MIPIM: challenge for real estate as ESG bar is set ever higher

THE ESG bar is being set ever higher but real estate companies are facing up to the challenge, delegates heard at Real Asset Media’s Impact, ESG & Sustainable Development briefing, which took place at MIPIM in Cannes yesterday. 

Jens Böhnlein, Global Head of Asset Management, Commerz Real

“We need to come up with new products all the time and our Impact Fund was a first. It only invests in renewable infrastructure and has a positive impact on CO2 reduction, in line with article 9 of EU taxonomy, said Jens Böhnlein, Global Head of Asset Management, Commerz Real. “We’re trying to convert the entire company into an ESG-driven community, but the real estate aspect is a bit more complex”.

The regulatory environment keeps changing and more clarity is needed, but it is already evident that it will be more rigorous and demanding.

“The pandemic and other challenges have brought an acceleration, said Sebastian Kreutel, Director, PwC Germany. “Now there is no more place for article 6, article 8 products will become the norm. Hopefully soon there will be more clarity on what you need to do to be eligible for an article 8 fund from a legal and regulatory point of view”.

Industry players have a better understanding of what needs to be done but the details are still sketchy.

“I agree that article 8 is the new normal now, but it’s still very much work in progress on multiple fronts, including impact”, said Böhnlein. “The social taxonomy draft has just been released, it will be interesting if it leads to new products being developed”.

Shiny new buildings fit easily into article 8 requirements. But the real problem is non-ESG compliant existing stock with all its embedded carbon.

“Refurbishment is where you can have a real impact”, said Kreutel. “In Germany we need to double the rate at least in order to reach the goals we have set ourselves. More incentives are needed for the industry to speed up that process”.

Real estate companies must examine their portfolios in detail and work out what needs to be done. It’s a time-consuming process but an essential one, experts agreed.

“Selling off non-compliant buildings is not a solution”, said Böhnlein. “We try to get a good understanding of all 160 assets in our portfolio and when it’s possible to convert an asset then we do, but we have to accept that we can’t deliver everything at once and that there is a lot of complexity involved”.

It is impossible to underestimate the gravity of the situation and the need to act urgently, said Böhnlein: “We as an industry need to find solutions or there won’t be a planet to live on. The message has to be stark to get through to people”.