 00:04:25.300 align:middle line:90% They can go to the bank. 00:04:25.300 --> 00:04:27.080 align:middle line:90% They can issue their own bonds. 00:04:27.080 --> 00:04:29.890 align:middle line:90% They can issue their new stocks. 00:04:29.890 --> 00:04:31.900 align:middle line:90% So that's the REITs. 00:04:31.900 --> 00:04:33.280 align:middle line:90% That's why we focus on this. 00:04:33.280 --> 00:04:38.180 align:middle line:84% Then you can understand the important role of REITs here. 00:04:38.180 --> 00:04:43.160 align:middle line:84% For those who forgot what REITs is about 00:04:43.160 --> 00:04:47.900 align:middle line:84% or haven't touched on this topic, 00:04:47.900 --> 00:04:50.630 align:middle line:84% there are very quick basics of REITs. 00:04:50.630 --> 00:04:52.800 align:middle line:90% So REITs basically is here. 00:04:52.800 --> 00:04:59.210 align:middle line:84% It's a company, and then this company's main business, 00:04:59.210 --> 00:05:02.960 align:middle line:84% the main business, the core business to invest on, 00:05:02.960 --> 00:05:05.750 align:middle line:84% not other factories or manufacturing 00:05:05.750 --> 00:05:07.640 align:middle line:90% or IT or biotech, no. 00:05:07.640 --> 00:05:11.700 align:middle line:84% They invest in income-generating real estate properties. 00:05:11.700 --> 00:05:13.790 align:middle line:84% So that's office-- commercial real estate, 00:05:13.790 --> 00:05:15.030 align:middle line:90% commercial real estate. 00:05:15.030 --> 00:05:17.450 align:middle line:84% So they invest in commercial real estate. 00:05:17.450 --> 00:05:20.160 align:middle line:84% And then because they are publicly traded-- 00:05:20.160 --> 00:05:22.160 align:middle line:84% so actually, there are so many investors. 00:05:22.160 --> 00:05:27.450 align:middle line:84% Maybe you are one of this, and I'm also one of this. 00:05:27.450 --> 00:05:31.520 align:middle line:84% All these investors, we buy the stocks of the REITs. 00:05:31.520 --> 00:05:33.630 align:middle line:90% So we buy stocks of REITs. 00:05:33.630 --> 00:05:35.630 align:middle line:84% REITs have our own money and then 00:05:35.630 --> 00:05:37.770 align:middle line:84% invest in all the real estate, then real estate 00:05:37.770 --> 00:05:39.420 align:middle line:84% because they are income producing. 00:05:39.420 --> 00:05:40.810 align:middle line:90% They're commercial properties. 00:05:40.810 --> 00:05:44.040 align:middle line:84% Then every year, every month, they 00:05:44.040 --> 00:05:46.260 align:middle line:84% have rents that become the revenue. 00:05:46.260 --> 00:05:47.530 align:middle line:90% And then you distribute. 00:05:47.530 --> 00:05:49.500 align:middle line:90% So that's basically the idea. 00:05:49.500 --> 00:05:56.790 align:middle line:84% The key things is REITs, they enjoy some tax benefit 00:05:56.790 --> 00:05:58.510 align:middle line:90% in the United States. 00:05:58.510 --> 00:06:03.360 align:middle line:84% So then basically they saw there's no corporate tax-- 00:06:03.360 --> 00:06:08.470 align:middle line:84% income tax but just the personal individual income tax. 00:06:08.470 --> 00:06:15.660 align:middle line:84% So basically, the cash flow from those properties to this company 00:06:15.660 --> 00:06:18.060 align:middle line:84% can pass through directly to individuals. 00:06:18.060 --> 00:06:22.260 align:middle line:84% When we get our dividend and all the things, as individuals, we 00:06:22.260 --> 00:06:24.430 align:middle line:90% pay tax, pay income tax. 00:06:24.430 --> 00:06:27.300 align:middle line:84% But at this level, they don't pay so that this 00:06:27.300 --> 00:06:28.990 align:middle line:90% is an advantage of REITs. 00:06:28.990 --> 00:06:33.030 align:middle line:84% Since you have this advantage, then there's also a rule. 00:06:33.030 --> 00:06:35.220 align:middle line:90% You cannot be so like-- 00:06:35.220 --> 00:06:36.490 align:middle line:90% has this advantage. 00:06:36.490 --> 00:06:39.450 align:middle line:84% But then you need to also follow this rule 00:06:39.450 --> 00:06:44.430 align:middle line:84% is 75% of the income generated by real estate-- 00:06:44.430 --> 00:06:50.400 align:middle line:84% and they also must invest all their assets mainly 00:06:50.400 --> 00:06:51.790 align:middle line:90% in real estate, 75%. 00:06:51.790 --> 00:06:54.130 align:middle line:84% You have a little bit more on other things, 00:06:54.130 --> 00:06:58.650 align:middle line:84% but the majority, 75%, need to be in real estate. 00:06:58.650 --> 00:07:02.040 align:middle line:84% And another thing is you need to distribute 00:07:02.040 --> 00:07:05.590 align:middle line:84% because all the people on here, all our investors on here, 00:07:05.590 --> 00:07:09.660 align:middle line:84% so you need to-- you are obliged to distribute 00:07:09.660 --> 00:07:11.890 align:middle line:90% 90% of your income. 00:07:11.890 --> 00:07:16.140 align:middle line:84% So all the income from here, you cannot just stay here to do 00:07:16.140 --> 00:07:16.990 align:middle line:90% other things. 00:07:16.990 --> 00:07:22.870 align:middle line:84% Instead, 90% of the annual income need to be distributed. 00:07:22.870 --> 00:07:27.400 align:middle line:84% So that's, if you follow this 90% and 75% rule 00:07:27.400 --> 00:07:31.170 align:middle line:84% so you can enjoy this tax benefit at this level, no income 00:07:31.170 --> 00:07:33.670 align:middle line:90% tax, at this level, income tax. 00:07:33.670 --> 00:07:37.840 align:middle line:84% So that's the basic idea of REITs. 00:07:37.840 --> 00:07:41.860 align:middle line:84% So then, of course, as a company, 00:07:41.860 --> 00:07:45.070 align:middle line:84% they become a publicly listed company. 00:07:45.070 --> 00:07:46.360 align:middle line:90% They invest in real estate. 00:07:46.360 --> 00:07:48.760 align:middle line:84% Then we say, OK, then let's compare 00:07:48.760 --> 00:07:53.440 align:middle line:90% a little bit of this for me. 00:07:53.440 --> 00:07:56.140 align:middle line:84% You, as a investor, we directly go 00:07:56.140 --> 00:07:58.570 align:middle line:84% to buy real estate, a commercial real estate. 00:07:58.570 --> 00:08:02.740 align:middle line:84% Or I buy the stock of the REITs, and the REITs 00:08:02.740 --> 00:08:05.380 align:middle line:84% will go to invest in this real estate. 00:08:05.380 --> 00:08:09.010 align:middle line:84% So that's a direct real estate investing, to buy a building 00:08:09.010 --> 00:08:10.210 align:middle line:90% or buy a property. 00:08:10.210 --> 00:08:15.220 align:middle line:84% Or you buy stocks from REITs, a company, Boston Properties. 00:08:15.220 --> 00:08:17.920 align:middle line:84% And then they will do-- use your money, 00:08:17.920 --> 00:08:20.590 align:middle line:84% pool all the money of the individuals together 00:08:20.590 --> 00:08:23.560 align:middle line:84% to buy real estate and invest in real estate. 00:08:23.560 --> 00:08:26.800 align:middle line:84% So these are two ways, direct way or indirect way 00:08:26.800 --> 00:08:28.520 align:middle line:90% from individual perspective. 00:08:28.520 --> 00:08:32.440 align:middle line:84% And someone can tell me the basics 00:08:32.440 --> 00:08:35.834 align:middle line:84% of the comparison advantage or disadvantage of each one? 00:08:35.834 --> 00:08:38.370 align:middle line:90% 00:08:38.370 --> 00:08:39.575 align:middle line:90% [? Derek. ?] 00:08:39.575 --> 00:08:40.950 align:middle line:84% AUDIENCE: REITs allow you to have 00:08:40.950 --> 00:08:44.250 align:middle line:84% greater geographic diversification versus buying 00:08:44.250 --> 00:08:46.830 align:middle line:90% direct real estate, perhaps. 00:08:46.830 --> 00:08:47.760 align:middle line:90% SIQI ZHENG: Why? 00:08:47.760 --> 00:08:50.745 align:middle line:84% But why you can have this geographic diversification? 00:08:50.745 --> 00:08:52.870 align:middle line:84% AUDIENCE: Well, because the rates are larger scale. 00:08:52.870 --> 00:08:56.790 align:middle line:84% So like, for example, we could own properties 00:08:56.790 --> 00:08:58.960 align:middle line:84% in every geography in the United States, 00:08:58.960 --> 00:09:02.100 align:middle line:84% so you're able to diversify away some 00:09:02.100 --> 00:09:04.050 align:middle line:84% of the idiosyncratic risk that comes along 00:09:04.050 --> 00:09:07.122 align:middle line:84% with an individual city or municipality. 00:09:07.122 --> 00:09:07.830 align:middle line:90% SIQI ZHENG: Yeah. 00:09:07.830 --> 00:09:10.440 align:middle line:84% I think the basic rationale, logic 00:09:10.440 --> 00:09:12.180 align:middle line:84% is, as individuals, we don't have 00:09:12.180 --> 00:09:14.200 align:middle line:90% so much money for ourselves. 00:09:14.200 --> 00:09:16.620 align:middle line:84% It's very hard for common people like us 00:09:16.620 --> 00:09:19.880 align:middle line:84% to invest in so many countries, to go there to buy buildings. 00:09:19.880 --> 00:09:22.620 align:middle line:84% Then since REITs are stocks, they are small pieces, 00:09:22.620 --> 00:09:25.770 align:middle line:84% then you can buy different stocks. 00:09:25.770 --> 00:09:29.500 align:middle line:84% AUDIENCE: So REITs were conceived as a pre-tax vehicles, 00:09:29.500 --> 00:09:32.780 align:middle line:84% so that's their most important characteristic. 00:09:32.780 --> 00:09:35.910 align:middle line:84% So if you invested in direct real estate instead of a REIT, 00:09:35.910 --> 00:09:39.270 align:middle line:84% you will be taxed, for example, on your corporation level 00:09:39.270 --> 00:09:41.130 align:middle line:90% and then on your income level. 00:09:41.130 --> 00:09:44.250 align:middle line:84% And the REIT, whatever income comes out of the REIT 00:09:44.250 --> 00:09:45.773 align:middle line:90% is tax exempt-- 00:09:45.773 --> 00:09:46.440 align:middle line:90% SIQI ZHENG: Yes. 00:09:46.440 --> 00:09:46.950 align:middle line:90% AUDIENCE: --in a way. 00:09:46.950 --> 00:09:49.380 align:middle line:84% And you're only taxed on the income you had of it. 00:09:49.380 --> 00:09:50.160 align:middle line:90% SIQI ZHENG: Yes. 00:09:50.160 --> 00:09:52.770 align:middle line:84% AUDIENCE: I think that's the main advantage of investing 00:09:52.770 --> 00:09:55.230 align:middle line:90% of REITs, direct real estate. 00:09:55.230 --> 00:09:56.400 align:middle line:90% SIQI ZHENG: Tax advantage. 00:09:56.400 --> 00:09:57.270 align:middle line:90% Please. 00:09:57.270 --> 00:09:59.340 align:middle line:84% AUDIENCE: I think it's also that in case of-- 00:09:59.340 --> 00:10:02.400 align:middle line:84% it's not a shared-- it's a shared loss or a shared risk 00:10:02.400 --> 00:10:04.860 align:middle line:84% because so many people are investing together 00:10:04.860 --> 00:10:07.330 align:middle line:84% as opposed to buying a direct property, 00:10:07.330 --> 00:10:09.220 align:middle line:84% you're alone, like sharing the risk. 00:10:09.220 --> 00:10:11.200 align:middle line:84% SIQI ZHENG: You want this feeling of together. 00:10:11.200 --> 00:10:12.990 align:middle line:84% You mean here in the United States? 00:10:12.990 --> 00:10:14.203 align:middle line:90% You mentioned India or-- 00:10:14.203 --> 00:10:15.120 align:middle line:90% AUDIENCE: Yeah, it's-- 00:10:15.120 --> 00:10:15.935 align:middle line:90% SIQI ZHENG: Also in India. 00:10:15.935 --> 00:10:17.730 align:middle line:84% AUDIENCE: They'll mutually find something like that. 00:10:17.730 --> 00:10:18.630 align:middle line:90% SIQI ZHENG: OK. 00:10:18.630 --> 00:10:21.270 align:middle line:90% Please, and then you. 00:10:21.270 --> 00:10:23.610 align:middle line:84% AUDIENCE: Already you don't need that much, 00:10:23.610 --> 00:10:26.010 align:middle line:84% that big amount capitals to invest 00:10:26.010 --> 00:10:28.790 align:middle line:84% in [INAUDIBLE] by a small amount compared 00:10:28.790 --> 00:10:31.010 align:middle line:84% to the direct investment that we need 00:10:31.010 --> 00:10:33.502 align:middle line:84% to have that large capital [INAUDIBLE]. 00:10:33.502 --> 00:10:34.210 align:middle line:90% SIQI ZHENG: Yeah. 00:10:34.210 --> 00:10:34.700 align:middle line:90% AUDIENCE: [INAUDIBLE] 00:10:34.700 --> 00:10:36.367 align:middle line:84% SIQI ZHENG: You don't have enough money. 00:10:36.367 --> 00:10:39.590 align:middle line:84% Not everyone can directly invest in real estate. 00:10:39.590 --> 00:10:41.820 align:middle line:84% AUDIENCE: Investment is also more liquid. 00:10:41.820 --> 00:10:42.930 align:middle line:90% SIQI ZHENG: Liquid, yes. 00:10:42.930 --> 00:10:43.830 align:middle line:90% You can buy and sell. 00:10:43.830 --> 00:10:44.610 align:middle line:90% Today, you'll buy. 00:10:44.610 --> 00:10:45.560 align:middle line:90% Tomorrow, you'll sell. 00:10:45.560 --> 00:10:49.730 align:middle line:84% But a building, you need a broker, and it takes so long. 00:10:49.730 --> 00:10:54.290 align:middle line:84% So given this so good benefit and advantages, 00:10:54.290 --> 00:10:57.620 align:middle line:84% in this classroom, who has invested in REITs? 00:10:57.620 --> 00:10:58.880 align:middle line:90% Please raise your hand. 00:10:58.880 --> 00:11:00.540 align:middle line:90% In your own money. 00:11:00.540 --> 00:11:02.510 align:middle line:90% I invested. 00:11:02.510 --> 00:11:04.080 align:middle line:90% OK, not so many. 00:11:04.080 --> 00:11:05.790 align:middle line:84% Since it's so good, you should consider. 00:11:05.790 --> 00:11:08.870 align:middle line:84% But I only bought a little bit of REITs. 00:11:08.870 --> 00:11:14.630 align:middle line:84% So we already covered all this, basically REITs stock. 00:11:14.630 --> 00:11:17.010 align:middle line:84% They're stocks, so they are highly liquid. 00:11:17.010 --> 00:11:18.980 align:middle line:84% You can buy today, sell tomorrow, 00:11:18.980 --> 00:11:20.750 align:middle line:84% and you even don't need to know what are 00:11:20.750 --> 00:11:23.120 align:middle line:90% the real properties underlying. 00:11:23.120 --> 00:11:24.170 align:middle line:90% So you don't know. 00:11:24.170 --> 00:11:26.000 align:middle line:84% Maybe they just put the money to invest 00:11:26.000 --> 00:11:28.580 align:middle line:84% in global, all kinds of cities, countries, 00:11:28.580 --> 00:11:32.450 align:middle line:84% and you don't need to go to there to see these buildings. 00:11:32.450 --> 00:11:38.460 align:middle line:84% And they're very transparent because the stock market and all 00:11:38.460 --> 00:11:39.450 align:middle line:90% these advantages. 00:11:39.450 --> 00:11:42.240 align:middle line:84% Especially for our small investors, 00:11:42.240 --> 00:11:43.955 align:middle line:84% we really cannot do this first one. 00:11:43.955 --> 00:11:47.340 align:middle line:90% 00:11:47.340 --> 00:11:52.350 align:middle line:84% But then another thing is you have lower control. 00:11:52.350 --> 00:11:55.380 align:middle line:84% But you need to make the trade off because, 00:11:55.380 --> 00:11:56.880 align:middle line:90% if you really want to control-- 00:11:56.880 --> 00:11:58.140 align:middle line:90% you're some control freak-- 00:11:58.140 --> 00:12:00.490 align:middle line:84% then you really want to do private equity. 00:12:00.490 --> 00:12:02.940 align:middle line:84% You really want to hands on to change your property, 00:12:02.940 --> 00:12:04.410 align:middle line:90% or you really want to invest. 00:12:04.410 --> 00:12:08.030 align:middle line:84% For this, you just invest so indirectly. 00:12:08.030 --> 00:12:11.670 align:middle line:84% You even don't know what are the buildings behind. 00:12:11.670 --> 00:12:14.200 align:middle line:90% So that's basically the idea. 00:12:14.200 --> 00:12:17.520 align:middle line:84% As we said, REITs, basically the US 00:12:17.520 --> 00:12:21.330 align:middle line:84% is the birthplace of the modern REITs. 00:12:21.330 --> 00:12:24.540 align:middle line:84% But other countries and regions also 00:12:24.540 --> 00:12:29.260 align:middle line:84% followed and adopted the REITs approach. 00:12:29.260 --> 00:12:31.260 align:middle line:84% There's so many countries now have 00:12:31.260 --> 00:12:32.880 align:middle line:84% REITs because it's a very good way 00:12:32.880 --> 00:12:35.840 align:middle line:84% to make very, very illiquid-- real estate 00:12:35.840 --> 00:12:38.800 align:middle line:84% assets become a liquid thing that common people can invest 00:12:38.800 --> 00:12:39.300 align:middle line:90% in. 00:12:39.300 --> 00:12:44.405 align:middle line:84% So this is a very innovation of the financial investment 00:12:44.405 --> 00:12:44.905 align:middle line:90% vehicle. 00:12:44.905 --> 00:12:47.930 align:middle line:90% 00:12:47.930 --> 00:12:51.330 align:middle line:84% I anyone to tell me some story of the REITs in your countries? 