Creating an eco-system that combines the best tech solutions will enable companies to reduce emissions, delegates heard at Real Asset Media’s presentation The Intersection of ESG and Digitisation in Real Estate, staged in the International Investors’ Lounge at Expo Real in Munich this week.
“Digitisation and ESG are the two main topics on our clients’ agendas,” said Sebastian Kreutel, director, PwC Germany. “They want to know what the best strategy is at company level, at an asset level and at a product level.”
In order to help them, PwC has undertaken and completed a Real Estate Benchmark Survey 2021.
The main finding is that “asset managers are aware of the strategic relevance of ESG and are adapting product strategies accordingly”, said Kreutel. “They know that otherwise they won’t be able to sell their products or operate in the market.”
Comprehensive sustainability strategies will therefore shape the agenda for decision-makers. The demand for sustainable investments will continue to grow but, just as there are many aspects to sustainability, there are just as many investment strategies.
“Every company must find its own solution, it has to be customised but always anchored to market standards,” said Kreutel.
Availability of data and data reporting rules are two issues
An issue highlighted in the survey is the availability of data over the medium term and the question of who collects, owns and screens them and how secure they are. Collecting data is made easier by smart metering and integrated technological solutions. Another issue is the structuring of sustainable contract management, with clear data reporting rules.
Sustainability and climate protection have an impact on different fields of action in the real estate sector. In a fund strategy it involves strategic positioning for real estate asset management companies, developing a strategy at product level, taking into account the ESG regulatory framework, the impact on the market and the provision of green investments.
In products and investments, it involves assessing sustainable products and the role played by ESG criteria in investment decisions. At a company level, it means incorporating ESG in workflows and in the organisational structure.
Complete transformation is not the route preferred by most companies
“Very few companies choose the route of complete transformation,” said Kreutel. “Most approach it from the product side, by developing sustainable products that clients want, then scaling up. Or they take a top-down view, develop an ESG strategy at corporate level and then incorporate it in a fund.”
Only 7.7% of companies surveyed are planning a complete strategic realignment because of ESG, while 53.8% opt for an interest-related organisational re-structuring and 38.5% choose a product-related strategic realignment.
“Of the six drivers for strategic positioning, the key one is increased demand from institutional investors and the client side,” said Kreutel. “A second factor is conviction, intrinsic motivation and a genuine interest in sustainability. The third driver is regulatory requirements, followed by reputation, performance and owner requirements.”