INREV is trying to help companies tackle the ESG challenge by creating a framework, Irina Pylypchuk, director of research and market information, INREV, told the recent CEE Summit, which was organised by Real Asset Media and Poland Today.
“There are no standards in the market when it comes to the key questions on ESG,” she said. “That’s why we are working to create an alignment and a well-established ESG framework for all fund managers, investors and participants in the non-listed market when it comes to sustainability reporting guidelines, due diligence, governance, impact investing and net zero carbon.”
INREV is acting on several fronts: emphasising the importance of ESG goals and performance at both a vehicle and asset level, building up and providing access to market and industry level data, providing best practice on the structure, policies and regulations that impact investments, increasing awareness of governance and social aspects that impact the industry and promoting common standards of governance for non-listed real estate vehicles.
The main focus is currently on the environmental aspect of ESG because energy consumption or carbon emissions are easier to measure and companies know they can make a real difference.
“The social aspect is more difficult to assess,” said Pylypchuk. “Europe is lagging behind even the US, as there is no standard in place on diversity, inclusion and equity. As to governance, owing to the war in Ukraine it has moved to the top of the agenda because accountability and transparency have become really important. Who you are renting to and who you do business with are key questions for companies.”
At the beginning of what will be a long journey, data, however limited, can provide knowledge and understanding of the starting point and an idea of what needs to be done. 2050 is the goal for everyone, but the starting points are very different.
Bleak picture on stranded assets
“A few months ago we started a pilot project on performance, examining over 6,000 assets,” she said. “The idea is to build a special data set to understand how your asset and your portfolio compares to others. On current energy use and carbon intensity, the picture is bleak: in less than ten years’ time a third of all assets in Europe will be stranded. In 2050 over 50% of assets will be stranded.”
This is an estimate, said Pylipchuk, but the picture is likely to be even more bleak in reality.
Looking at Europe, the Netherlands is ahead of the curve in terms of ESG initiatives, while CEE markets have high energy use and high carbon emissions and will find it a challenge to reach the 2050 goal. “In CEE there is a lot of scope for retrofitting and repurposing buildings.”
It is crucial therefore to do everything possible to tackle the situation, as the real estate sector can play a crucial role in de-carbonisation efforts. “ESG has clearly taken off as a topic well beyond disclosure,” she said. “ESG must be integrated into every strategy. Now is the time to act”.