00:12:51.330 --> 00:12:53.300 align:middle line:90% So the US, we know. 00:12:53.300 --> 00:12:55.220 align:middle line:90% We all know, and we invest in. 00:12:55.220 --> 00:12:57.920 align:middle line:90% But other countries? 00:12:57.920 --> 00:12:59.650 align:middle line:84% Just now, you already talked India. 00:12:59.650 --> 00:13:03.568 align:middle line:84% Do you want to say more, when India started the REITs? 00:13:03.568 --> 00:13:05.110 align:middle line:84% AUDIENCE: I don't know much about it. 00:13:05.110 --> 00:13:08.470 align:middle line:84% For me, it's like a concept [INAUDIBLE]. 00:13:08.470 --> 00:13:12.450 align:middle line:84% SIQI ZHENG: OK, any other stories? 00:13:12.450 --> 00:13:13.350 align:middle line:90% Please. 00:13:13.350 --> 00:13:16.740 align:middle line:84% AUDIENCE: So in Colombia, we have an adapted figure 00:13:16.740 --> 00:13:17.410 align:middle line:90% of a REIT. 00:13:17.410 --> 00:13:19.680 align:middle line:90% It's called the PEY. 00:13:19.680 --> 00:13:21.373 align:middle line:90% It was founded in 20-- 00:13:21.373 --> 00:13:22.540 align:middle line:90% it's not on the [? board. ?] 00:13:22.540 --> 00:13:23.165 align:middle line:90% SIQI ZHENG: OK. 00:13:23.165 --> 00:13:27.150 align:middle line:84% AUDIENCE: It was founded in 2008 by a former colleague 00:13:27.150 --> 00:13:29.040 align:middle line:90% of Sam Zell. 00:13:29.040 --> 00:13:31.050 align:middle line:84% So what he did was basically adapt 00:13:31.050 --> 00:13:33.480 align:middle line:84% the REIT model, the American REIT model, 00:13:33.480 --> 00:13:36.490 align:middle line:90% to adapt to our tax laws. 00:13:36.490 --> 00:13:39.450 align:middle line:90% And it works basically the same. 00:13:39.450 --> 00:13:40.890 align:middle line:90% It's a pre-tax vehicle. 00:13:40.890 --> 00:13:43.390 align:middle line:90% It's open. 00:13:43.390 --> 00:13:46.870 align:middle line:84% It's priced in the BVC, which is the Bolsa de Valores 00:13:46.870 --> 00:13:47.740 align:middle line:90% de Colombiana. 00:13:47.740 --> 00:13:50.400 align:middle line:84% It's the Wall Street of Colombia. 00:13:50.400 --> 00:13:52.360 align:middle line:90% It's really small, so it's-- 00:13:52.360 --> 00:13:56.153 align:middle line:84% SIQI ZHENG: That was the first one, first REITs, the first one. 00:13:56.153 --> 00:13:57.070 align:middle line:90% AUDIENCE: Three REITs. 00:13:57.070 --> 00:13:58.480 align:middle line:90% SIQI ZHENG: Three weeks, OK. 00:13:58.480 --> 00:14:00.237 align:middle line:84% AUDIENCE: That's the biggest one. 00:14:00.237 --> 00:14:05.900 align:middle line:84% That's 120 million square feet under management. 00:14:05.900 --> 00:14:08.710 align:middle line:84% And because our market is so small, 00:14:08.710 --> 00:14:10.450 align:middle line:84% it's not like in the States that you have 00:14:10.450 --> 00:14:12.710 align:middle line:90% REITs for each type of assets. 00:14:12.710 --> 00:14:15.010 align:middle line:84% You have a office street, like BXP. 00:14:15.010 --> 00:14:16.720 align:middle line:90% You have a-- 00:14:16.720 --> 00:14:19.463 align:middle line:84% SIQI ZHENG: Industrial, like a Prologis. 00:14:19.463 --> 00:14:21.130 align:middle line:84% AUDIENCE: You have different [INAUDIBLE] 00:14:21.130 --> 00:14:25.425 align:middle line:84% they have from hospitality to retail to multifamily. 00:14:25.425 --> 00:14:26.050 align:middle line:90% SIQI ZHENG: OK. 00:14:26.050 --> 00:14:27.370 align:middle line:90% AUDIENCE: Every type of asset. 00:14:27.370 --> 00:14:28.840 align:middle line:90% It's rather new. 00:14:28.840 --> 00:14:30.795 align:middle line:84% People still don't-- are not very educated, 00:14:30.795 --> 00:14:32.170 align:middle line:84% so they don't really understand-- 00:14:32.170 --> 00:14:35.060 align:middle line:84% SIQI ZHENG: You should go back to do this REITs. 00:14:35.060 --> 00:14:36.700 align:middle line:90% Julio, your story. 00:14:36.700 --> 00:14:40.090 align:middle line:84% AUDIENCE: Yeah, in Mexico, we started in 2011, 00:14:40.090 --> 00:14:41.230 align:middle line:90% if I'm not mistaken. 00:14:41.230 --> 00:14:44.540 align:middle line:84% And I think what's interesting is-- 00:14:44.540 --> 00:14:46.460 align:middle line:90% 2010, there it is. 00:14:46.460 --> 00:14:49.970 align:middle line:84% Since then, the commercial property prices 00:14:49.970 --> 00:14:55.740 align:middle line:84% have increased significantly until before the pandemic. 00:14:55.740 --> 00:14:57.660 align:middle line:90% SIQI ZHENG: What other stories? 00:14:57.660 --> 00:15:00.930 align:middle line:90% Later, we will talk about China. 00:15:00.930 --> 00:15:02.400 align:middle line:90% Other besides China? 00:15:02.400 --> 00:15:04.320 align:middle line:90% South Korea? 00:15:04.320 --> 00:15:06.040 align:middle line:90% AUDIENCE: South Korea. 00:15:06.040 --> 00:15:08.880 align:middle line:84% [INAUDIBLE] I believe that more [INAUDIBLE]. 00:15:08.880 --> 00:15:11.290 align:middle line:90% SIQI ZHENG: Infrastructure. 00:15:11.290 --> 00:15:13.060 align:middle line:90% AUDIENCE: Macquarie-- Macquarie. 00:15:13.060 --> 00:15:14.620 align:middle line:84% I believe that was a Macquarie one. 00:15:14.620 --> 00:15:15.245 align:middle line:90% SIQI ZHENG: OK. 00:15:15.245 --> 00:15:16.840 align:middle line:90% AUDIENCE: But it does-- 00:15:16.840 --> 00:15:18.970 align:middle line:84% the control thing issue, control issue 00:15:18.970 --> 00:15:23.190 align:middle line:84% does become an issue because the valuations for REITs 00:15:23.190 --> 00:15:25.890 align:middle line:90% are maybe lower than market. 00:15:25.890 --> 00:15:28.260 align:middle line:90% And people try to-- 00:15:28.260 --> 00:15:31.410 align:middle line:84% there have been attempts to take over. 00:15:31.410 --> 00:15:33.190 align:middle line:90% SIQI ZHENG: OK, good. 00:15:33.190 --> 00:15:37.270 align:middle line:84% So, yes, I can talk a little bit more about China's REITs, 00:15:37.270 --> 00:15:39.280 align:middle line:90% and China is an expert. 00:15:39.280 --> 00:15:45.780 align:middle line:84% So I want to tell a joke or a small story, not a real story. 00:15:45.780 --> 00:15:50.170 align:middle line:84% So basically, 20 years ago, 20 years or more than 20 years ago, 00:15:50.170 --> 00:15:55.470 align:middle line:84% when I was a graduate student and my husband also a graduate. 00:15:55.470 --> 00:15:58.770 align:middle line:84% We were classmates in graduate school, 00:15:58.770 --> 00:16:02.160 align:middle line:84% and we were together in a kind of real estate center 00:16:02.160 --> 00:16:05.290 align:middle line:84% doing some research with our professors. 00:16:05.290 --> 00:16:07.500 align:middle line:90% We share one professor. 00:16:07.500 --> 00:16:09.150 align:middle line:84% That's why we got to know each other. 00:16:09.150 --> 00:16:11.520 align:middle line:84% And then he was a Master's student, 00:16:11.520 --> 00:16:13.360 align:middle line:90% and I was a PhD student. 00:16:13.360 --> 00:16:17.250 align:middle line:84% So then the professor said, you, please 00:16:17.250 --> 00:16:20.330 align:middle line:84% do your thesis, master's thesis, on REITs. 00:16:20.330 --> 00:16:23.200 align:middle line:84% At that time, there was no REITs at all in China. 00:16:23.200 --> 00:16:25.630 align:middle line:84% But there was a lot of discussions 00:16:25.630 --> 00:16:27.490 align:middle line:84% because they understood this so good. 00:16:27.490 --> 00:16:29.390 align:middle line:84% And they really want to do REITs. 00:16:29.390 --> 00:16:34.810 align:middle line:84% Then my professor asked my boyfriend at that time 00:16:34.810 --> 00:16:38.050 align:middle line:84% to do Master's thesis on REITs and to evaluate 00:16:38.050 --> 00:16:41.920 align:middle line:84% to forecast when is a good timing for China to launch 00:16:41.920 --> 00:16:42.680 align:middle line:90% REITs. 00:16:42.680 --> 00:16:44.530 align:middle line:90% That was 2002. 00:16:44.530 --> 00:16:48.670 align:middle line:84% And then he did some research and analysis. 00:16:48.670 --> 00:16:53.080 align:middle line:84% And then he came up with a conclusion it's not ready. 00:16:53.080 --> 00:16:55.270 align:middle line:84% Next 20 years, no REITs for China. 00:16:55.270 --> 00:16:58.540 align:middle line:84% No need, no need to do REITs because there 00:16:58.540 --> 00:17:03.010 align:middle line:84% are other huge capital sources and no incentive 00:17:03.010 --> 00:17:06.260 align:middle line:84% and very difficult legal, things like that. 00:17:06.260 --> 00:17:11.109 align:middle line:84% I wrote the thesis to elaborate on why no REITs 00:17:11.109 --> 00:17:14.030 align:middle line:84% and to compare China and the US systems. 00:17:14.030 --> 00:17:17.200 align:middle line:84% And then so that was his Master's thesis 00:17:17.200 --> 00:17:23.470 align:middle line:84% about to prove that there's no need for China to have REITs 00:17:23.470 --> 00:17:25.599 align:middle line:90% in the next 10 or 20 years. 00:17:25.599 --> 00:17:28.028 align:middle line:90% That became the reality. 00:17:28.028 --> 00:17:30.070 align:middle line:84% Although it's a lot of discussion, if you search, 00:17:30.070 --> 00:17:33.010 align:middle line:84% there's a lot of discussion back to early 2000, 00:17:33.010 --> 00:17:34.880 align:middle line:84% a lot of discussion about China's REITs. 00:17:34.880 --> 00:17:38.265 align:middle line:84% But it's just a dream, and nobody really launch. 00:17:38.265 --> 00:17:39.640 align:middle line:84% And the government did not launch 00:17:39.640 --> 00:17:42.610 align:middle line:90% until the recent recession. 00:17:42.610 --> 00:17:46.050 align:middle line:84% The recent pandemic recession, that, 00:17:46.050 --> 00:17:48.190 align:middle line:84% at that time, the Chinese government 00:17:48.190 --> 00:17:51.020 align:middle line:84% really had the real incentive, not the tax advantage. 00:17:51.020 --> 00:17:52.450 align:middle line:90% It's not about taxing. 00:17:52.450 --> 00:17:56.470 align:middle line:84% It's just because they didn't have enough funds, especially 00:17:56.470 --> 00:17:58.360 align:middle line:90% all the cities. 00:17:58.360 --> 00:18:00.910 align:middle line:84% All the cities, they were losing a lot of money 00:18:00.910 --> 00:18:02.450 align:middle line:84% from land sale and all the things. 00:18:02.450 --> 00:18:05.210 align:middle line:84% And first, the cities were very rich. 00:18:05.210 --> 00:18:08.770 align:middle line:84% They had enough money to build infrastructure, highway, 00:18:08.770 --> 00:18:11.060 align:middle line:84% high-speed rail and all the things. 00:18:11.060 --> 00:18:13.390 align:middle line:84% And then, suddenly, they lost a lot 00:18:13.390 --> 00:18:16.150 align:middle line:84% of money because of the COVID and all the other things, 00:18:16.150 --> 00:18:17.820 align:middle line:90% and they couldn't sell the land. 00:18:17.820 --> 00:18:20.150 align:middle line:84% The real estate market was declining. 00:18:20.150 --> 00:18:22.510 align:middle line:90% Then they said, OK, REITs, good. 00:18:22.510 --> 00:18:25.580 align:middle line:84% REITs is a very good solution for the cities. 00:18:25.580 --> 00:18:28.690 align:middle line:84% And then they launched a very different animal. 00:18:28.690 --> 00:18:33.730 align:middle line:84% It's not like what we mentioned here in the United States model, 00:18:33.730 --> 00:18:34.960 align:middle line:90% like this model. 00:18:34.960 --> 00:18:37.160 align:middle line:84% And the tax advantage is very important 00:18:37.160 --> 00:18:39.850 align:middle line:84% and how the disadvantage, advantage. 00:18:39.850 --> 00:18:41.410 align:middle line:90% They say, OK, REITs, good. 00:18:41.410 --> 00:18:43.540 align:middle line:84% They will use this concept, but they only 00:18:43.540 --> 00:18:46.960 align:middle line:84% apply to infrastructure field, infrastructure area. 00:18:46.960 --> 00:18:51.070 align:middle line:84% The transportation and the sewage and all the things 00:18:51.070 --> 00:18:54.290 align:middle line:84% infrastructure say, OK, now you are poor, right? 00:18:54.290 --> 00:18:55.010 align:middle line:90% No problem. 00:18:55.010 --> 00:18:58.180 align:middle line:84% You use REITs to get money from individual people 00:18:58.180 --> 00:18:59.500 align:middle line:90% or the citizens. 00:18:59.500 --> 00:19:00.980 align:middle line:90% So that's the REITs. 00:19:00.980 --> 00:19:05.770 align:middle line:84% Then they extract the money from common people, become REITs, 00:19:05.770 --> 00:19:11.068 align:middle line:84% and then they have another alternative way to gather money. 00:19:11.068 --> 00:19:12.610 align:middle line:84% And then they invest in real estate-- 00:19:12.610 --> 00:19:14.360 align:middle line:90% not real estate, infrastructure. 00:19:14.360 --> 00:19:15.620 align:middle line:90% So that's China's REITs. 00:19:15.620 --> 00:19:19.390 align:middle line:84% I don't think they have this tax advantage at all, no. 00:19:19.390 --> 00:19:23.307 align:middle line:84% And just another way for the city and state governments, 00:19:23.307 --> 00:19:25.140 align:middle line:84% especially state and provincial governments, 00:19:25.140 --> 00:19:28.060 align:middle line:84% to extract money from common people. 00:19:28.060 --> 00:19:31.570 align:middle line:84% And after this, now, I think it's two years old. 00:19:31.570 --> 00:19:34.210 align:middle line:90% It's a two years old, new baby. 00:19:34.210 --> 00:19:38.200 align:middle line:84% Recently, I got this information from the news 00:19:38.200 --> 00:19:40.990 align:middle line:90% that they plan to-- 00:19:40.990 --> 00:19:42.880 align:middle line:84% these two years was so successful, 00:19:42.880 --> 00:19:45.550 align:middle line:84% they have several very huge infrastructure 00:19:45.550 --> 00:19:49.240 align:middle line:84% REITs, so successful, then they will 00:19:49.240 --> 00:19:54.010 align:middle line:84% considering to expand the rates to commercial real estate using 00:19:54.010 --> 00:19:58.670 align:middle line:84% retail as the first step, like malls and the department stores. 00:19:58.670 --> 00:20:01.780 align:middle line:84% Not all-- the first cities became so poor 00:20:01.780 --> 00:20:05.530 align:middle line:84% they wanted to use REITs to save those cities to give them 00:20:05.530 --> 00:20:08.510 align:middle line:84% another way to gather money for cities to invest. 00:20:08.510 --> 00:20:10.040 align:middle line:84% Now, the real estate market was so 00:20:10.040 --> 00:20:13.070 align:middle line:84% bad they wanted to use this to stimulate the real estate 00:20:13.070 --> 00:20:13.830 align:middle line:90% market. 00:20:13.830 --> 00:20:16.200 align:middle line:90% So that's my understanding. 00:20:16.200 --> 00:20:18.770 align:middle line:90% And we can listen to CNN. 00:20:18.770 --> 00:20:21.650 align:middle line:90% But first, your question. 00:20:21.650 --> 00:20:24.300 align:middle line:84% AUDIENCE: Are these publicly owned REITs, 00:20:24.300 --> 00:20:25.790 align:middle line:84% you're saying cities issued REITs 00:20:25.790 --> 00:20:27.415 align:middle line:84% to pay for their infrastructure so this 00:20:27.415 --> 00:20:30.643 align:middle line:90% is an alternative to bond? 00:20:30.643 --> 00:20:32.310 align:middle line:84% SIQI ZHENG: That's a very good question. 00:20:32.310 --> 00:20:33.770 align:middle line:90% I think the cities, they-- 00:20:33.770 --> 00:20:36.080 align:middle line:84% the cities, not the city government, not the 00:20:36.080 --> 00:20:38.810 align:middle line:84% mayor himself, but they establish 00:20:38.810 --> 00:20:41.430 align:middle line:90% quasi-company corporation. 00:20:41.430 --> 00:20:45.470 align:middle line:84% Then they make that a listed company with the main business 00:20:45.470 --> 00:20:47.550 align:middle line:90% of infrastructure investment. 00:20:47.550 --> 00:20:51.830 align:middle line:84% Then they use that as a special vehicle to issue REITs, not 00:20:51.830 --> 00:20:55.370 align:middle line:90% the government itself. 00:20:55.370 --> 00:20:58.080 align:middle line:84% AUDIENCE: It's interesting that, actually, it's 00:20:58.080 --> 00:21:00.420 align:middle line:84% the same thing, same situation happened in Thailand. 00:21:00.420 --> 00:21:04.760 align:middle line:84% So the REIT concept was initially introduced 00:21:04.760 --> 00:21:07.610 align:middle line:84% during and after the Asian financial crisis 00:21:07.610 --> 00:21:11.807 align:middle line:84% to Thailand to help provide liquidity to disperse property-- 00:21:11.807 --> 00:21:13.140 align:middle line:90% SIQI ZHENG: To save that market. 