The direction of travel is clear: ESG has become a must-have and all stakeholders must be aware of requirements and regulations, experts agreed at Real Asset Media’ ESG-Effective Strategies for Real Estate briefing, organised in partnership with PwC.
The Markets session, which took place online yesterday, focused on how ESG will influence the strategies of investors, occupiers and finance.
“Investors, banks, insurance companies, everyone is pushing for green investments and there’s a lot of talk about net zero targets, but ESG is a lot broader than that,” said Thomas Veith, partner, real estate, PwC. “There will be a lot more regulation coming, so it would be advisable to have the full picture rather than just focus on emissions.”
The current focus is on reducing CO2 emissions, because that is the first target, but it is important to focus on all three components of ESG – the environment, society and governance.
“It’s important to improve the buildings, but also the processes within the buildings,” said Jens Böhnlein, global head of asset management, Commerz Real. “You have to have a purpose, define a clear governance process and think of what the social component means in practice and how you want to manage your assets.”
Questions are being asked now that were not asked previously, he said, such as where workers are coming from and from where materials are being sourced. The level of scrutiny will only increase and regulations will become more strict, so now is the right time to act and define a clear strategy.
ESG is no longer optional – otherwise expect intervention
“ESG is a necessity now, not an option, and if it doesn’t pick up speed then legislators will intervene,” said Assem El Alami, head of real estate finance, Berlin Hyp.
Integrating ESG into every part of the business and making the strategy a reality is a challenge on a legal, practical and organisational level, but it also involves a permanent shift in mindset.
“It means redefining your processes and learning our business again from scratch, and that’s a difficult thing to do,” said Peter Fischer, real estate leader, PwC Austria. “Bringing ESG into everyday life is also an opportunity to find a new market, but the challenge is the old mindset of the industry.”
In the last year, however, the shift in mindset has happened at a faster rate than expected.
“Responsible investment has moved into the mainstream,” said Richard Hamilton-Grey, director sustainability real estate, Europe & Asia-Pacific, Nuveen Real Estate. “Investors are embracing impact investing to generate market rate returns and at the same time improve the asset and have a positive ESG impact.”
The prerequisite for impact investing is being upfront about the intention, having a scorecard with your priorities on it and being clear about your objectives, he said. Whether those objectives are carbon reduction or job creation, it will enable their impact to be assessed against targets.