ESG compliance ‘critical’ for senior living in the Nordics

The Nordics have always been ahead on the ESG front, but now the issue has become ‘critical’ and it impacts valuations, experts agreed at the Senior Living and Care in the Nordics in-depth seminar, organised by SHHA and Real Asset Media, which took place online recently.

“ESG is hugely important and it is reflected in valuations as well,” said Clive Drury, Nordic lead, operational real estate, JLL Sweden. “It’s always been important but in the last five years it has become a critical issue. We see reduced liquidity and price differentiation if assets are not ESG-compliant.”

Properties are now assessed and valued by looking at foreseeable future risks, so all stakeholders must take note.

“We talk to municipalities to make their requirements tougher because we need product that is future-proof, so that we don’t find ourselves in the same situation in ten years’ time,” said Martin Persson, transaction manager, Skanska, Sweden. “We need to think ahead, rather than meet a short-term need, and have the residents in mind all the time when we develop new structures.”

The same criteria are applied when it comes to financing, which is easily available for the sector but lenders are selective.

“We only finance ESG-compliant properties, preferably certified,” said Henrik Rygaard Hansen, senior account manager, corporates and institutions, real estate Denmark, Nykredit. “We’re very comfortable lending to the senior housing sector because there is a huge need, especially for care homes, but we make sure the operators have a good track record and the assets are the right product in the right location.”

Creating the ‘right product’ also means investing in new materials and technologies that will make the asset future-proof.

“ESG is a big focus for us and a topic close to our hearts, so we welcome stricter rules,” said Persson. “We’ll be net zero by 2045, but we also have a short-term goal of reducing emissions by 10% every year, by using solar panels, geothermal heating, greener concrete and so on. We look at everything.”

Technology and innovation can help with the greening of assets but also with the operational side of care homes. However, there are many obstacles to implementing new solutions.

“There’s huge potential if you get the technology right, but legislation currently is a brake,” said Jonas Nolin, co-fund manager, investment director, head of Sweden, Northern Horizon. “For operators it’s not just a question of reducing costs, but also of improving people’s lives by making them more independent.”

Legislation currently does not allow the use of artificial intelligence, robotics or other solutions which could also help alleviate the shortage of labour issue, which continues to be a problem in the sector.

“We’re investing in sensors and radars and we are convinced that AI would be a great help,” said Jon van Geffen, head of growth and real estate, Ambea. “We’re actively talking to legislators in the hope that rules will change.”