00:21:13.140 --> 00:21:13.765 align:middle line:90% AUDIENCE: Yeah. 00:21:13.765 --> 00:21:16.940 align:middle line:84% So before then in the '90s, we only had property fund 00:21:16.940 --> 00:21:21.500 align:middle line:84% for the poor or the real estate asset together. 00:21:21.500 --> 00:21:23.840 align:middle line:90% But now we have [INAUDIBLE]-- 00:21:23.840 --> 00:21:26.702 align:middle line:84% because of that event, we have almost 20 REITs [INAUDIBLE]. 00:21:26.702 --> 00:21:27.410 align:middle line:90% SIQI ZHENG: Yeah. 00:21:27.410 --> 00:21:29.155 align:middle line:90% So always there was a trigger. 00:21:29.155 --> 00:21:29.780 align:middle line:90% AUDIENCE: Yeah. 00:21:29.780 --> 00:21:31.613 align:middle line:84% SIQI ZHENG: Otherwise, why bother themselves 00:21:31.613 --> 00:21:33.260 align:middle line:90% to create a new thing, right? 00:21:33.260 --> 00:21:34.530 align:middle line:90% There's a trigger. 00:21:34.530 --> 00:21:37.350 align:middle line:84% Now we have two experts for China's REITs, but be brief. 00:21:37.350 --> 00:21:40.980 align:middle line:84% You first and then [? Marcos. ?] Go ahead. 00:21:40.980 --> 00:21:43.700 align:middle line:90% Because CNN came from Guangzhou. 00:21:43.700 --> 00:21:45.840 align:middle line:84% That's a very big real estate company in China. 00:21:45.840 --> 00:21:48.000 align:middle line:90% They establish first REITs. 00:21:48.000 --> 00:21:50.586 align:middle line:90% 00:21:50.586 --> 00:21:53.690 align:middle line:84% AUDIENCE: This problem, because the China government 00:21:53.690 --> 00:21:57.980 align:middle line:84% financial framework [INAUDIBLE] to the financial 00:21:57.980 --> 00:22:05.200 align:middle line:84% [INAUDIBLE] because in China, with real estate, 00:22:05.200 --> 00:22:07.270 align:middle line:90% then they're [INAUDIBLE]. 00:22:07.270 --> 00:22:08.920 align:middle line:90% SIQI ZHENG: Separated. 00:22:08.920 --> 00:22:14.950 align:middle line:84% AUDIENCE: So [INAUDIBLE] very dangerously 00:22:14.950 --> 00:22:18.460 align:middle line:84% we can combine those two functions to mix. 00:22:18.460 --> 00:22:24.500 align:middle line:84% So also the public [INAUDIBLE], like the logistic, 00:22:24.500 --> 00:22:29.090 align:middle line:84% like some prefer this to REITs It's 00:22:29.090 --> 00:22:31.472 align:middle line:90% more stable than [INAUDIBLE]. 00:22:31.472 --> 00:22:32.180 align:middle line:90% SIQI ZHENG: Yeah. 00:22:32.180 --> 00:22:36.730 align:middle line:84% AUDIENCE: A commercial, like [INAUDIBLE] now 00:22:36.730 --> 00:22:40.330 align:middle line:84% I'm a real REIT in China [INAUDIBLE] 00:22:40.330 --> 00:22:43.053 align:middle line:84% also from Singapore and Hong Kong. 00:22:43.053 --> 00:22:43.720 align:middle line:90% SIQI ZHENG: Yes. 00:22:43.720 --> 00:22:44.830 align:middle line:90% OK, good. 00:22:44.830 --> 00:22:45.920 align:middle line:90% And Marcos? 00:22:45.920 --> 00:22:49.618 align:middle line:84% AUDIENCE: Yeah, and before the property rates in [? 2010 ?] 00:22:49.618 --> 00:22:53.830 align:middle line:84% to [? 2021, ?] they are like crazy rates within some 00:22:53.830 --> 00:22:56.320 align:middle line:90% companies, like logistic levers. 00:22:56.320 --> 00:23:00.540 align:middle line:84% And so the topic is about infrastructure, 00:23:00.540 --> 00:23:03.035 align:middle line:84% and that's because the government wants to control 00:23:03.035 --> 00:23:04.680 align:middle line:90% the REITs, the financial REITs. 00:23:04.680 --> 00:23:09.150 align:middle line:84% They don't want some speculative trading 00:23:09.150 --> 00:23:12.030 align:middle line:84% for the commercial real estate market. 00:23:12.030 --> 00:23:14.250 align:middle line:84% But now, since the situation changed, they do-- 00:23:14.250 --> 00:23:17.550 align:middle line:84% SIQI ZHENG: Yeah, they really want to rescue the real estate 00:23:17.550 --> 00:23:18.510 align:middle line:90% market there. 00:23:18.510 --> 00:23:22.620 align:middle line:84% AUDIENCE: [INAUDIBLE] open to affordable housing at first 00:23:22.620 --> 00:23:26.460 align:middle line:84% and then open to those kind of commercial lulls 00:23:26.460 --> 00:23:29.850 align:middle line:84% and [? property ?] [? scores. ?] So that's a gradual challenge 00:23:29.850 --> 00:23:33.330 align:middle line:90% of the government's intention. 00:23:33.330 --> 00:23:35.940 align:middle line:84% But at the same time, the situation there 00:23:35.940 --> 00:23:39.780 align:middle line:84% is still at very beginning, so comparing the overall volume 00:23:39.780 --> 00:23:42.022 align:middle line:90% is very, very few. 00:23:42.022 --> 00:23:42.980 align:middle line:90% SIQI ZHENG: Very small. 00:23:42.980 --> 00:23:44.870 align:middle line:84% AUDIENCE: Yeah a group [INAUDIBLE] very small 00:23:44.870 --> 00:23:46.710 align:middle line:84% compared to the overall real estate market. 00:23:46.710 --> 00:23:51.740 align:middle line:84% And at the same time, the major investors are not common people. 00:23:51.740 --> 00:23:54.390 align:middle line:84% Major investors do like the private equity firms. 00:23:54.390 --> 00:23:55.360 align:middle line:90% SIQI ZHENG: OK, not us. 00:23:55.360 --> 00:23:59.660 align:middle line:84% AUDIENCE: [INAUDIBLE] so will probably 00:23:59.660 --> 00:24:03.460 align:middle line:84% be limited because the kind of information 00:24:03.460 --> 00:24:07.523 align:middle line:90% asymmetry because [INAUDIBLE]. 00:24:07.523 --> 00:24:08.440 align:middle line:90% SIQI ZHENG: Very good. 00:24:08.440 --> 00:24:11.290 align:middle line:84% So that's why I'm thinking the following-- 00:24:11.290 --> 00:24:13.450 align:middle line:90% this is beyond our class. 00:24:13.450 --> 00:24:15.940 align:middle line:84% I'm going to organize a conference 00:24:15.940 --> 00:24:22.530 align:middle line:84% in the summer, July 31 and August 1, on Asia's real estate. 00:24:22.530 --> 00:24:25.170 align:middle line:84% So that will be an academic conference. 00:24:25.170 --> 00:24:29.560 align:middle line:84% We have papers, but I'm thinking, to organize a industry 00:24:29.560 --> 00:24:33.400 align:middle line:84% event to talk about these risks in emerging markets, especially 00:24:33.400 --> 00:24:36.910 align:middle line:84% Asia, because you can see these totally different animals. 00:24:36.910 --> 00:24:39.590 align:middle line:84% If you are interested, we can later discuss. 00:24:39.590 --> 00:24:40.990 align:middle line:90% I know you are interested. 00:24:40.990 --> 00:24:42.760 align:middle line:84% And if you are interested, we can 00:24:42.760 --> 00:24:46.570 align:middle line:84% talk together and how to organize because we have so many 00:24:46.570 --> 00:24:48.020 align:middle line:90% like new market for REITs. 00:24:48.020 --> 00:24:50.890 align:middle line:84% But this is not our focus of class. 00:24:50.890 --> 00:24:55.240 align:middle line:84% I need to quickly move on to green REITs 00:24:55.240 --> 00:24:57.880 align:middle line:84% because we are talking about sustainability. 00:24:57.880 --> 00:25:04.540 align:middle line:84% So basically, even if you look back to our MSRED thesis-- 00:25:04.540 --> 00:25:07.790 align:middle line:84% I think we have the database of the MSRED theses. 00:25:07.790 --> 00:25:11.300 align:middle line:84% And in the past several decades, you will see-- 00:25:11.300 --> 00:25:14.960 align:middle line:84% you can find some theses on the REITs topic 00:25:14.960 --> 00:25:17.280 align:middle line:84% to evaluate this emerging market. 00:25:17.280 --> 00:25:24.200 align:middle line:84% So last year an MSRED student, Chenzhou, he 00:25:24.200 --> 00:25:31.610 align:middle line:84% worked with me and to interview institutional investors and then 00:25:31.610 --> 00:25:33.710 align:middle line:84% and also REITs and private equity 00:25:33.710 --> 00:25:38.780 align:middle line:84% to understand their preference and their perception 00:25:38.780 --> 00:25:42.140 align:middle line:84% of sustainable real estate, given that they are REITs 00:25:42.140 --> 00:25:45.020 align:middle line:84% or given that there are some institutional investors 00:25:45.020 --> 00:25:46.730 align:middle line:90% behind the REITs. 00:25:46.730 --> 00:25:50.850 align:middle line:84% Like big ones, they invest in REITs from the capital market. 00:25:50.850 --> 00:25:54.930 align:middle line:84% And what are they thinking about this ESG investment? 00:25:54.930 --> 00:25:57.090 align:middle line:90% So that's from his thesis. 00:25:57.090 --> 00:26:03.320 align:middle line:84% So basically, now, more than 60% of the REITs 00:26:03.320 --> 00:26:07.430 align:middle line:84% by the equity market, this big size, they have-- they 00:26:07.430 --> 00:26:11.580 align:middle line:84% are very ambitious, these carbon targets, 00:26:11.580 --> 00:26:13.910 align:middle line:90% so net zero carbon targets. 00:26:13.910 --> 00:26:18.390 align:middle line:84% And it's a very sharp increase, year by year increase. 00:26:18.390 --> 00:26:21.960 align:middle line:84% So now the ESG also very, very important for many, many REITs. 00:26:21.960 --> 00:26:23.462 align:middle line:90% They have their own net zero. 00:26:23.462 --> 00:26:24.920 align:middle line:84% When they talk about net zero, they 00:26:24.920 --> 00:26:28.460 align:middle line:84% mean their portfolio, all the property they are investing. 00:26:28.460 --> 00:26:32.700 align:middle line:84% And then it's a huge increase, this impact of investors. 00:26:32.700 --> 00:26:36.890 align:middle line:84% But the very, very important thing is, who are pushing them? 00:26:36.890 --> 00:26:38.390 align:middle line:90% Who are pushing them? 00:26:38.390 --> 00:26:40.710 align:middle line:90% So that's now we are doing-- 00:26:40.710 --> 00:26:42.900 align:middle line:90% we want you to do some research. 00:26:42.900 --> 00:26:47.720 align:middle line:84% [? Chen's ?] thesis is kind of preparation of our in-depth-- 00:26:47.720 --> 00:26:50.330 align:middle line:84% understanding is like the following. 00:26:50.330 --> 00:26:53.600 align:middle line:90% REITs is here. 00:26:53.600 --> 00:26:55.950 align:middle line:90% We have 250 or 260 REITs. 00:26:55.950 --> 00:26:57.380 align:middle line:90% That's for the United States. 00:26:57.380 --> 00:27:00.600 align:middle line:84% And you will see that they're very, very aggressive. 00:27:00.600 --> 00:27:02.990 align:middle line:84% They are saying they're going to do 00:27:02.990 --> 00:27:05.450 align:middle line:90% all those net zero and the ESG. 00:27:05.450 --> 00:27:06.800 align:middle line:90% But why? 00:27:06.800 --> 00:27:09.020 align:middle line:84% Whether are these managers of the REITs 00:27:09.020 --> 00:27:12.470 align:middle line:84% they really from the heart want to do so, 00:27:12.470 --> 00:27:20.970 align:middle line:84% or they have the underlying institutional investors, 00:27:20.970 --> 00:27:22.350 align:middle line:90% they are pushing them. 00:27:22.350 --> 00:27:27.920 align:middle line:84% So these are the institutional investors, 00:27:27.920 --> 00:27:31.820 align:middle line:84% like Pension Fund and those insurance companies 00:27:31.820 --> 00:27:35.570 align:middle line:84% and the asset management, BlackRock, all those. 00:27:35.570 --> 00:27:41.810 align:middle line:84% So then he went to interview those investors, this underlying 00:27:41.810 --> 00:27:44.010 align:middle line:90% behind the scene the REITs. 00:27:44.010 --> 00:27:49.220 align:middle line:84% And the key thing is most of the institutional investors 00:27:49.220 --> 00:27:50.910 align:middle line:84% behind the REITs they are pushing, 00:27:50.910 --> 00:27:53.750 align:middle line:84% so these managers, they need to get capital. 00:27:53.750 --> 00:27:55.800 align:middle line:90% This is capital allocation. 00:27:55.800 --> 00:28:00.710 align:middle line:84% So if those investors said, I want to invest in you. 00:28:00.710 --> 00:28:01.920 align:middle line:90% I will give you capital-- 00:28:01.920 --> 00:28:07.370 align:middle line:84% if you, your portfolio, have a higher share of the sustainable 00:28:07.370 --> 00:28:09.540 align:middle line:84% real estate, we will invest in you. 00:28:09.540 --> 00:28:12.300 align:middle line:84% So they need to get capital from them. 00:28:12.300 --> 00:28:14.880 align:middle line:84% So that's the fundamental driving force. 00:28:14.880 --> 00:28:17.420 align:middle line:84% And from our interviews from them, 00:28:17.420 --> 00:28:19.610 align:middle line:84% the key things, the key patterns we found 00:28:19.610 --> 00:28:23.420 align:middle line:84% is that the leaders, these very, very-- 00:28:23.420 --> 00:28:26.030 align:middle line:90% the most pro-ESG investors-- 00:28:26.030 --> 00:28:31.890 align:middle line:84% those people-- are from Europe and Western and northern Europe. 00:28:31.890 --> 00:28:34.910 align:middle line:84% So I give you some examples of the Central Bank of Norway 00:28:34.910 --> 00:28:39.210 align:middle line:84% and also the Netherlands Dutch Pension Fund. 00:28:39.210 --> 00:28:41.960 align:middle line:84% All those are very big guys, and they invest heavily 00:28:41.960 --> 00:28:43.760 align:middle line:90% in the US REITs. 00:28:43.760 --> 00:28:46.100 align:middle line:90% And they're really pro-ESG. 00:28:46.100 --> 00:28:49.110 align:middle line:84% They say, if you do this, I will give you money, capital. 00:28:49.110 --> 00:28:53.510 align:middle line:90% And then among all our-- 00:28:53.510 --> 00:28:56.058 align:middle line:84% and the Canadian Pension Fund, you 00:28:56.058 --> 00:28:58.350 align:middle line:84% can see all these Canadian real estate investment asset 00:28:58.350 --> 00:29:03.450 align:middle line:84% management and the global in Sydney and Australia, Germany. 00:29:03.450 --> 00:29:07.050 align:middle line:84% All those, they were the people behind this. 00:29:07.050 --> 00:29:12.600 align:middle line:84% And then for the Middle East, Middle East, very, very big 00:29:12.600 --> 00:29:15.580 align:middle line:84% guys, the investors, they care the least. 00:29:15.580 --> 00:29:16.210 align:middle line:90% I'm not sure. 00:29:16.210 --> 00:29:18.960 align:middle line:84% Maybe we didn't really interview those who care a lot. 00:29:18.960 --> 00:29:20.590 align:middle line:90% But overall, they care least. 00:29:20.590 --> 00:29:22.590 align:middle line:90% And the US states in the middle. 00:29:22.590 --> 00:29:24.340 align:middle line:84% I think maybe Asia also in the middle. 00:29:24.340 --> 00:29:26.440 align:middle line:84% So that's the basic pattern of this. 00:29:26.440 --> 00:29:30.720 align:middle line:84% So now the understanding is this is a principal agent. 00:29:30.720 --> 00:29:31.805 align:middle line:90% This is the principal. 00:29:31.805 --> 00:29:33.180 align:middle line:84% They have capital in their hands. 00:29:33.180 --> 00:29:37.270 align:middle line:84% This agent, they get money and manage the properties. 00:29:37.270 --> 00:29:40.162 align:middle line:84% So maybe they are very aggressive, 00:29:40.162 --> 00:29:42.120 align:middle line:84% not because they really think that's important, 00:29:42.120 --> 00:29:43.450 align:middle line:90% but they need the capital. 00:29:43.450 --> 00:29:47.940 align:middle line:84% So that's our preliminary funding. 00:29:47.940 --> 00:29:50.340 align:middle line:84% But now we are going to do in-depth research. 00:29:50.340 --> 00:29:53.480 align:middle line:84% We have not started yet is to understand we will 00:29:53.480 --> 00:29:55.350 align:middle line:90% have survey of those people. 00:29:55.350 --> 00:29:59.090 align:middle line:84% We will have more survey of those people to understand. 00:29:59.090 --> 00:30:02.890 align:middle line:84% So then I went back to literature. 00:30:02.890 --> 00:30:06.180 align:middle line:84% With any research, we need to look at what have been done. 00:30:06.180 --> 00:30:07.790 align:middle line:90% That's the literature. 00:30:07.790 --> 00:30:11.090 align:middle line:84% From the literature, we do see, for example, 00:30:11.090 --> 00:30:14.960 align:middle line:90% this paper, 2012 paper. 00:30:14.960 --> 00:30:19.060 align:middle line:84% They did observe that doing well by doing 00:30:19.060 --> 00:30:23.763 align:middle line:84% good, that also applies to green REITs, not just green buildings. 00:30:23.763 --> 00:30:25.180 align:middle line:84% Remember, green buildings, we have 00:30:25.180 --> 00:30:26.750 align:middle line:90% this doing well by doing good. 00:30:26.750 --> 00:30:29.410 align:middle line:84% If you are green building, then you 00:30:29.410 --> 00:30:31.070 align:middle line:90% have a price on rent premium. 00:30:31.070 --> 00:30:33.190 align:middle line:84% But for REITs, similarly, but it's 00:30:33.190 --> 00:30:34.810 align:middle line:90% a portfolio-level aggregate. 