Are real estate investors ready to face the bigger issues?

(Top L to R) Sebastian Orthmann, Richard Betts, Richard Hamilton-Grey.
(Bottom) Clare Thomas, Natalie Orde, Olivier Elamine.

There is an increased interest in, and understanding of, the social impact of real estate, experts agreed at Real Asset Media’s Re-setting Real Estate: Covid-19 and the rise of ESG and social purpose briefing, which was held online on REALX.Global recently.

“Pension funds and institutions now are more interested in investments that make a difference,” said Richard Hamilton-Grey, director sustainability, real estate Europe & Asia-Pacific, Nuveen Real Estate. “There’s a real opportunity to widen impact investing to bigger issues, and Covid-19 has accelerated the understanding that real estate can play a huge role in the social fabric,” he said.

According to the new CMS annual survey, 99% of investors believe they have a corporate social purpose and that it is a win:win situation, because it also adds to the company’s value. There is a widespread belief that real estate needs to improve its performance and demonstrate its credentials when it comes to ESG.

Growing interest in ESG-compliant funds

“We see a growing interest on the part of investors for ESG-compliant funds,” said Sebastian Orthmann, partner and head of real estate, CMS Germany.

“ESG has gone mainstream and it’s not going to stop,” said Hamilton-Grey. “There’s a good cocktail for the transition, the obvious carrot of doing the right thing and the stick of an increasingly stringent regulatory environment.”

What is needed is a healthy dose of realism and the realisation that sacrifices need to be made now for rewards in the future, said Olivier Elamine, CEO, Alstria Office REIT.

“The main reason we can’t manage climate change is that money can’t be made from it,” he said. “We need a collective acknowledgement that there is a cost to it. We need to invest and that investment is not going to yield immediate results. Everyone, investors, landlords, tenants, need to realise the scale of the challenge.”

Health and wellbeing at the forefront in pandemic

The pandemic has accelerated concerns about health and wellbeing, but on the other hand there is a risk that ESG issues could end up on the back burner at this time of economic crisis.

“Our strategy doesn’t change in these difficult times,” said Natalie Orde, sustainability manager, Grosvenor Europe. “There may be capex constraints but we need to be more creative about how we use our resources, continue to reduce our emissions and persuade others to do the same.”

Short-termism must be banished, she said: “We agree with Mark Carney that we can’t self-isolate from climate change, so we cannot afford to ignore it. We’ve been around for 340 years as a company, so we take a long-term view.”