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EU Taxonomy will be a brand new chapter for real estate

Karlien De Bruin, Global Head of ESG, Sanne Group

EU taxonomy will have a transformational impact on the real estate sector, experts agreed at Real Asset Media’s ESG- Effective Strategies for Real Estate briefing, organised in partnership with PwC and held online recently.

“The EU has taken the first step, coming up with regulations that try to nudge people in the direction of the Paris Agreement 2050 goals,” said Karlien De Bruin, global head of ESG, Sanne Group. “It’s a test run, but in a few years’ time there will regulations in all jurisdictions because it’s a global issue.”

In order to implement the strategy, interdisciplinary teams will be needed as well as disclosure regulations, transparency and data exchange clauses. The market will develop and agreements will be adjusted.

“ESG is much more than climate change, which is an important part, but not the full picture,” said Christiane Conrads, EMEA real estate ESG leader, PwC Legal. “The EU taxonomy contains minimum standards from a social point of view as well. In the end, it’s all about quality improvement.”

It is work in progress and the details need to be filled in to have a complete picture. “In six months’ time we will have made a lot of progress and will know a lot more,” said Conrads. “It will be a whole new chapter for real estate.”

EU legislation is very advanced and will be followed by other, non-EU countries.

Space for government to incentivise companies that embrace ESG

“We’re not directly affected by EU regulations, but we like to follow best practice,” said Olga Balytska, head of real estate, PwC Legal Ukraine. “Some Ukrainian companies adopt EU rules because it gives them a competitive advantage and places them well in the market.”

There is also a space for government to step in and reward companies that comply with ESG rules in order to encourage others to follow.

“If you invest €20 million and follow ESG requirements, the Ukrainian State will reimburse up to 30% of your investment, and this is proving to be a good incentive,” said Balytska.

The incentive to comply can be a tax break, a wish to do the right thing or to improve’s one standing and image or simply the desire to avoid negative consequences in the future, because there is no doubt that regulations are here to stay and that they will become more demanding with time.