00:30:34.810 --> 00:30:38.800 align:middle line:84% Each REIT may own hundreds of buildings, aggregate together. 00:30:38.800 --> 00:30:44.140 align:middle line:84% So they measure the sheer of the green properties 00:30:44.140 --> 00:30:47.690 align:middle line:84% in that portfolio, the entire portfolio. 00:30:47.690 --> 00:30:50.380 align:middle line:84% And then you can see that, for this REIT, 00:30:50.380 --> 00:30:52.300 align:middle line:90% they are holding the portfolio. 00:30:52.300 --> 00:30:57.670 align:middle line:84% The share of LEED-Certified properties and the Energy Star 00:30:57.670 --> 00:30:59.960 align:middle line:84% also rose very fast in recent years. 00:30:59.960 --> 00:31:02.890 align:middle line:90% And then they did say-- 00:31:02.890 --> 00:31:05.070 align:middle line:84% they did, from the data, they have all-- 00:31:05.070 --> 00:31:06.950 align:middle line:84% the REIT research relatively easy. 00:31:06.950 --> 00:31:07.450 align:middle line:90% Why? 00:31:07.450 --> 00:31:09.980 align:middle line:84% Because you have all the data, because they're all stocks. 00:31:09.980 --> 00:31:14.110 align:middle line:84% You just all-- get all the data, annual report, all the things, 00:31:14.110 --> 00:31:15.490 align:middle line:90% very public information. 00:31:15.490 --> 00:31:17.780 align:middle line:84% So they got all the data of the REITs. 00:31:17.780 --> 00:31:21.560 align:middle line:84% And they found that, for those greener REITs in terms 00:31:21.560 --> 00:31:25.100 align:middle line:84% of the higher share of the green buildings in their portfolio, 00:31:25.100 --> 00:31:27.230 align:middle line:84% they have higher return on equity 00:31:27.230 --> 00:31:30.400 align:middle line:90% and also higher return on asset. 00:31:30.400 --> 00:31:34.100 align:middle line:84% And then they also have better performance. 00:31:34.100 --> 00:31:36.580 align:middle line:84% Then, of course, you can argue, when 00:31:36.580 --> 00:31:38.710 align:middle line:84% we do rigorous research-- remember, 00:31:38.710 --> 00:31:41.230 align:middle line:84% I mentioned this apple-to-apple comparison 00:31:41.230 --> 00:31:43.510 align:middle line:90% before the spring break. 00:31:43.510 --> 00:31:46.480 align:middle line:84% We also tested you on in the midterm of the apple 00:31:46.480 --> 00:31:51.130 align:middle line:84% to apple, not that we need to be very careful of the endogeneity. 00:31:51.130 --> 00:31:54.100 align:middle line:84% So then this kind of argument really, really 00:31:54.100 --> 00:31:58.730 align:middle line:84% may have this problem is the reverse causality. 00:31:58.730 --> 00:32:02.110 align:middle line:84% For example, better perform the rates. 00:32:02.110 --> 00:32:03.418 align:middle line:90% They are doing very well. 00:32:03.418 --> 00:32:04.460 align:middle line:90% They have a lot of money. 00:32:04.460 --> 00:32:05.950 align:middle line:90% They make a lot of money. 00:32:05.950 --> 00:32:07.610 align:middle line:90% They have better performance. 00:32:07.610 --> 00:32:10.190 align:middle line:90% So they are more cash rich. 00:32:10.190 --> 00:32:12.730 align:middle line:84% So if they are more cash rich, then they 00:32:12.730 --> 00:32:15.920 align:middle line:84% can spend more on green investment. 00:32:15.920 --> 00:32:18.550 align:middle line:84% If you struggle with your performance, 00:32:18.550 --> 00:32:22.510 align:middle line:84% you need to, first, keep your bottom line. 00:32:22.510 --> 00:32:24.820 align:middle line:84% You don't have time or you don't have the resource 00:32:24.820 --> 00:32:26.750 align:middle line:90% to think about these ESG things. 00:32:26.750 --> 00:32:29.170 align:middle line:84% But the return rates, REITs, they 00:32:29.170 --> 00:32:30.990 align:middle line:90% are thinking about the image. 00:32:30.990 --> 00:32:32.780 align:middle line:84% They are thinking about their social image 00:32:32.780 --> 00:32:36.900 align:middle line:84% and the cooperation, social responsibility. 00:32:36.900 --> 00:32:37.790 align:middle line:90% So they invest. 00:32:37.790 --> 00:32:40.190 align:middle line:90% So that's the reverse causality. 00:32:40.190 --> 00:32:40.857 align:middle line:90% Bill. 00:32:40.857 --> 00:32:42.440 align:middle line:84% AUDIENCE: Another concern I would have 00:32:42.440 --> 00:32:44.220 align:middle line:84% is that this is over 10 years old. 00:32:44.220 --> 00:32:49.100 align:middle line:84% And so now as LEED becomes more and more common in the market, 00:32:49.100 --> 00:32:51.673 align:middle line:84% I'd be interested to see this study more updated-- 00:32:51.673 --> 00:32:52.340 align:middle line:90% SIQI ZHENG: Yes. 00:32:52.340 --> 00:32:53.690 align:middle line:84% AUDIENCE: [? --to see if ?] the results are the same now. 00:32:53.690 --> 00:32:54.260 align:middle line:90% SIQI ZHENG: Yes. 00:32:54.260 --> 00:32:54.968 align:middle line:90% That's very good. 00:32:54.968 --> 00:32:58.730 align:middle line:84% Maybe another thesis can be done to update this because this 00:32:58.730 --> 00:33:01.440 align:middle line:90% is not that difficult to do. 00:33:01.440 --> 00:33:05.480 align:middle line:84% So there's so many channels, so then they 00:33:05.480 --> 00:33:09.740 align:middle line:84% use very advanced econometrics to address 00:33:09.740 --> 00:33:13.190 align:middle line:84% that potential other channels than they really, 00:33:13.190 --> 00:33:17.250 align:middle line:84% really pin down in their data set. 00:33:17.250 --> 00:33:19.580 align:middle line:84% If you portfolio-- your portfolio 00:33:19.580 --> 00:33:23.690 align:middle line:84% of your all the properties, increase of 1% of the LEED 00:33:23.690 --> 00:33:28.910 align:middle line:84% buildings in your portfolio, you have this ROA increase 00:33:28.910 --> 00:33:32.750 align:middle line:84% by 3.5 percentage points and ROE increased 00:33:32.750 --> 00:33:34.590 align:middle line:90% by 8 percentage points. 00:33:34.590 --> 00:33:41.180 align:middle line:84% And you also have a lower beta, means your portfolio is-- 00:33:41.180 --> 00:33:42.630 align:middle line:90% have a lower risk. 00:33:42.630 --> 00:33:47.520 align:middle line:84% So that's, really, supported by the building-level analysis. 00:33:47.520 --> 00:33:51.680 align:middle line:84% The building-level analysis said that, when there was recession 00:33:51.680 --> 00:33:54.380 align:middle line:84% like that, ups and downs, those energy-- more 00:33:54.380 --> 00:33:57.870 align:middle line:84% energy-efficient buildings, they perform relatively better. 00:33:57.870 --> 00:33:59.870 align:middle line:84% So that's why, if you have a portfolio 00:33:59.870 --> 00:34:04.070 align:middle line:84% of those greener assets, you can handle the up 00:34:04.070 --> 00:34:06.355 align:middle line:84% and downs of the recession much better. 00:34:06.355 --> 00:34:08.940 align:middle line:90% 00:34:08.940 --> 00:34:11.409 align:middle line:84% So that's why-- OK, and this is all the research. 00:34:11.409 --> 00:34:14.050 align:middle line:90% We want to update this. 00:34:14.050 --> 00:34:15.880 align:middle line:90% So that's why we are doing this. 00:34:15.880 --> 00:34:18.429 align:middle line:84% So now I have two related REITs projects. 00:34:18.429 --> 00:34:19.020 align:middle line:90% One is this. 00:34:19.020 --> 00:34:21.449 align:middle line:90% The other is this. 00:34:21.449 --> 00:34:24.239 align:middle line:84% So now we are doing something like that. 00:34:24.239 --> 00:34:28.050 align:middle line:84% From the news, we saw all this applied 00:34:28.050 --> 00:34:33.150 align:middle line:84% to net zero, this, this, that, that, cities, and the states 00:34:33.150 --> 00:34:35.520 align:middle line:84% and also companies and all the REITs, 00:34:35.520 --> 00:34:37.409 align:middle line:90% so all the REITs they have. 00:34:37.409 --> 00:34:39.120 align:middle line:90% So I went to-- 00:34:39.120 --> 00:34:41.650 align:middle line:84% in the spring break, I went to San Francisco. 00:34:41.650 --> 00:34:42.670 align:middle line:90% I went to Prologis. 00:34:42.670 --> 00:34:45.070 align:middle line:84% They are very, very progressive on this. 00:34:45.070 --> 00:34:48.030 align:middle line:84% They are logistics and supply chain. 00:34:48.030 --> 00:34:51.780 align:middle line:84% And we know BXP is very, very progressive, 00:34:51.780 --> 00:34:56.790 align:middle line:84% and we have other data center REITs and all the REITs. 00:34:56.790 --> 00:35:00.810 align:middle line:84% So we collect data of all the REITs. 00:35:00.810 --> 00:35:04.830 align:middle line:84% We have a long-time span, 2010 to 2019. 00:35:04.830 --> 00:35:06.900 align:middle line:84% And then with all the information-- 00:35:06.900 --> 00:35:08.500 align:middle line:90% some are missing values-- 00:35:08.500 --> 00:35:11.830 align:middle line:84% altogether, we have now currently our database 178 00:35:11.830 --> 00:35:14.420 align:middle line:90% REITs in our data set. 00:35:14.420 --> 00:35:19.160 align:middle line:84% Then we want to understand not just the, like in this way, 00:35:19.160 --> 00:35:23.400 align:middle line:84% to count how many green properties. 00:35:23.400 --> 00:35:25.160 align:middle line:90% That's one way. 00:35:25.160 --> 00:35:29.270 align:middle line:84% And then now we are going to do two things, green talking 00:35:29.270 --> 00:35:30.590 align:middle line:90% and green doing. 00:35:30.590 --> 00:35:32.420 align:middle line:90% Maybe they are different. 00:35:32.420 --> 00:35:37.280 align:middle line:84% So because we observed so much talking, a lot of talking, 00:35:37.280 --> 00:35:40.220 align:middle line:84% and the news release and the conference 00:35:40.220 --> 00:35:43.280 align:middle line:84% and like that, and then green talking 00:35:43.280 --> 00:35:46.070 align:middle line:84% is one indicator because the investors, as us, we 00:35:46.070 --> 00:35:48.350 align:middle line:84% don't know really, where are the properties? 00:35:48.350 --> 00:35:49.340 align:middle line:90% What's going on? 00:35:49.340 --> 00:35:52.880 align:middle line:90% We just read the news. 00:35:52.880 --> 00:35:55.790 align:middle line:84% So we are going to construct a green talking 00:35:55.790 --> 00:35:59.660 align:middle line:84% index by extracting their news conference 00:35:59.660 --> 00:36:05.240 align:middle line:84% or some senior c-suite leader's media report 00:36:05.240 --> 00:36:08.570 align:middle line:84% or their annual report, say, they are-- how 00:36:08.570 --> 00:36:09.690 align:middle line:90% ambitious they are. 00:36:09.690 --> 00:36:12.080 align:middle line:84% Then we create a green talking index. 00:36:12.080 --> 00:36:16.560 align:middle line:84% And then we measure their green doing, whether they really 00:36:16.560 --> 00:36:20.880 align:middle line:84% invest in real green things or just a cheap talk. 00:36:20.880 --> 00:36:23.280 align:middle line:90% So then we have green talking. 00:36:23.280 --> 00:36:24.810 align:middle line:90% We have green doing. 00:36:24.810 --> 00:36:29.670 align:middle line:84% Then we say how they really affect the performance 00:36:29.670 --> 00:36:31.290 align:middle line:90% on stock market. 00:36:31.290 --> 00:36:34.890 align:middle line:84% Thus, we have beta alpha and the asset return on equity, 00:36:34.890 --> 00:36:36.780 align:middle line:90% all the outcome variables. 00:36:36.780 --> 00:36:38.760 align:middle line:90% So that's our research. 00:36:38.760 --> 00:36:42.690 align:middle line:84% So we are not in this stage of construct, this green talking 00:36:42.690 --> 00:36:44.220 align:middle line:90% and green doing indexes. 00:36:44.220 --> 00:36:46.800 align:middle line:90% But we have our hypothesis. 00:36:46.800 --> 00:36:50.670 align:middle line:84% So we say, for example, this is the stock price. 00:36:50.670 --> 00:36:52.560 align:middle line:90% This is the time. 00:36:52.560 --> 00:36:57.120 align:middle line:84% Then, suddenly, there's a green pledge, net zero, 2040. 00:36:57.120 --> 00:36:59.760 align:middle line:84% Then the stock market might respond because it's 00:36:59.760 --> 00:37:01.260 align:middle line:90% an information shock. 00:37:01.260 --> 00:37:06.510 align:middle line:84% Then it's going up if, if the investors, 00:37:06.510 --> 00:37:07.920 align:middle line:90% they really appreciate that. 00:37:07.920 --> 00:37:11.590 align:middle line:84% If we don't care, then maybe there's no response. 00:37:11.590 --> 00:37:14.160 align:middle line:84% But if the investors, the individuals, they care, 00:37:14.160 --> 00:37:16.840 align:middle line:84% maybe they will see this as a information shock. 00:37:16.840 --> 00:37:21.720 align:middle line:84% But whether it can sustain or they will go back, then, 00:37:21.720 --> 00:37:24.780 align:middle line:84% of course, if you just talk, just talking, then, 00:37:24.780 --> 00:37:27.330 align:middle line:84% after some time, the investor noticed, 00:37:27.330 --> 00:37:29.890 align:middle line:84% I realized that there is no real action. 00:37:29.890 --> 00:37:31.090 align:middle line:90% So they go back. 00:37:31.090 --> 00:37:33.510 align:middle line:84% But for the green doing for those REITs may 00:37:33.510 --> 00:37:35.700 align:middle line:90% continue to increase if-- 00:37:35.700 --> 00:37:39.570 align:middle line:84% will be sustained if the market really appreciates this ESG 00:37:39.570 --> 00:37:40.740 align:middle line:90% investment. 00:37:40.740 --> 00:37:42.630 align:middle line:84% So that's our hypothesis number one. 00:37:42.630 --> 00:37:45.360 align:middle line:84% Maybe it's the opposite direction because you 00:37:45.360 --> 00:37:46.500 align:middle line:90% talk about all those-- 00:37:46.500 --> 00:37:50.040 align:middle line:84% whether what's these two relationship, 00:37:50.040 --> 00:37:51.460 align:middle line:90% you have your core business. 00:37:51.460 --> 00:37:53.340 align:middle line:90% You cannot everyday do ESG. 00:37:53.340 --> 00:37:56.790 align:middle line:84% If this may be costly and if there 00:37:56.790 --> 00:38:00.030 align:middle line:84% is no synergy as a substitution between these two things, 00:38:00.030 --> 00:38:02.040 align:middle line:90% you spend more money on ESG. 00:38:02.040 --> 00:38:04.240 align:middle line:84% You have less resource on other things. 00:38:04.240 --> 00:38:05.500 align:middle line:90% Maybe that will go down. 00:38:05.500 --> 00:38:06.450 align:middle line:90% We don't know. 00:38:06.450 --> 00:38:07.980 align:middle line:90% That's an open question. 00:38:07.980 --> 00:38:13.430 align:middle line:84% So that's the-- give you a sense of what we are doing on this. 00:38:13.430 --> 00:38:17.570 align:middle line:84% And then let's move on to green bond. 00:38:17.570 --> 00:38:20.210 align:middle line:90% So green bond is that side. 00:38:20.210 --> 00:38:24.020 align:middle line:90% Equity side is a risk, the debt. 00:38:24.020 --> 00:38:28.280 align:middle line:84% So green bonds is quite easy to understand. 00:38:28.280 --> 00:38:31.760 align:middle line:84% So if you understand the bond, what's the definition of bond? 00:38:31.760 --> 00:38:36.030 align:middle line:84% Bond, basically, fixed-income investment vehicle. 00:38:36.030 --> 00:38:38.540 align:middle line:90% Equity is not fixed, variable. 00:38:38.540 --> 00:38:40.070 align:middle line:90% Bond is fixed. 00:38:40.070 --> 00:38:42.200 align:middle line:90% And who can issue? 00:38:42.200 --> 00:38:43.410 align:middle line:90% Government can issue. 00:38:43.410 --> 00:38:47.300 align:middle line:84% Just now we talk about this Treasury bond 00:38:47.300 --> 00:38:50.240 align:middle line:84% issued by Federal Government here in the United States. 00:38:50.240 --> 00:38:53.390 align:middle line:84% And, here, cities' municipal bonds, they can also issue. 00:38:53.390 --> 00:38:56.270 align:middle line:84% So this government cities and the government cities 00:38:56.270 --> 00:38:59.510 align:middle line:84% and the Federal Government and all this can issue. 00:38:59.510 --> 00:39:02.397 align:middle line:84% And big companies, they can also issue green bonds. 00:39:02.397 --> 00:39:03.980 align:middle line:84% So that's not just a government bonds, 00:39:03.980 --> 00:39:07.140 align:middle line:84% but also there's a corporate bonds. 00:39:07.140 --> 00:39:11.970 align:middle line:84% So that's the of basic concept of bonds. 00:39:11.970 --> 00:39:14.230 align:middle line:90% So bond is a fixed income. 