As a Principles for Responsible Investment (PRI) signatory, Zagga has committed to integrate sustainability factors into all investment stages, from analysis to reporting.
Zagga first established its independent ESG advisory committee back in 2023, which is mandated to advise and oversee the integration of environmental, social and governance (ESG) considerations into Zagga’s investment and operational strategies.
Independent chair of the committee, Nikki Kemp, said the move marked an important milestone for the firm.
“This affirms Zagga’s commitment to responsible investment practices and reflects its belief that responsible investment considerations are essential to managing risk and delivering sustainable returns for investors,” Kemp said.
PRI CEO David Atkin also commended the firm’s choice, highlighting it as an indication of the increasing trend among investment managers to abide by international responsible investment benchmarks.
“Zagga’s commitment to responsible investment reflects a growing recognition of the importance of such analysis across all asset classes”, Atkin said.
With Australia’s private credit market now valued at AU$205 billion, Zagga CEO and co-founder Alan Greenstein emphasised the accompanying responsibility that comes with such rapid growth.
“As an investor-first business, ESG is no longer a ‘nice to have’ but a must to ensure we deliver for the global investors who entrust us with their capital,” Greenstein said.
Zagga’s ESG goals
Breaking down the firm’s stance on ESG, Greenstein told InvestorDaily that while the firm does not operate at the forefront of ESG initiatives – being primarily a residential development lender – its goal is to contribute to the best of its ability.
On the macro level, he said the firm wants to be a good corporate citizen: “We want to walk the walk and actually be a contributor to the sustainability of the environment and the planet.”
He emphasised that while environmental factors often dominate ESG discussions, a more holistic approach is needed.
For example, Greenstein pointed to Zagga’s role in tackling Australia’s housing shortage through lending to construct residential assets, adding that the firm is committed to ensuring the capital it invests in projects adheres to the sector’s sustainability and compliance needs.
Moreover, he said the second part centres on the practical application of ESG objectives.
He stressed that Zagga is in a “fortunate position”, given that in Australia, many existing development applications and construction regulations are already aligning with ESG compliance.
The final step, Greenstein explained, is about collaborating effectively.
Increased investor demand drives higher standards
Greenstein credited the push for higher standards to increased demand on the part of wholesale and institutional investors for greater ESG alignment in alternative asset classes.
In turn, he said this demand feeds into a continued cycle from developers through to property buyers.
“Developers today understand that keeping up to date with ESG principles and being mindful of sustainability and the environment is not only something they want to do, but it’s something they need to do, because the buyers who are buying those properties want to live in those types of properties as well,” he told InvestorDaily.
As Kemp similarly explained, just as alternative assets have become more mainstream, (particularly as investors seek well-diversified portfolios amid increasing global volatility) ESG has moved “from the periphery to the core” of responsible investing.
Additionally, she said ESG’s appeal extends beyond its inherent good, with a demonstrated capacity to generate superior investment returns.
Greenstein reinforced this by pointing to a 2019 research from Morgan Stanley, which indicated that sustainable funds exhibited lower risk between 2004 and 2018, particularly during the more volatile market periods, including 2008, 2009 and 2015.
However, he concluded that while improved investment results are crucial, increased investor demand – beyond just private markets – remains the primary driver of change.
“The research shows that over 80 per cent of Australians want to see ESG type investments offered in their retirement, which means that ageing Australians are also interested in the fact that Australia itself becomes more sustainable,” he said.
