The coronavirus crisis has brought environmental, social and governance issues to the fore, delegates heard at Real Asset Media’s Germany Investment Briefing, which took place online this week with a record over 300 participants from 25 countries.
‘There is more of a focus on ESG because of the nature of the crisis,’ said Christiane Conrads, Head of German Real Estate Desk, PwC Legal. ‘There was a huge demand for ESG compliance already before the pandemic, but now it is increasing. It has become a testing ground’.
There was a danger that there would be a focus on the economy to the detriment of environmental and social standards, but it has not materialized, she said. On the contrary, companies are under scrutiny as never before, and they are paying more attention to the impact they have on the environment, on their employees and on society. The drive towards sustainable investing has shifted in response to the coronavirus crisis.
‘The crisis has highlighted the importance of adopting a life-cycle approach, and implementing ESG strategies leads to investments that are long-lasting and resilient,’ Conrads said. ‘ESG-compliant firms are better positioned in the market and have easier access to financing too, which is very competitive now because banks are in a difficult position at present’.
Institutional investors require ESG criteria, as do key stakeholders like regulators, politicians, tenants and employees.
ESG factors are a key layer of diligence in a sector like real estate which has ‘high risk exposure,’ she said. ‘Think of stranded asset risks, transition risks and physical risks. On the other hand, ESG integration allows higher rental income, lower yields for building, higher sale price, lower financing costs and better performance’.
Implementing a comprehensive ESG strategy now is also an investment in the future, for when the situation will return to normal.
‘Asset managers have a very difficult job now, but they are developing resilience,’ Conrads said. ‘Focusing on ESG means being well-positioned not just during the crisis but also when the emergency is over’.