00:39:14.230 --> 00:39:17.220 align:middle line:84% So when we [? issue ?] this, it's kind of a paper, saying, 00:39:17.220 --> 00:39:21.090 align:middle line:84% if you buy this and, each month, if you just 00:39:21.090 --> 00:39:24.720 align:middle line:84% lend money to us, to the government or to the company, 00:39:24.720 --> 00:39:26.820 align:middle line:84% then each month you have a interest rate, 00:39:26.820 --> 00:39:28.840 align:middle line:90% then they will pay back. 00:39:28.840 --> 00:39:33.960 align:middle line:84% So you have a very secured income flow as determined 00:39:33.960 --> 00:39:36.830 align:middle line:84% as specified in this contract of the bond. 00:39:36.830 --> 00:39:38.490 align:middle line:90% So that's bond. 00:39:38.490 --> 00:39:40.770 align:middle line:90% So they have different purposes. 00:39:40.770 --> 00:39:45.500 align:middle line:84% For example, municipal bond, the city is here. 00:39:45.500 --> 00:39:47.140 align:middle line:84% My understanding the city is here. 00:39:47.140 --> 00:39:50.230 align:middle line:84% They issue municipal bonds because they really need money 00:39:50.230 --> 00:39:52.480 align:middle line:84% to build the city infrastructure and school and all 00:39:52.480 --> 00:39:53.860 align:middle line:90% this public service. 00:39:53.860 --> 00:39:56.710 align:middle line:84% So they issue bonds, municipal bonds. 00:39:56.710 --> 00:39:59.780 align:middle line:84% And then they issue municipal bonds. 00:39:59.780 --> 00:40:01.060 align:middle line:90% And then you need to pay back. 00:40:01.060 --> 00:40:02.025 align:middle line:90% You can issue bonds. 00:40:02.025 --> 00:40:03.650 align:middle line:84% Then you collect money, a lot of money. 00:40:03.650 --> 00:40:06.880 align:middle line:84% Then you build roads and all the infrastructure, schools, 00:40:06.880 --> 00:40:08.980 align:middle line:90% hospitals in your city. 00:40:08.980 --> 00:40:10.810 align:middle line:90% And then you need to pay back. 00:40:10.810 --> 00:40:15.070 align:middle line:84% The main revenue that the cities can pay back 00:40:15.070 --> 00:40:19.630 align:middle line:84% can be the new money coming in, can pay back the property tax. 00:40:19.630 --> 00:40:22.570 align:middle line:84% Because you maintain your city public service, 00:40:22.570 --> 00:40:27.770 align:middle line:84% your housing price can be very stable and even increase. 00:40:27.770 --> 00:40:30.700 align:middle line:84% Then you collect property tax, which is a flow. 00:40:30.700 --> 00:40:32.290 align:middle line:84% Every year, you collect, collect. 00:40:32.290 --> 00:40:34.940 align:middle line:84% Then you use your property tax to pay back. 00:40:34.940 --> 00:40:39.100 align:middle line:84% The basic logic behind is you borrow money, upfront money, 00:40:39.100 --> 00:40:41.350 align:middle line:84% because you need to, first, invest. 00:40:41.350 --> 00:40:46.310 align:middle line:84% And then your city becomes beautiful and better service. 00:40:46.310 --> 00:40:48.960 align:middle line:84% Then your housing price will be good. 00:40:48.960 --> 00:40:51.960 align:middle line:84% And then you collect property tax every year to pay back. 00:40:51.960 --> 00:40:55.280 align:middle line:90% So that's the idea. 00:40:55.280 --> 00:40:59.090 align:middle line:84% But as far as I know, in many developing countries, 00:40:59.090 --> 00:41:02.660 align:middle line:84% the cities, they are not allowed to issue bonds. 00:41:02.660 --> 00:41:04.910 align:middle line:84% And especially when the institution 00:41:04.910 --> 00:41:09.180 align:middle line:84% is not that very well developed, then you have no property tax. 00:41:09.180 --> 00:41:13.580 align:middle line:84% If the city does not have a stable income flow stream, 00:41:13.580 --> 00:41:15.300 align:middle line:90% how can you issue bonds? 00:41:15.300 --> 00:41:17.790 align:middle line:84% You issue bonds, and you have no money to pay back. 00:41:17.790 --> 00:41:20.990 align:middle line:84% So you have-- so you don't have any credibility, 00:41:20.990 --> 00:41:23.330 align:middle line:84% and you don't have guarantee for the future cash flow 00:41:23.330 --> 00:41:24.810 align:middle line:90% to pay back. 00:41:24.810 --> 00:41:27.740 align:middle line:84% So that's I think that's a very big problem. 00:41:27.740 --> 00:41:30.920 align:middle line:84% From my understanding, my research, in Chinese cities, 00:41:30.920 --> 00:41:33.590 align:middle line:84% they don't have property tax until now today. 00:41:33.590 --> 00:41:36.060 align:middle line:84% They only have very little tiny pilot. 00:41:36.060 --> 00:41:38.100 align:middle line:90% It's not real property tax. 00:41:38.100 --> 00:41:40.080 align:middle line:84% If you don't have property tax, then-- 00:41:40.080 --> 00:41:41.310 align:middle line:90% but they still need money. 00:41:41.310 --> 00:41:44.000 align:middle line:84% The cities, they really need money to build, build, build. 00:41:44.000 --> 00:41:48.560 align:middle line:84% And then they have a quasi-municipal bond then 00:41:48.560 --> 00:41:52.490 align:middle line:84% the city cannot issue because the city has no income flow 00:41:52.490 --> 00:41:54.260 align:middle line:90% inflow for future. 00:41:54.260 --> 00:41:57.320 align:middle line:84% They establish a special vehicle. 00:41:57.320 --> 00:41:59.480 align:middle line:84% A special vehicle is a quasi-company 00:41:59.480 --> 00:42:01.850 align:middle line:84% like a state-owned infrastructure investment 00:42:01.850 --> 00:42:02.700 align:middle line:90% company. 00:42:02.700 --> 00:42:03.990 align:middle line:90% And they issue bonds. 00:42:03.990 --> 00:42:05.990 align:middle line:84% They really issue bonds because they need money. 00:42:05.990 --> 00:42:08.690 align:middle line:84% They issue bonds, and then they don't have property tax. 00:42:08.690 --> 00:42:09.930 align:middle line:90% But they sell the land. 00:42:09.930 --> 00:42:11.630 align:middle line:90% The government sells the land. 00:42:11.630 --> 00:42:18.450 align:middle line:84% And then they use the land sale revenue to pay back the bond. 00:42:18.450 --> 00:42:22.770 align:middle line:84% So basically, this is a government, city government. 00:42:22.770 --> 00:42:24.470 align:middle line:90% They cannot issue. 00:42:24.470 --> 00:42:29.900 align:middle line:84% This is a city government bank, the company, they issue. 00:42:29.900 --> 00:42:36.380 align:middle line:84% They issue bonds then to all the citizens. 00:42:36.380 --> 00:42:38.190 align:middle line:90% Then money come in. 00:42:38.190 --> 00:42:42.130 align:middle line:84% Then they transfer the money, not-- even don't transfer, 00:42:42.130 --> 00:42:45.050 align:middle line:84% just to build, build the infrastructure. 00:42:45.050 --> 00:42:48.530 align:middle line:84% And then there's no property tax, and the land, 00:42:48.530 --> 00:42:50.875 align:middle line:84% the government sells the land, land sale. 00:42:50.875 --> 00:42:53.390 align:middle line:90% 00:42:53.390 --> 00:42:55.680 align:middle line:84% Then the money, get the money to pay back. 00:42:55.680 --> 00:42:58.170 align:middle line:84% But this is very dangerous and very risky. 00:42:58.170 --> 00:43:01.110 align:middle line:84% When you can sell the land, you can pay back. 00:43:01.110 --> 00:43:03.530 align:middle line:84% When you run out of the land sale revenue, 00:43:03.530 --> 00:43:05.040 align:middle line:90% then you are in trouble. 00:43:05.040 --> 00:43:07.640 align:middle line:84% You are in trouble because you cannot sell because the market 00:43:07.640 --> 00:43:09.410 align:middle line:90% is so bad, you cannot sell. 00:43:09.410 --> 00:43:13.190 align:middle line:90% All the city's is shrinking. 00:43:13.190 --> 00:43:15.410 align:middle line:84% Shrinking cities, how you can sell the land? 00:43:15.410 --> 00:43:16.610 align:middle line:90% No money. 00:43:16.610 --> 00:43:18.650 align:middle line:84% And then they say, OK, especially 00:43:18.650 --> 00:43:20.460 align:middle line:90% in the recession, no money. 00:43:20.460 --> 00:43:22.830 align:middle line:84% Then the government all are quiet, oh, no money. 00:43:22.830 --> 00:43:23.810 align:middle line:90% How can we maintain? 00:43:23.810 --> 00:43:26.510 align:middle line:84% Even without building new, how can we maintain? 00:43:26.510 --> 00:43:29.480 align:middle line:84% Then the central government say, OK, we will give you 00:43:29.480 --> 00:43:30.920 align:middle line:90% another thing, the REITs. 00:43:30.920 --> 00:43:34.580 align:middle line:84% So I linked to my REITs story of China because they have no money 00:43:34.580 --> 00:43:35.750 align:middle line:90% and they no land sale. 00:43:35.750 --> 00:43:38.280 align:middle line:84% But they already issued bonds, and they cannot pay back. 00:43:38.280 --> 00:43:41.990 align:middle line:84% Then they create a new thing of REITs. 00:43:41.990 --> 00:43:43.585 align:middle line:84% I talk too much about China because-- 00:43:43.585 --> 00:43:45.552 align:middle line:90% AUDIENCE: [INAUDIBLE] 00:43:45.552 --> 00:43:45.605 align:middle line:90% 00:43:45.605 --> 00:43:46.230 align:middle line:90% SIQI ZHENG: No. 00:43:46.230 --> 00:43:47.980 align:middle line:90% You can still buy if you-- 00:43:47.980 --> 00:43:49.480 align:middle line:90% AUDIENCE: [INAUDIBLE] 00:43:49.480 --> 00:43:52.110 align:middle line:84% SIQI ZHENG: Oh, we are so optimistic about China's 00:43:52.110 --> 00:43:54.150 align:middle line:90% economic recovery. 00:43:54.150 --> 00:43:56.580 align:middle line:84% So if you are interested, come to my China class 00:43:56.580 --> 00:43:58.140 align:middle line:90% this afternoon. 00:43:58.140 --> 00:44:00.250 align:middle line:90% But we will stop here. 00:44:00.250 --> 00:44:02.105 align:middle line:90% But the key thing is REITs. 00:44:02.105 --> 00:44:07.090 align:middle line:90% 00:44:07.090 --> 00:44:09.010 align:middle line:84% The key thing is bonds, and then we 00:44:09.010 --> 00:44:11.050 align:middle line:84% want to understand bonds, green bonds. 00:44:11.050 --> 00:44:12.950 align:middle line:84% We are not talking about general bonds. 00:44:12.950 --> 00:44:15.130 align:middle line:84% We are talking about green bonds. 00:44:15.130 --> 00:44:17.920 align:middle line:90% So now, it's a new huge trend. 00:44:17.920 --> 00:44:22.010 align:middle line:84% From the data you can see from 2017 to 2025, 00:44:22.010 --> 00:44:25.250 align:middle line:84% it's a fast, sharp increase of the green bond. 00:44:25.250 --> 00:44:27.040 align:middle line:90% What does green bonds mean? 00:44:27.040 --> 00:44:32.050 align:middle line:84% Green bonds are either governments or companies, 00:44:32.050 --> 00:44:33.740 align:middle line:90% they issue bonds. 00:44:33.740 --> 00:44:36.850 align:middle line:84% And they said, when they issue, they announce 00:44:36.850 --> 00:44:39.765 align:middle line:84% or they say that we issue the bonds. 00:44:39.765 --> 00:44:41.140 align:middle line:84% We collect the money we are going 00:44:41.140 --> 00:44:44.120 align:middle line:90% to use on green investment. 00:44:44.120 --> 00:44:49.097 align:middle line:84% So that's a very simple concept to say, oh, we issue bonds. 00:44:49.097 --> 00:44:50.680 align:middle line:84% If you buy bonds, I can collect money. 00:44:50.680 --> 00:44:57.370 align:middle line:84% Then I will use renewable energy on wind farm, on solar farm, 00:44:57.370 --> 00:45:01.420 align:middle line:84% on climate resilience investment in coastal areas 00:45:01.420 --> 00:45:05.390 align:middle line:84% in the clean energy of the electricity, something 00:45:05.390 --> 00:45:06.100 align:middle line:90% like that. 00:45:06.100 --> 00:45:07.850 align:middle line:90% So that's the idea. 00:45:07.850 --> 00:45:11.420 align:middle line:84% On this, both government-- if the city want to build, 00:45:11.420 --> 00:45:12.510 align:middle line:90% then they issue. 00:45:12.510 --> 00:45:15.350 align:middle line:84% If the company wants to do green building investment, 00:45:15.350 --> 00:45:16.160 align:middle line:90% they can issue. 00:45:16.160 --> 00:45:17.600 align:middle line:90% So they say that. 00:45:17.600 --> 00:45:18.680 align:middle line:90% Question [INAUDIBLE]. 00:45:18.680 --> 00:45:20.503 align:middle line:84% AUDIENCE: What makes a green bond green, 00:45:20.503 --> 00:45:22.670 align:middle line:84% is it only the project that it's going to be funded? 00:45:22.670 --> 00:45:26.700 align:middle line:84% Or are there special tax benefits of doing this? 00:45:26.700 --> 00:45:29.190 align:middle line:84% Are they tax exempt at the municipal level? 00:45:29.190 --> 00:45:30.960 align:middle line:90% SIQI ZHENG: No, no, no. 00:45:30.960 --> 00:45:34.090 align:middle line:84% That-- no, I don't think they have tax advantage. 00:45:34.090 --> 00:45:37.260 align:middle line:84% But if they invest in those things, if those things, 00:45:37.260 --> 00:45:38.650 align:middle line:90% they have the incentive. 00:45:38.650 --> 00:45:43.600 align:middle line:84% For example, the Biden's Inflation Reduction Bill Act, 00:45:43.600 --> 00:45:48.300 align:middle line:84% if they invest in solar and in electric vehicles, 00:45:48.300 --> 00:45:49.217 align:middle line:90% they get this benefit. 00:45:49.217 --> 00:45:49.883 align:middle line:90% AUDIENCE: Right. 00:45:49.883 --> 00:45:52.260 align:middle line:84% But the investor is not seeing any added benefit of-- 00:45:52.260 --> 00:45:55.440 align:middle line:84% SIQI ZHENG: Yeah, but they may have an actual premium 00:45:55.440 --> 00:45:57.870 align:middle line:90% return from this. 00:45:57.870 --> 00:45:59.520 align:middle line:84% AUDIENCE: Is it based on performance? 00:45:59.520 --> 00:46:01.860 align:middle line:84% Is it kind of retrospectively analyzed? 00:46:01.860 --> 00:46:04.672 align:middle line:84% Or is it just you make the promise and then [INAUDIBLE]. 00:46:04.672 --> 00:46:06.130 align:middle line:84% SIQI ZHENG: You'll make the promise 00:46:06.130 --> 00:46:07.610 align:middle line:90% because that's for the future. 00:46:07.610 --> 00:46:10.030 align:middle line:84% But it's not like a very cheap talking. 00:46:10.030 --> 00:46:14.650 align:middle line:84% Later, you will see they have some way to validate. 00:46:14.650 --> 00:46:18.790 align:middle line:84% So yes, so basically that's huge. 00:46:18.790 --> 00:46:21.940 align:middle line:84% And remember, REITs can also issue bonds 00:46:21.940 --> 00:46:24.640 align:middle line:84% because REITs are also companies, 00:46:24.640 --> 00:46:27.790 align:middle line:84% REITs can borrow money from the bank, or REITs can issue bonds. 00:46:27.790 --> 00:46:34.030 align:middle line:84% REITs can issue new stocks to raise fund. 00:46:34.030 --> 00:46:37.210 align:middle line:84% AUDIENCE: Like US and other countries issue 00:46:37.210 --> 00:46:40.570 align:middle line:84% a bond from [INAUDIBLE] also use that model? 00:46:40.570 --> 00:46:41.993 align:middle line:90% SIQI ZHENG: Now, which model? 00:46:41.993 --> 00:46:43.660 align:middle line:84% AUDIENCE: By the government [INAUDIBLE]. 00:46:43.660 --> 00:46:44.890 align:middle line:90% SIQI ZHENG: Yes, yes. 00:46:44.890 --> 00:46:48.880 align:middle line:84% This is a general, general concept of bond. 00:46:48.880 --> 00:46:51.970 align:middle line:84% So government, and they must have-- people 00:46:51.970 --> 00:46:54.340 align:middle line:84% must have trust in those entities. 00:46:54.340 --> 00:46:56.850 align:middle line:84% that they will pay you back, that you can issue bond. 00:46:56.850 --> 00:46:58.360 align:middle line:84% For example, I cannot issue bonds. 00:46:58.360 --> 00:46:59.530 align:middle line:90% How can I issue? 00:46:59.530 --> 00:47:04.355 align:middle line:84% Nobody will think I can pay back. 00:47:04.355 --> 00:47:08.200 align:middle line:84% So the REITs, they are issuing a lot of green bonds. 00:47:08.200 --> 00:47:11.000 align:middle line:84% So, for example, we always use Boston Properties 00:47:11.000 --> 00:47:12.000 align:middle line:90% because they are coming. 00:47:12.000 --> 00:47:14.590 align:middle line:84% Zhengzhen will have a case study of Boston Properties, 00:47:14.590 --> 00:47:15.760 align:middle line:90% and they are coming here. 00:47:15.760 --> 00:47:18.550 align:middle line:84% And they are across the river, so you can see. 00:47:18.550 --> 00:47:20.440 align:middle line:90% And we are trying to-- 00:47:20.440 --> 00:47:23.800 align:middle line:84% we are now trying to arrange our final presentation 00:47:23.800 --> 00:47:26.620 align:middle line:84% in the Prudential Center building 00:47:26.620 --> 00:47:30.940 align:middle line:84% to give you a business environment to really pitch. 00:47:30.940 --> 00:47:34.690 align:middle line:84% So green bonds, they issued several rounds 00:47:34.690 --> 00:47:37.220 align:middle line:90% of the green bonds. 00:47:37.220 --> 00:47:39.630 align:middle line:84% For those companies, what's the incentive for this? 00:47:39.630 --> 00:47:42.740 align:middle line:84% What's the incentive for them to make the promise 00:47:42.740 --> 00:47:44.883 align:middle line:90% and to issue green bonds? 