Environmental, social and ethical issues are now centre-stage and there is no going back, experts agreed at Real Asset Media’s European Outlook Investment Briefing, which was held in Frankfurt recently.
‘ESG finally has become a hot topic,’ said Christiane Conrads, Head of German Real Estate Desk, PwC Legal. ‘It comes up in every client meeting and we work very hard to find tailor-made solutions that will increase the value of our clients’ real estate portfolio’.
The biggest change in the last 12 months has been an increase in transparency, she said: ‘More and more companies publish sustainability reports even if they don’t have to, set themselves binding targets and provide proof they have met them or explain why they haven’t’.
Risk management and compliance tests have also been adopted to implement ESG criteria. There are several drivers for this new commitment, from a changing social climate to investor deman and from regulation to sustainable finance.
‘There is a huge demand from investors to buy into sustainable assets and to have certificates for the assets they buy’, said Nils Skornicka, Managing Director Acquisitions & Development, Tishman Speyer. ‘Occupiers are increasingly looking for smart buildings, so that’s what we try to build, taking into consideration everything from technology to orientation and well-being’.
Lenders are also actively promoting green products and their risk assessment takes into account the environmental impact of a building.
‘Two years ago we said we wanted 20% of our portfolio to be green in 2020 and we are right on track,’ said Assem El Alami, Head of Real Estate Finance, International Key Accounts and Syndication, Berlin Hyp. ‘We are also the largest private issuer of green bonds, even if Germany lags behind other countries like France in that respect’.
The environmental part of ESG gets the most attention, but social and governance issues will gain more prominence in the near future, said Conrads: ‘More and more investors realise that an ESG strategy is not just about risk management but also about value creation, because better financing and insurance conditions can offset higher operating costs’.
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