There has been a real mindshift on impact investing in the industry, delegates heard at Real Asset Media’s Real Estate – the Ultimate Impact Asset Class? briefing, which took place online on the REALX.Global platform recently.
“Investors still look for performance, but now they want performance with purpose,” said Nehla Krir, head of sustainability and CSR, BNP Paribas. “It is regulations-driven, but also conviction-based. We, as investment managers, need to push and combine all these elements, delivering performance as well as impact.”
Impact investing suits real estate well because buildings by their nature are rooted in the community and meant to be useful for people.
“It has shot up to the forefront of investors’ consideration,” said Martin Zdravkov, head of UK residential and impact investing, La Salle Investment Management. “During the pandemic there’s been a focus on not just evaluating problems but also contributing solutions, without sacrificing returns.”
Events in the last year have contributed to a mindshift in real estate, as more investors have taken socially responsible investment on board and seen its impact in the round.
“I believe there has been real change in the industry,” said Michel Van Oostvoorn, director investments, Hartfelt Fund Management. “Investors in our funds really want that combination of social impact and financial returns and they believe it’s possible.”
Social returns driving financial returns
The idea that impact investing means sacrificing returns is an “outdated thought”, he said: “We strongly believe that social returns drive financial returns. Over the long term, impact investing strategies outperform.”
In the healthcare sector in the Netherlands, for example, it has been shown that high satisfaction rates of residents and workers drive occupancy rates which, in turn, drive financial returns as well.
“Investors are searching for volume and yield, but they also want to align their strategies with prevailing trends,” said Ron van Bloois, chair, Senior Housing and Healthcare Association. “That’s why they are taking the social element into consideration more and more, to create a value chain between them and the user.”
Intentionality is key, because the whole strategy needs to be built around the social objectives to be reached.
“Impact investing gives extra purpose and goes well beyond just incorporating ESG into the strategy, good as that is,” said Abigail Dean, global head of strategic insights, Nuveen. “You cannot retro-fit an impact investing strategy. It’s a transformative investment, not just a positive one.”