00:47:44.883 --> 00:47:46.050 align:middle line:90% AUDIENCE: It's cheap for me. 00:47:46.050 --> 00:47:48.250 align:middle line:90% SIQI ZHENG: Cheaper. 00:47:48.250 --> 00:47:51.680 align:middle line:84% The cost of capital will be cheap, cheaper. 00:47:51.680 --> 00:47:54.860 align:middle line:90% Why will be cheaper? 00:47:54.860 --> 00:47:57.220 align:middle line:84% AUDIENCE: [INAUDIBLE], if you go back a slide, 00:47:57.220 --> 00:48:00.510 align:middle line:84% they're priced at like half a percent above the Treasury. 00:48:00.510 --> 00:48:02.750 align:middle line:90% It's really cheap money. 00:48:02.750 --> 00:48:07.700 align:middle line:84% SIQI ZHENG: Yes, so they just need to pay very low interest 00:48:07.700 --> 00:48:11.240 align:middle line:90% rate to these investors. 00:48:11.240 --> 00:48:14.580 align:middle line:90% Yes, so basically, that's true. 00:48:14.580 --> 00:48:19.280 align:middle line:84% For example, this is research already done, 2019 paper. 00:48:19.280 --> 00:48:24.980 align:middle line:84% In this 2019 paper, they look at the asset level and also 00:48:24.980 --> 00:48:31.610 align:middle line:84% the portfolio level and show that the greenness 00:48:31.610 --> 00:48:33.590 align:middle line:84% of the REITs-- for example, they say, 00:48:33.590 --> 00:48:35.660 align:middle line:84% we are going to use this money to invest 00:48:35.660 --> 00:48:39.840 align:middle line:84% in green assets, green buildings, green infrastructure. 00:48:39.840 --> 00:48:43.220 align:middle line:84% They can really lower the bond spread, the cost 00:48:43.220 --> 00:48:44.340 align:middle line:90% of capital of the bond. 00:48:44.340 --> 00:48:46.100 align:middle line:90% They just get cheap capital. 00:48:46.100 --> 00:48:47.480 align:middle line:90% So they show this. 00:48:47.480 --> 00:48:49.080 align:middle line:90% So that's very clear. 00:48:49.080 --> 00:48:50.870 align:middle line:84% But this is, on average-- remember, 00:48:50.870 --> 00:48:53.180 align:middle line:84% all the statistics are on average. 00:48:53.180 --> 00:48:55.320 align:middle line:84% It's not, say, if you tomorrow issue, 00:48:55.320 --> 00:48:57.390 align:middle line:90% then you will definitely get. 00:48:57.390 --> 00:49:02.490 align:middle line:84% So that's a risk example that they issue bonds, 00:49:02.490 --> 00:49:08.160 align:middle line:84% and then they have a lower cost of capital, lower spread. 00:49:08.160 --> 00:49:11.250 align:middle line:84% And this Fannie Mae also issue green bonds. 00:49:11.250 --> 00:49:18.490 align:middle line:84% So this is a government-sponsored enterprise. 00:49:18.490 --> 00:49:22.260 align:middle line:84% So then because, Fannie Mae, they just 00:49:22.260 --> 00:49:26.380 align:middle line:84% purchase a lot of mortgages from the small banks-- 00:49:26.380 --> 00:49:28.800 align:middle line:84% they purchase this mortgage from a small bank. 00:49:28.800 --> 00:49:33.810 align:middle line:84% They securitize them, and they sell to the public market. 00:49:33.810 --> 00:49:38.610 align:middle line:84% And all the mortgages, there are some green building mortgages. 00:49:38.610 --> 00:49:41.710 align:middle line:84% The energy-efficient buildings, the LEED-Certified buildings, 00:49:41.710 --> 00:49:42.510 align:middle line:90% and this. 00:49:42.510 --> 00:49:49.360 align:middle line:84% And then Fannie Mae buy a lot of loans from banks. 00:49:49.360 --> 00:49:52.200 align:middle line:84% The banks lend money to the individual households 00:49:52.200 --> 00:49:53.230 align:middle line:90% and the buildings. 00:49:53.230 --> 00:49:55.830 align:middle line:84% And if those buildings, they are green buildings, 00:49:55.830 --> 00:49:58.920 align:middle line:84% they can identify in the pool of all the mortgages 00:49:58.920 --> 00:50:01.830 align:middle line:84% which are green mortgages, which are not green mortgages. 00:50:01.830 --> 00:50:05.520 align:middle line:84% If your pool has a lot of green mortgages, 00:50:05.520 --> 00:50:09.300 align:middle line:84% then the Fannie Mae said, this pool is a green mortgage pool. 00:50:09.300 --> 00:50:13.575 align:middle line:84% Based on this pool, I'm going to issue green bonds. 00:50:13.575 --> 00:50:14.530 align:middle line:90% I got green bonds. 00:50:14.530 --> 00:50:17.370 align:middle line:84% And then for the mortgage, the underlying green mortgage, 00:50:17.370 --> 00:50:21.075 align:middle line:84% the monthly payment to the bank, the bank 00:50:21.075 --> 00:50:22.200 align:middle line:90% pass through to Fannie Mae. 00:50:22.200 --> 00:50:26.230 align:middle line:84% Fannie Mae will pay back the investors of the bonds. 00:50:26.230 --> 00:50:29.490 align:middle line:84% AUDIENCE: What's the percentage of the green project assets 00:50:29.490 --> 00:50:34.402 align:middle line:84% has to be in there in order to issue a green bond? 00:50:34.402 --> 00:50:35.860 align:middle line:84% SIQI ZHENG: That's a good question. 00:50:35.860 --> 00:50:36.830 align:middle line:90% I don't know. 00:50:36.830 --> 00:50:37.630 align:middle line:90% We need to check. 00:50:37.630 --> 00:50:39.610 align:middle line:84% I think they have different types 00:50:39.610 --> 00:50:41.750 align:middle line:84% of the green bonds that Fannie Mae and Freddie Mac. 00:50:41.750 --> 00:50:45.160 align:middle line:84% They must have a very specific thing 00:50:45.160 --> 00:50:49.340 align:middle line:84% that now we can see that they have these ESG bonds. 00:50:49.340 --> 00:50:51.170 align:middle line:84% Green bonds is one of the ESG bonds. 00:50:51.170 --> 00:50:54.490 align:middle line:84% Then they have this environmental criterion 00:50:54.490 --> 00:50:57.510 align:middle line:90% and the social and economic. 00:50:57.510 --> 00:51:03.640 align:middle line:84% For example, you need to really reduce the energy by 30% and 15% 00:51:03.640 --> 00:51:04.280 align:middle line:90% like that. 00:51:04.280 --> 00:51:06.063 align:middle line:84% So then you are a green mortgage. 00:51:06.063 --> 00:51:07.730 align:middle line:84% You can define that as a green mortgage. 00:51:07.730 --> 00:51:10.915 align:middle line:84% But how much the share of the green mortgage in the pool 00:51:10.915 --> 00:51:12.290 align:middle line:84% that you can say this green bond? 00:51:12.290 --> 00:51:14.290 align:middle line:84% I think that's a practical question. 00:51:14.290 --> 00:51:16.540 align:middle line:90% We can check. 00:51:16.540 --> 00:51:17.950 align:middle line:90% But you cannot just see. 00:51:17.950 --> 00:51:20.800 align:middle line:90% You cannot just announce-- 00:51:20.800 --> 00:51:21.500 align:middle line:90% Carlos. 00:51:21.500 --> 00:51:23.080 align:middle line:84% AUDIENCE: So a question, have you 00:51:23.080 --> 00:51:27.550 align:middle line:84% seen [? except ?] of big financial institutions, 00:51:27.550 --> 00:51:30.790 align:middle line:84% like REITs or Fannie Mae, Freddie Mac, 00:51:30.790 --> 00:51:33.040 align:middle line:90% et cetera, committing-- 00:51:33.040 --> 00:51:36.050 align:middle line:84% like real estate development companies funding themselves 00:51:36.050 --> 00:51:41.523 align:middle line:84% through this type of financing green bonds? 00:51:41.523 --> 00:51:42.190 align:middle line:90% SIQI ZHENG: Yes. 00:51:42.190 --> 00:51:43.190 align:middle line:90% Yes. 00:51:43.190 --> 00:51:46.280 align:middle line:84% No, these are become more and more important. 00:51:46.280 --> 00:51:48.620 align:middle line:84% Those rates, they issue green bonds. 00:51:48.620 --> 00:51:53.380 align:middle line:84% And because they saw the benefit of that, the lower capital, 00:51:53.380 --> 00:51:54.678 align:middle line:90% cost of capital. 00:51:54.678 --> 00:51:56.470 align:middle line:84% AUDIENCE: But have you seen the real estate 00:51:56.470 --> 00:51:59.475 align:middle line:90% developers, not huge-- 00:51:59.475 --> 00:52:00.100 align:middle line:90% SIQI ZHENG: No. 00:52:00.100 --> 00:52:01.070 align:middle line:90% AUDIENCE: Related companies. 00:52:01.070 --> 00:52:02.153 align:middle line:90% SIQI ZHENG: I don't have-- 00:52:02.153 --> 00:52:04.060 align:middle line:90% I didn't say that. 00:52:04.060 --> 00:52:08.660 align:middle line:84% Maybe later, we can have Charles talk about this real world. 00:52:08.660 --> 00:52:10.610 align:middle line:84% But I think developers, it's very hard. 00:52:10.610 --> 00:52:12.670 align:middle line:84% You need to own the properties, and you 00:52:12.670 --> 00:52:14.480 align:middle line:84% need to be a very big stable company. 00:52:14.480 --> 00:52:15.572 align:middle line:90% Otherwise, who will buy? 00:52:15.572 --> 00:52:17.530 align:middle line:84% AUDIENCE: I think I can contribute a little bit 00:52:17.530 --> 00:52:18.363 align:middle line:90% to this [INAUDIBLE]? 00:52:18.363 --> 00:52:19.390 align:middle line:90% SIQI ZHENG: Yes. 00:52:19.390 --> 00:52:21.640 align:middle line:84% AUDIENCE: So the company I was working for is heavily 00:52:21.640 --> 00:52:25.030 align:middle line:84% involved into the tax credit, affordable housing, 00:52:25.030 --> 00:52:26.207 align:middle line:90% or [INAUDIBLE]. 00:52:26.207 --> 00:52:27.290 align:middle line:90% SIQI ZHENG: United States. 00:52:27.290 --> 00:52:29.410 align:middle line:84% AUDIENCE: In the United State with low carbon. 00:52:29.410 --> 00:52:33.690 align:middle line:84% And sometimes when there is a gap, when [INAUDIBLE] rent, 00:52:33.690 --> 00:52:34.780 align:middle line:90% you-- 00:52:34.780 --> 00:52:37.450 align:middle line:84% they do use something called a tax-exempt law, 00:52:37.450 --> 00:52:42.920 align:middle line:84% which is issued by the government agency authority, who 00:52:42.920 --> 00:52:46.310 align:middle line:84% is [INAUDIBLE] agency [INAUDIBLE]. 00:52:46.310 --> 00:52:49.890 align:middle line:84% And they issue bonds on behalf of the department. 00:52:49.890 --> 00:52:53.390 align:middle line:90% And then your asset [INAUDIBLE]. 00:52:53.390 --> 00:52:54.940 align:middle line:90% AUDIENCE: But is it green? 00:52:54.940 --> 00:52:56.190 align:middle line:90% SIQI ZHENG: That's affordable. 00:52:56.190 --> 00:52:58.985 align:middle line:90% So that's a social, ESG, social. 00:52:58.985 --> 00:53:00.360 align:middle line:84% AUDIENCE: I'm talking about green 00:53:00.360 --> 00:53:02.600 align:middle line:84% because that applies for the whole world, not just 00:53:02.600 --> 00:53:04.085 align:middle line:90% the United States. 00:53:04.085 --> 00:53:07.340 align:middle line:84% That's my actual [? deepen ?] question. 00:53:07.340 --> 00:53:12.080 align:middle line:84% This can be exploited in a very [INAUDIBLE] US-- 00:53:12.080 --> 00:53:16.120 align:middle line:84% AUDIENCE: My personal experience is that, yes [INAUDIBLE]. 00:53:16.120 --> 00:53:21.560 align:middle line:84% It's hard to market this [INAUDIBLE] the construction 00:53:21.560 --> 00:53:26.180 align:middle line:84% lender or the senior [INAUDIBLE] financier. 00:53:26.180 --> 00:53:29.600 align:middle line:84% But you do get additional equity investors, 00:53:29.600 --> 00:53:32.820 align:middle line:84% and you may have a lower cost of equity. 00:53:32.820 --> 00:53:36.430 align:middle line:84% So you may not see it so much on that side of things. 00:53:36.430 --> 00:53:40.140 align:middle line:84% You might realize it on the equity side of things. 00:53:40.140 --> 00:53:46.140 align:middle line:84% The reason I think you see these spreads is either, in a bond, 00:53:46.140 --> 00:53:48.930 align:middle line:84% you have a lower interest rate, so to speak, 00:53:48.930 --> 00:53:51.300 align:middle line:84% on the bond for one of two reasons. 00:53:51.300 --> 00:53:53.880 align:middle line:84% Either the bond is perceived as less risky, 00:53:53.880 --> 00:53:56.160 align:middle line:84% which maybe there's an argument for that, 00:53:56.160 --> 00:53:58.740 align:middle line:84% or there's a lot of capital chasing 00:53:58.740 --> 00:54:00.550 align:middle line:90% fewer of these types of assets. 00:54:00.550 --> 00:54:02.990 align:middle line:84% So it has real green credentials. 00:54:02.990 --> 00:54:05.760 align:middle line:84% There's a lot of people who want to buy that, which just drives 00:54:05.760 --> 00:54:07.340 align:middle line:90% down the cost of capital. 00:54:07.340 --> 00:54:10.260 align:middle line:84% That's what I experienced in the real estate market 00:54:10.260 --> 00:54:11.730 align:middle line:90% from an equity side. 00:54:11.730 --> 00:54:14.580 align:middle line:84% When you're dealing with smaller lending institutions, 00:54:14.580 --> 00:54:15.870 align:middle line:90% debt is priced-- 00:54:15.870 --> 00:54:17.310 align:middle line:84% SIQI ZHENG: Very expensive, right? 00:54:17.310 --> 00:54:18.360 align:middle line:84% AUDIENCE: Well, these days, it's horrible. 00:54:18.360 --> 00:54:19.600 align:middle line:90% SIQI ZHENG: Smaller. 00:54:19.600 --> 00:54:20.100 align:middle line:90% Yes. 00:54:20.100 --> 00:54:22.450 align:middle line:84% So I just want to clarify one thing. 00:54:22.450 --> 00:54:24.780 align:middle line:84% I think that's a basic concept of bond 00:54:24.780 --> 00:54:26.880 align:middle line:84% is, no matter which green bond or general bond, 00:54:26.880 --> 00:54:29.640 align:middle line:84% you have a contract like a paper. 00:54:29.640 --> 00:54:30.490 align:middle line:90% This is a bond. 00:54:30.490 --> 00:54:33.120 align:middle line:90% They say this is a $100. 00:54:33.120 --> 00:54:35.910 align:middle line:84% And then, each year, we promise to pay you back 00:54:35.910 --> 00:54:37.510 align:middle line:90% because it's a fixed. 00:54:37.510 --> 00:54:40.820 align:middle line:84% Each year, you have some cash flow. 00:54:40.820 --> 00:54:43.490 align:middle line:84% You will receive a check of this. 00:54:43.490 --> 00:54:46.700 align:middle line:84% Well, this is book value of this. 00:54:46.700 --> 00:54:49.240 align:middle line:90% Then each year, you will get $2. 00:54:49.240 --> 00:54:51.890 align:middle line:90% And then this is on the paper. 00:54:51.890 --> 00:54:55.520 align:middle line:84% But then, later, this bond will be traded on the market. 00:54:55.520 --> 00:54:58.600 align:middle line:84% If this is very popular, someone will 00:54:58.600 --> 00:55:02.230 align:middle line:84% be willing to pay $110 to buy this paper. 00:55:02.230 --> 00:55:07.240 align:middle line:84% So this paper is a contract to say future cash flow will 00:55:07.240 --> 00:55:12.680 align:middle line:84% be calculated based on the book value times this interest rate. 00:55:12.680 --> 00:55:14.090 align:middle line:90% Each year you will get $2. 00:55:14.090 --> 00:55:17.950 align:middle line:84% But those individual investors, based on whether it's popular 00:55:17.950 --> 00:55:20.530 align:middle line:84% or not, will be willing to pay higher price to buy this. 00:55:20.530 --> 00:55:24.700 align:middle line:84% Or it's not popular, will pay lower price, will be, say, 90%-- 00:55:24.700 --> 00:55:27.140 align:middle line:90% $90 or $110. 00:55:27.140 --> 00:55:29.990 align:middle line:84% So that will totally be market because it's a public market. 00:55:29.990 --> 00:55:32.560 align:middle line:84% So suppose this is a green building, green bond, 00:55:32.560 --> 00:55:34.300 align:middle line:90% and it's very popular. 00:55:34.300 --> 00:55:37.240 align:middle line:84% And we see this $100, but the investors 00:55:37.240 --> 00:55:41.080 align:middle line:84% are willing to pay-- all of us are willing to pay $110. 00:55:41.080 --> 00:55:43.240 align:middle line:84% Then that's so good for the issuer 00:55:43.240 --> 00:55:45.760 align:middle line:84% because you can still pay this little, 00:55:45.760 --> 00:55:47.030 align:middle line:90% but you'll get more money. 00:55:47.030 --> 00:55:49.210 align:middle line:84% That's why this is a cheap capital. 00:55:49.210 --> 00:55:50.270 align:middle line:90% That's the idea. 00:55:50.270 --> 00:55:52.000 align:middle line:84% It's not like always fixed at this price, 00:55:52.000 --> 00:55:54.580 align:middle line:84% but this transaction price will vary according 00:55:54.580 --> 00:55:56.060 align:middle line:90% to the market condition. 00:55:56.060 --> 00:56:00.050 align:middle line:84% This is just, on the paper, this bond fixed income. 00:56:00.050 --> 00:56:03.520 align:middle line:84% So that's to you-- help us understand. 00:56:03.520 --> 00:56:06.640 align:middle line:84% For example, when Boston Properties, they issue this, 00:56:06.640 --> 00:56:07.840 align:middle line:90% they have these papers. 00:56:07.840 --> 00:56:10.960 align:middle line:84% But later, how this will be valued in the market, 00:56:10.960 --> 00:56:13.210 align:middle line:84% that cannot be controlled by them. 00:56:13.210 --> 00:56:16.030 align:middle line:84% That will be controlled whether these are popular 00:56:16.030 --> 00:56:18.820 align:middle line:84% and whether the investors are willing to pay 00:56:18.820 --> 00:56:21.130 align:middle line:90% to buy those papers. 00:56:21.130 --> 00:56:23.270 align:middle line:84% So then that's why you cannot just talk. 00:56:23.270 --> 00:56:24.820 align:middle line:84% You cannot just, oh, I promise you. 00:56:24.820 --> 00:56:27.410 align:middle line:84% When I collect the money, I will do this and do that. 00:56:27.410 --> 00:56:31.210 align:middle line:84% It's so good and so solar panels and all the carbon 00:56:31.210 --> 00:56:32.530 align:middle line:90% reduction things. 00:56:32.530 --> 00:56:34.250 align:middle line:90% You need to stick to-- 00:56:34.250 --> 00:56:37.700 align:middle line:84% this is the climate transition finance handbook. 00:56:37.700 --> 00:56:40.010 align:middle line:84% And they have these green bond principles. 00:56:40.010 --> 00:56:41.330 align:middle line:90% I don't think this is a law. 00:56:41.330 --> 00:56:42.770 align:middle line:90% This is not from government. 00:56:42.770 --> 00:56:44.920 align:middle line:90% This is non-profit organization. 00:56:44.920 --> 00:56:48.940 align:middle line:84% But they association of all these 00:56:48.940 --> 00:56:50.540 align:middle line:90% all these green bond issuers. 00:56:50.540 --> 00:56:53.300 align:middle line:90% They say, let's stick to this. 00:56:53.300 --> 00:56:55.360 align:middle line:84% Then, if you sell your green bond, 00:56:55.360 --> 00:56:59.350 align:middle line:84% you must follow all those principles 00:56:59.350 --> 00:57:01.480 align:middle line:84% like this and that, all the details. 00:57:01.480 --> 00:57:03.320 align:middle line:84% So then you can sell your green bond. 00:57:03.320 --> 00:57:06.970 align:middle line:84% It's kind of a certificate of the bond. 00:57:06.970 --> 00:57:09.290 align:middle line:84% You need to meet this, this, this, your green bond. 00:57:09.290 --> 00:57:10.670 align:middle line:90% You cannot just argue. 00:57:10.670 --> 00:57:12.910 align:middle line:90% You cannot just greenwash. 00:57:12.910 --> 00:57:15.640 align:middle line:84% So there, I'm going to just give you 00:57:15.640 --> 00:57:21.700 align:middle line:84% a basic, very basic flavor of the institution for the folio 00:57:21.700 --> 00:57:25.660 align:middle line:84% level, how to raise money from the public market 00:57:25.660 --> 00:57:28.630 align:middle line:84% to finance sustainable real estate. 00:57:28.630 --> 00:57:30.730 align:middle line:90% Equity, we talk about REITs. 00:57:30.730 --> 00:57:36.340 align:middle line:84% And then we have this, that we are talking about green bonds. 00:57:36.340 --> 00:57:40.030 align:middle line:84% Now I'm going to do something about this final thing, 00:57:40.030 --> 00:57:43.850 align:middle line:84% and then I will pass on to Charles about final project. 00:57:43.850 --> 00:57:46.580 align:middle line:84% Now, today, we need to assign the final project. 00:57:46.580 --> 00:57:48.250 align:middle line:84% Then you will have something to do. 00:57:48.250 --> 00:57:51.400 align:middle line:84% But before that, I'm going to talk about this. 00:57:51.400 --> 00:57:54.980 align:middle line:84% And, as you know, that all the things are measurement. 00:57:54.980 --> 00:57:58.360 align:middle line:84% If you have no data, if you have no measurement, 00:57:58.360 --> 00:58:00.280 align:middle line:84% and then if you have no benchmarking, 00:58:00.280 --> 00:58:01.820 align:middle line:90% then that's cheap talking. 00:58:01.820 --> 00:58:04.210 align:middle line:84% We just say, oh, green bond, green REITs. 00:58:04.210 --> 00:58:05.300 align:middle line:90% We are so green. 00:58:05.300 --> 00:58:06.070 align:middle line:90% So what? 00:58:06.070 --> 00:58:07.490 align:middle line:90% And who will trust you? 00:58:07.490 --> 00:58:11.350 align:middle line:84% Because then your value will depreciate. 00:58:11.350 --> 00:58:14.890 align:middle line:84% Maybe just one day information shock and then 00:58:14.890 --> 00:58:15.860 align:middle line:90% you will depreciate. 00:58:15.860 --> 00:58:18.550 align:middle line:84% So that means data and measurement and benchmarking 00:58:18.550 --> 00:58:24.130 align:middle line:84% are so important to build the credibility of how green 00:58:24.130 --> 00:58:25.210 align:middle line:90% you are. 00:58:25.210 --> 00:58:28.930 align:middle line:84% Then now this emerging field, maybe later 00:58:28.930 --> 00:58:30.940 align:middle line:84% you can find jobs in this area because there's 00:58:30.940 --> 00:58:34.540 align:middle line:84% a huge need for this data and the transparency information 00:58:34.540 --> 00:58:37.760 align:middle line:84% to solve this information asymmetry problem. 00:58:37.760 --> 00:58:40.480 align:middle line:84% So there are many, many companies are doing so. 00:58:40.480 --> 00:58:43.270 align:middle line:84% Many of them, they are start-ups. This data, 00:58:43.270 --> 00:58:47.480 align:middle line:84% data analytics, and this kind of companies, 00:58:47.480 --> 00:58:49.330 align:middle line:90% but then they become big. 00:58:49.330 --> 00:58:53.380 align:middle line:84% So for example-- and some are government provided-- 00:58:53.380 --> 00:58:59.840 align:middle line:84% these are all examples and also from MSRED thesis. 00:58:59.840 --> 00:59:01.670 align:middle line:84% He did a very good summary of this. 00:59:01.670 --> 00:59:06.770 align:middle line:84% Data acquisition, so there's a software 00:59:06.770 --> 00:59:10.550 align:middle line:84% called Portfolio Manager provided by the EPA portfolio 00:59:10.550 --> 00:59:11.330 align:middle line:90% EPA. 00:59:11.330 --> 00:59:12.530 align:middle line:90% That's a government thing. 00:59:12.530 --> 00:59:18.410 align:middle line:84% Then this is very fundamental to collect all the utility 00:59:18.410 --> 00:59:19.940 align:middle line:90% data from each building. 00:59:19.940 --> 00:59:21.680 align:middle line:84% From each building, they use this 00:59:21.680 --> 00:59:23.930 align:middle line:84% because then they can share, you need 00:59:23.930 --> 00:59:25.940 align:middle line:84% to have a standard format and the software 00:59:25.940 --> 00:59:27.650 align:middle line:90% to collect all the information. 00:59:27.650 --> 00:59:29.270 align:middle line:84% So for example, now we are working 00:59:29.270 --> 00:59:30.810 align:middle line:90% with REITs called the Varus. 00:59:30.810 --> 00:59:34.830 align:middle line:84% Varus uses residential rates, multifamily rates? 00:59:34.830 --> 00:59:38.690 align:middle line:84% So we are now collecting data from Varus, 00:59:38.690 --> 00:59:41.210 align:middle line:84% and we are working with Christoph Reinhart, 00:59:41.210 --> 00:59:45.260 align:middle line:84% the professor in architecture, to do energy modeling 00:59:45.260 --> 00:59:48.150 align:middle line:84% for those multifamily REITs properties. 00:59:48.150 --> 00:59:50.640 align:middle line:90% Then they said, we want data. 00:59:50.640 --> 00:59:52.640 align:middle line:84% Then they say, you sign up for this, 00:59:52.640 --> 00:59:56.480 align:middle line:84% and we will transfer the data from this portfolio manager 00:59:56.480 --> 00:59:57.000 align:middle line:90% to you. 00:59:57.000 --> 00:59:59.240 align:middle line:90% Then we create an account. 00:59:59.240 --> 01:00:00.360 align:middle line:90% Then they transfer data. 01:00:00.360 --> 01:00:04.220 align:middle line:84% So we have the data because we share this software. 01:00:04.220 --> 01:00:08.160 align:middle line:84% Then you need to integrate the data and visualize the data. 01:00:08.160 --> 01:00:10.610 align:middle line:90% So something, it's measurabl-- 01:00:10.610 --> 01:00:11.390 align:middle line:90% no, it's very big. 01:00:11.390 --> 01:00:14.370 align:middle line:84% At first, maybe a startup, now a very good company. 01:00:14.370 --> 01:00:18.740 align:middle line:84% They are doing all this ESG and carbon accounting 01:00:18.740 --> 01:00:22.280 align:middle line:84% data and how to aggregate from different utility 01:00:22.280 --> 01:00:24.830 align:middle line:84% sources and their buildings and the different types. 01:00:24.830 --> 01:00:26.480 align:middle line:90% So that's measurabl. 01:00:26.480 --> 01:00:28.190 align:middle line:90% And you cannot just do so. 01:00:28.190 --> 01:00:30.810 align:middle line:84% You need a third-party assurance. 01:00:30.810 --> 01:00:33.680 align:middle line:90% It's very similar to accounting. 01:00:33.680 --> 01:00:37.610 align:middle line:84% Accounting is about money, financial, now using carbon-- 01:00:37.610 --> 01:00:40.230 align:middle line:90% not accounting, audit. 01:00:40.230 --> 01:00:44.160 align:middle line:84% You need a carbon audit, third-party assurance. 01:00:44.160 --> 01:00:47.510 align:middle line:84% This DNV is a very, very now-popular one 01:00:47.510 --> 01:00:52.610 align:middle line:84% to issue assurance opinion, just audit of whether you just 01:00:52.610 --> 01:00:56.120 align:middle line:84% make up numbers or these real numbers you cross-validate 01:00:56.120 --> 01:00:59.530 align:middle line:84% and, lastly, audit of your carbon. 01:00:59.530 --> 01:01:01.180 align:middle line:90% And then you calculate. 01:01:01.180 --> 01:01:04.465 align:middle line:84% As you as we all know, scope 1, 2, 3, you need to report. 01:01:04.465 --> 01:01:06.090 align:middle line:84% Especially if you are a listed company, 01:01:06.090 --> 01:01:09.250 align:middle line:84% you report scope 1, scope 2, scope 3. 01:01:09.250 --> 01:01:13.270 align:middle line:84% Then they have those companies, those data analytics companies. 01:01:13.270 --> 01:01:18.440 align:middle line:84% They have algorithm that you just pull the data into this. 01:01:18.440 --> 01:01:21.370 align:middle line:84% Then they calculate for you 1, 2, 3 like that. 01:01:21.370 --> 01:01:25.180 align:middle line:84% Of course, scope 3 is the most, most challenging one. 01:01:25.180 --> 01:01:30.340 align:middle line:84% 1 or 2, relatively, just formulas and all the parameters 01:01:30.340 --> 01:01:32.710 align:middle line:84% [INAUDIBLE] scope 3, that's emobdied carbon, 01:01:32.710 --> 01:01:34.890 align:middle line:84% is very difficult. So I think there 01:01:34.890 --> 01:01:36.880 align:middle line:84% are challenges of who can calculate 01:01:36.880 --> 01:01:41.230 align:middle line:84% the most, most reliable scope 3 embodied carbon. 01:01:41.230 --> 01:01:44.680 align:middle line:84% Then you evaluate the benchmark, say, oh, this company 01:01:44.680 --> 01:01:45.400 align:middle line:90% is so much. 01:01:45.400 --> 01:01:50.110 align:middle line:84% This company is so much numbers, got audited, reliable, 01:01:50.110 --> 01:01:51.610 align:middle line:90% calculated. 01:01:51.610 --> 01:01:55.180 align:middle line:90% Then you need to evaluate. 01:01:55.180 --> 01:01:59.430 align:middle line:84% When your portfolio will be become a strength for the folio 01:01:59.430 --> 01:02:04.000 align:middle line:84% means under this regulation, saying, that you lose value. 01:02:04.000 --> 01:02:07.680 align:middle line:90% That's a model of the CRREM. 01:02:07.680 --> 01:02:11.370 align:middle line:84% Then you talk-- you know your portfolio is in danger, 01:02:11.370 --> 01:02:16.560 align:middle line:84% is in risk, in the risk of later exceed this carbon cap. 01:02:16.560 --> 01:02:20.450 align:middle line:84% Or your benchmark with your peers, that's GRESB. 01:02:20.450 --> 01:02:22.940 align:middle line:84% So I will just quickly go through GRESB. 01:02:22.940 --> 01:02:27.860 align:middle line:84% Very interestingly, I told you that my day started at 6:30 this 01:02:27.860 --> 01:02:28.680 align:middle line:90% morning. 01:02:28.680 --> 01:02:31.940 align:middle line:84% I went swimming again, and then I talked to-- 01:02:31.940 --> 01:02:33.770 align:middle line:90% I had a lunch with GRESB. 01:02:33.770 --> 01:02:38.870 align:middle line:84% GRESB is a company called Global Real Estate Sustainability 01:02:38.870 --> 01:02:40.190 align:middle line:90% Benchmark. 01:02:40.190 --> 01:02:42.170 align:middle line:84% This, you can-- think about this. 01:02:42.170 --> 01:02:44.670 align:middle line:84% I think they already talked about this in the first session, 01:02:44.670 --> 01:02:45.350 align:middle line:90% GRESB. 01:02:45.350 --> 01:02:48.810 align:middle line:84% So this is a portfolio version of LEED. 01:02:48.810 --> 01:02:49.430 align:middle line:90% Think about. 01:02:49.430 --> 01:02:53.030 align:middle line:84% LEED is a building-level certificate, LEED silver, 01:02:53.030 --> 01:02:55.530 align:middle line:90% LEED gold, gold, LEED practicum. 01:02:55.530 --> 01:02:58.970 align:middle line:84% Then you know it's a certificate rating system. 01:02:58.970 --> 01:03:00.238 align:middle line:90% That's on the building level. 01:03:00.238 --> 01:03:01.530 align:middle line:90% This building is LEED building. 01:03:01.530 --> 01:03:03.000 align:middle line:84% That building is not LEED building. 01:03:03.000 --> 01:03:07.640 align:middle line:84% But when you go to portfolio, like REITs, 01:03:07.640 --> 01:03:10.520 align:middle line:84% like a big asset management company, 01:03:10.520 --> 01:03:12.690 align:middle line:90% they own a pension fund. 01:03:12.690 --> 01:03:15.290 align:middle line:84% They own hundreds of buildings in different cities, 01:03:15.290 --> 01:03:17.150 align:middle line:84% different countries, different types, 01:03:17.150 --> 01:03:20.750 align:middle line:84% maybe not just only buildings, but also other real assets 01:03:20.750 --> 01:03:22.620 align:middle line:84% like infrastructure, this and that. 01:03:22.620 --> 01:03:27.410 align:middle line:84% Then they also need a measure, a benchmarking tool 01:03:27.410 --> 01:03:31.440 align:middle line:84% as a certificate, to show how green your portfolio is. 01:03:31.440 --> 01:03:33.800 align:middle line:90% So that's a GRESB. 01:03:33.800 --> 01:03:40.310 align:middle line:84% So GRESB, the founder of GRESB is a professor, Nils Kok. 01:03:40.310 --> 01:03:43.050 align:middle line:84% He founded this GRESB as a startup. 01:03:43.050 --> 01:03:47.610 align:middle line:84% Then he sold to become so big, and he has no time to manage. 01:03:47.610 --> 01:03:49.220 align:middle line:84% He needs to write papers like me. 01:03:49.220 --> 01:03:51.710 align:middle line:84% He sold, but he's very entrepreneur. 01:03:51.710 --> 01:03:55.880 align:middle line:84% And he's a professor in the Maastricht University. 01:03:55.880 --> 01:03:59.600 align:middle line:84% And he's a PhD supervisor of Juan Palacios. 01:03:59.600 --> 01:04:03.300 align:middle line:84% So Nils Kok, I think he will always come. 01:04:03.300 --> 01:04:04.440 align:middle line:90% He will later come. 01:04:04.440 --> 01:04:06.320 align:middle line:84% But already, he sold this company. 01:04:06.320 --> 01:04:09.920 align:middle line:84% This morning, this company, as you can see, 01:04:09.920 --> 01:04:14.580 align:middle line:84% headquarters in Amsterdam, and they started this. 01:04:14.580 --> 01:04:19.280 align:middle line:84% Now, they have a US business, and the US business, 01:04:19.280 --> 01:04:21.090 align:middle line:90% a small office, a few people. 01:04:21.090 --> 01:04:24.820 align:middle line:84% They just reached out to me, say, can we talk? 01:04:24.820 --> 01:04:26.910 align:middle line:84% They want to collaborate with us. 01:04:26.910 --> 01:04:29.820 align:middle line:84% And I say-- they want to talk today. 01:04:29.820 --> 01:04:31.390 align:middle line:90% I said, I have no time. 01:04:31.390 --> 01:04:33.310 align:middle line:84% I have so much teaching and all the things. 01:04:33.310 --> 01:04:34.020 align:middle line:90% No time. 01:04:34.020 --> 01:04:36.010 align:middle line:90% Then we say, OK, breakfast. 01:04:36.010 --> 01:04:39.030 align:middle line:84% Then after my swim, I went to Flour. 01:04:39.030 --> 01:04:41.520 align:middle line:84% And we three, we talked, sat there for one hour 01:04:41.520 --> 01:04:42.370 align:middle line:90% before our class. 01:04:42.370 --> 01:04:43.590 align:middle line:90% I talk about GRESB. 01:04:43.590 --> 01:04:45.940 align:middle line:84% And they really want you to work with us. 01:04:45.940 --> 01:04:48.940 align:middle line:84% They want to expand their US market, but they don't know how. 01:04:48.940 --> 01:04:50.710 align:middle line:90% They're just data provider. 01:04:50.710 --> 01:04:53.550 align:middle line:84% They have a lot of-- they have more than 10 years of data 01:04:53.550 --> 01:04:55.828 align:middle line:90% of all the portfolio. 01:04:55.828 --> 01:04:58.120 align:middle line:84% They have portfolio, but they aggregate from buildings. 01:04:58.120 --> 01:04:59.162 align:middle line:90% They have building level. 01:04:59.162 --> 01:05:03.190 align:middle line:84% They have portfolio level, all the indicators that I talked 01:05:03.190 --> 01:05:04.780 align:middle line:90% about how we can do together. 01:05:04.780 --> 01:05:06.670 align:middle line:90% I say we are scholars. 01:05:06.670 --> 01:05:07.900 align:middle line:90% We do research. 01:05:07.900 --> 01:05:10.060 align:middle line:84% But we can translate our research 01:05:10.060 --> 01:05:13.630 align:middle line:90% how to be useful to you. 01:05:13.630 --> 01:05:16.503 align:middle line:84% And I talked about our collaboration with Moody's. 01:05:16.503 --> 01:05:17.920 align:middle line:84% Now, we have another collaboration 01:05:17.920 --> 01:05:21.520 align:middle line:84% with Moody's on the climate and commercial real estate. 01:05:21.520 --> 01:05:24.220 align:middle line:84% I think we can later establish another collaboration 01:05:24.220 --> 01:05:24.850 align:middle line:90% with GRESB. 01:05:24.850 --> 01:05:26.530 align:middle line:84% And then we can have all their data, 01:05:26.530 --> 01:05:28.690 align:middle line:90% and we can do whatever we want. 01:05:28.690 --> 01:05:31.180 align:middle line:84% And another thing they really mentioned, 01:05:31.180 --> 01:05:33.330 align:middle line:90% they want to hire interns. 01:05:33.330 --> 01:05:37.600 align:middle line:84% So if you are interested in, so their US office 01:05:37.600 --> 01:05:39.350 align:middle line:90% is just a base in Boston. 01:05:39.350 --> 01:05:41.870 align:middle line:90% So they said they want interns. 01:05:41.870 --> 01:05:43.600 align:middle line:84% But first, you need to understand 01:05:43.600 --> 01:05:45.370 align:middle line:84% what they are doing so that you can 01:05:45.370 --> 01:05:49.540 align:middle line:84% say if you want to do internship in the Boston office. 01:05:49.540 --> 01:05:54.280 align:middle line:84% So as I said, it's a portfolio-level LEED. 01:05:54.280 --> 01:05:58.050 align:middle line:84% So they are measuring ESG, and they have-- 01:05:58.050 --> 01:06:00.650 align:middle line:90% so basically, it's scores. 01:06:00.650 --> 01:06:01.970 align:middle line:90% They have the overall score. 01:06:01.970 --> 01:06:04.270 align:middle line:84% They have subscores of every aspects 01:06:04.270 --> 01:06:06.460 align:middle line:90% you can think about of ESG. 01:06:06.460 --> 01:06:07.850 align:middle line:90% You have the leadership. 01:06:07.850 --> 01:06:10.330 align:middle line:84% And because it's ESG, not just the green, 01:06:10.330 --> 01:06:14.240 align:middle line:84% there's a leadership and the stakeholder engagement. 01:06:14.240 --> 01:06:17.570 align:middle line:84% And they also have energy materials, 01:06:17.570 --> 01:06:20.610 align:middle line:84% and they have this social aspect. 01:06:20.610 --> 01:06:22.970 align:middle line:84% So basically, they have many, many subcategories. 01:06:22.970 --> 01:06:25.760 align:middle line:84% Whether this is very scientific, I'm not sure, 01:06:25.760 --> 01:06:27.590 align:middle line:90% but they are developing. 01:06:27.590 --> 01:06:29.540 align:middle line:84% They are developing this as a first step 01:06:29.540 --> 01:06:33.590 align:middle line:84% to have this subtopics, subscores. 01:06:33.590 --> 01:06:39.260 align:middle line:84% Then they have their weights for if this-- 01:06:39.260 --> 01:06:42.680 align:middle line:84% already a very mature portfolio, that's management 01:06:42.680 --> 01:06:44.210 align:middle line:90% always have 30%. 01:06:44.210 --> 01:06:47.890 align:middle line:84% Your company leadership is governance, all the things. 01:06:47.890 --> 01:06:50.570 align:middle line:84% Then you have the performance of your properties. 01:06:50.570 --> 01:06:53.480 align:middle line:84% And this one is like a development, things like, 01:06:53.480 --> 01:06:56.660 align:middle line:84% if you are more like a developer or the development. 01:06:56.660 --> 01:06:58.370 align:middle line:90% So then you have this. 01:06:58.370 --> 01:07:02.540 align:middle line:84% So the key thing is they have a report. 01:07:02.540 --> 01:07:05.660 align:middle line:84% The companies, the portfolio company, the portfolios, 01:07:05.660 --> 01:07:09.920 align:middle line:84% for example, those REITs, they need to sign up for this. 01:07:09.920 --> 01:07:12.650 align:middle line:84% For example, [INAUDIBLE] because they are not government. 01:07:12.650 --> 01:07:15.090 align:middle line:84% They are not government, say you must report data to me. 01:07:15.090 --> 01:07:15.740 align:middle line:90% No. 01:07:15.740 --> 01:07:17.880 align:middle line:84% They are-- at first they were a start up. 01:07:17.880 --> 01:07:22.190 align:middle line:84% Now it's just a very popular rating company. 01:07:22.190 --> 01:07:26.840 align:middle line:84% Then they say, OK, if you want me to evaluate your portfolio 01:07:26.840 --> 01:07:30.120 align:middle line:84% and give you a score, you sign up. 01:07:30.120 --> 01:07:31.390 align:middle line:90% Your register. 01:07:31.390 --> 01:07:34.170 align:middle line:90% Then you give us all your data. 01:07:34.170 --> 01:07:37.140 align:middle line:90% Submit all the data to GRESB. 01:07:37.140 --> 01:07:40.160 align:middle line:84% And then we will do all these ratings for you. 01:07:40.160 --> 01:07:46.290 align:middle line:84% So, for example, this is a Kilroy Realty Corporation. 01:07:46.290 --> 01:07:48.940 align:middle line:90% That's an example. 01:07:48.940 --> 01:07:52.990 align:middle line:84% Then you-- then because this is-- many, many portfolios, they 01:07:52.990 --> 01:07:55.673 align:middle line:84% sign up, these asset management companies, pension funds, 01:07:55.673 --> 01:07:56.840 align:middle line:90% and the REITs, they sign up. 01:07:56.840 --> 01:07:58.507 align:middle line:84% Then they have lots of data because they 01:07:58.507 --> 01:07:59.480 align:middle line:90% collect all the data. 01:07:59.480 --> 01:08:01.300 align:middle line:84% Then you can compare with your groups, 01:08:01.300 --> 01:08:03.670 align:middle line:84% and you can make the trend this year 01:08:03.670 --> 01:08:06.320 align:middle line:84% that your score will increase or not. 01:08:06.320 --> 01:08:10.600 align:middle line:84% And then you have this asset strengths and opportunities, 01:08:10.600 --> 01:08:15.490 align:middle line:84% at which part you lag behind, which part you are the leader, 01:08:15.490 --> 01:08:16.670 align:middle line:90% and how to improve. 01:08:16.670 --> 01:08:18.252 align:middle line:90% So they will-- oh. 01:08:18.252 --> 01:08:22.601 align:middle line:90% 01:08:22.601 --> 01:08:24.790 align:middle line:84% So then you'll say, OK, this part, waste, 01:08:24.790 --> 01:08:25.770 align:middle line:90% you need to improve. 01:08:25.770 --> 01:08:27.450 align:middle line:90% Water, you need to improve. 01:08:27.450 --> 01:08:31.630 align:middle line:84% And you are doing this data monitoring so well. 01:08:31.630 --> 01:08:32.617 align:middle line:90% So that's an analysis. 01:08:32.617 --> 01:08:33.784 align:middle line:90% They will give you a report. 01:08:33.784 --> 01:08:37.630 align:middle line:90% 01:08:37.630 --> 01:08:39.995 align:middle line:84% This is a good example because, later, we 01:08:39.995 --> 01:08:41.620 align:middle line:84% will have guest from Boston Properties. 01:08:41.620 --> 01:08:45.490 align:middle line:84% You can see they are doing very well in terms of the GRESB. 01:08:45.490 --> 01:08:49.899 align:middle line:84% They say, OK, 90 out of 100, their score is 90. 01:08:49.899 --> 01:08:53.090 align:middle line:90% And the pr average is 79. 01:08:53.090 --> 01:08:56.270 align:middle line:84% So good, better, better than average. 01:08:56.270 --> 01:08:59.600 align:middle line:84% Then each year, you will see the trend, basically. 01:08:59.600 --> 01:09:02.649 align:middle line:84% And this data, after they get the data from all the companies, 01:09:02.649 --> 01:09:04.490 align:middle line:90% they won't put them online. 01:09:04.490 --> 01:09:07.899 align:middle line:84% So this is, for example, for me, as a professor, 01:09:07.899 --> 01:09:10.090 align:middle line:84% I want to do research, use GRESB, 01:09:10.090 --> 01:09:11.689 align:middle line:90% I need to buy data from them. 01:09:11.689 --> 01:09:13.330 align:middle line:84% That's why, this morning, I was happy 01:09:13.330 --> 01:09:16.130 align:middle line:84% because they are coming to me and try to collaborate. 01:09:16.130 --> 01:09:19.120 align:middle line:84% So I said, first step, give data to me. 01:09:19.120 --> 01:09:21.939 align:middle line:84% And I can get free data from them, which is good. 01:09:21.939 --> 01:09:25.930 align:middle line:84% Now, there are one, two, three papers already published 01:09:25.930 --> 01:09:28.000 align:middle line:90% by other scholars. 01:09:28.000 --> 01:09:30.220 align:middle line:90% They got data from GRESB. 01:09:30.220 --> 01:09:34.390 align:middle line:84% And they started how you cannot have their rating, 01:09:34.390 --> 01:09:41.920 align:middle line:84% but you need to show whether for the portfolios with higher GRESB 01:09:41.920 --> 01:09:45.700 align:middle line:84% rating score, whether that will lead to better real estate 01:09:45.700 --> 01:09:49.060 align:middle line:84% return to justify why you want to go green, 01:09:49.060 --> 01:09:50.680 align:middle line:90% why you want to have ESG. 01:09:50.680 --> 01:09:54.160 align:middle line:84% If you do ESG, then your stock market stock performance 01:09:54.160 --> 01:09:55.030 align:middle line:90% goes down. 01:09:55.030 --> 01:09:56.320 align:middle line:90% That doesn't make sense. 01:09:56.320 --> 01:10:00.940 align:middle line:84% So this paper, this very new paper, private equity, 01:10:00.940 --> 01:10:03.970 align:middle line:84% private equity, they collect all the private equity 01:10:03.970 --> 01:10:05.710 align:middle line:90% with GRESB scores. 01:10:05.710 --> 01:10:07.180 align:middle line:90% And they run regression. 01:10:07.180 --> 01:10:11.230 align:middle line:84% They show that, really, GRESB participation performance are 01:10:11.230 --> 01:10:13.180 align:middle line:90% both significant of the fund. 01:10:13.180 --> 01:10:16.870 align:middle line:84% Private equity, this is private equity fund returns. 01:10:16.870 --> 01:10:20.010 align:middle line:84% And then this paper is about REITs. 01:10:20.010 --> 01:10:26.500 align:middle line:84% Similarly, they started ROA, ROE, and all these indicators. 01:10:26.500 --> 01:10:32.560 align:middle line:84% They also show for those REITs with higher ESG and higher GRESB 01:10:32.560 --> 01:10:35.550 align:middle line:84% score, they have higher performance. 01:10:35.550 --> 01:10:38.150 align:middle line:90% So that's the other paper. 01:10:38.150 --> 01:10:44.360 align:middle line:84% Finally, they also show that, for those rates, 01:10:44.360 --> 01:10:47.160 align:middle line:90% the higher GRESB, scores. 01:10:47.160 --> 01:10:48.320 align:middle line:90% they go to the bank. 01:10:48.320 --> 01:10:51.860 align:middle line:84% They can get cheap loans, lower the cost of capital. 01:10:51.860 --> 01:10:52.640 align:middle line:90% That's so good. 01:10:52.640 --> 01:10:54.120 align:middle line:90% You have better performance. 01:10:54.120 --> 01:10:56.100 align:middle line:90% You have lower cost of capital. 01:10:56.100 --> 01:10:57.740 align:middle line:90% Then you make more money. 01:10:57.740 --> 01:10:59.960 align:middle line:90% So that's another paper. 01:10:59.960 --> 01:11:02.940 align:middle line:84% But this still-- on average, still statistics. 01:11:02.940 --> 01:11:05.810 align:middle line:84% It's not say, this REITs, you get higher GRESB score, 01:11:05.810 --> 01:11:10.160 align:middle line:84% then you will guarantee you get this lower cost of capital 01:11:10.160 --> 01:11:11.130 align:middle line:90% or higher return. 01:11:11.130 --> 01:11:12.920 align:middle line:84% But on average, these three papers 01:11:12.920 --> 01:11:16.340 align:middle line:84% showed, if you have a higher GRESB, score, 01:11:16.340 --> 01:11:19.160 align:middle line:84% you have lower interest rate when you 01:11:19.160 --> 01:11:20.750 align:middle line:90% go to the bank to borrow money. 01:11:20.750 --> 01:11:22.760 align:middle line:84% Then you have better performance in term 01:11:22.760 --> 01:11:24.620 align:middle line:84% of the REITs or the private equity 01:11:24.620 --> 01:11:28.760 align:middle line:90% to justify the benefit of ESG. 01:11:28.760 --> 01:11:32.180 align:middle line:84% And also then GRESB also become famous. 01:11:32.180 --> 01:11:35.660 align:middle line:84% Then all the companies want to get the GRESB score. 01:11:35.660 --> 01:11:38.390 align:middle line:90% So I'm going to skip this. 01:11:38.390 --> 01:11:43.070 align:middle line:84% And finally, I want to say one thing is I cannot only say good 01:11:43.070 --> 01:11:43.970 align:middle line:90% things. 01:11:43.970 --> 01:11:50.210 align:middle line:84% Another, on the other hand, now, Professor Roberto Rigobon 01:11:50.210 --> 01:11:53.780 align:middle line:84% at MIT Sloan, they have a team, a research project 01:11:53.780 --> 01:11:56.960 align:middle line:84% called ESG Confusion, so confused. 01:11:56.960 --> 01:11:59.690 align:middle line:84% That's a ESG Confusion, which means now 01:11:59.690 --> 01:12:00.930 align:middle line:90% there are so many ratings-- 01:12:00.930 --> 01:12:02.920 align:middle line:84% GRESB is from the real estate sector. 01:12:02.920 --> 01:12:04.760 align:middle line:90% Then you have this and that. 01:12:04.760 --> 01:12:12.350 align:middle line:84% You have a lot of things, like I might see [INAUDIBLE] S&P Global 01:12:12.350 --> 01:12:13.910 align:middle line:90% and Moody's also. 01:12:13.910 --> 01:12:15.930 align:middle line:90% There's so many ESG ratings. 01:12:15.930 --> 01:12:18.230 align:middle line:84% If you Google, so many because this 01:12:18.230 --> 01:12:21.980 align:middle line:84% is such a good area to make money 01:12:21.980 --> 01:12:23.520 align:middle line:90% for these rating companies. 01:12:23.520 --> 01:12:26.600 align:middle line:84% They publish their own ratings, and their own ratings 01:12:26.600 --> 01:12:28.100 align:middle line:90% are not consistent. 01:12:28.100 --> 01:12:31.070 align:middle line:84% So are not consistent at all, they 01:12:31.070 --> 01:12:33.450 align:middle line:90% are not correlated that much. 01:12:33.450 --> 01:12:35.710 align:middle line:90% So it's very confused. 01:12:35.710 --> 01:12:39.410 align:middle line:84% They are noisy and messy and unreliable. 01:12:39.410 --> 01:12:43.710 align:middle line:84% So they created this ESG Confusion project to understand. 01:12:43.710 --> 01:12:47.900 align:middle line:84% You see, the correlation is so low, like 0.5 or something 01:12:47.900 --> 01:12:49.130 align:middle line:90% like that. 01:12:49.130 --> 01:12:50.640 align:middle line:90% This company says it is green. 01:12:50.640 --> 01:12:52.130 align:middle line:84% That company says it's not green. 01:12:52.130 --> 01:12:53.090 align:middle line:90% It's so confused. 01:12:53.090 --> 01:12:57.710 align:middle line:84% And we even need to question whether they make up some data. 01:12:57.710 --> 01:12:59.840 align:middle line:84% Or is this really real data or not? 01:12:59.840 --> 01:13:03.470 align:middle line:84% Or what's the methodology's about, whether it's greenwashing 01:13:03.470 --> 01:13:04.240 align:middle line:90% or not? 01:13:04.240 --> 01:13:07.770 align:middle line:84% So they are trying to develop a methodology-- not trying. 01:13:07.770 --> 01:13:09.200 align:middle line:90% They already published papers. 01:13:09.200 --> 01:13:10.790 align:middle line:84% And their already published papers, 01:13:10.790 --> 01:13:13.670 align:middle line:84% they have a very innovative methodology 01:13:13.670 --> 01:13:17.810 align:middle line:84% to collect this information and to make sure 01:13:17.810 --> 01:13:23.060 align:middle line:84% how to derive a reliable ESG measure from these noisy 01:13:23.060 --> 01:13:23.610 align:middle line:90% measures. 01:13:23.610 --> 01:13:26.420 align:middle line:84% This is, really, a way from econometric science to this very 01:13:26.420 --> 01:13:27.950 align:middle line:90% advanced methodology. 01:13:27.950 --> 01:13:31.530 align:middle line:84% So now we are small part of this ESG Confusion project. 01:13:31.530 --> 01:13:34.120 align:middle line:84% We are looking at the real estate side. 01:13:34.120 --> 01:13:51.000 align:middle line:90%