Realcast: Kharkiv looks beyond war, Germany is poised for rebound, ESG takes over news

Ukraine is clearly focused on the ongoing war but already looking ahead to post-conflict reconstruction. In an interview with Real Asset Media Ihor Terekhov, the mayor of Kharkiv, the country’s second city that is still holding strong, said he is looking forward to welcoming investors back when peace comes and the reconstruction process starts.

Real Asset Media held a briefing in London focused on the outlook for German real estate. Experts agreed that the market has been in wait and see mode for a while but it’s poised to spring back into life later this year. Investors are “lining up already and keen to do deals”, said Oliver Kummerfeldt of Schroders Capital, as soon as prices come down and valuations settle.

Florian Rosch, of Greenberg Traurig said they are already seeing restructurings and people coming under pressure, which is opening up opportunities for investors. The living sector has proved to be the most resilient, logistics assets are still in demand and the office sector is recovering as 90% of people have gone back to work.  

There may not be a green premium on assets yet but there’s definitely a brown discount, said Markus Beran of Berlin Hyp, as investors as well as tenants are becoming more selective and buildings that are not ESG-compliant are increasingly at risk of becoming stranded assets. Many assets will need to be upgraded and improved, which is why transformation loans are a real focus for Berlin Hyp, that aims to facilitate that kind of activity.

Beyond Germany there were some interesting ESG-related stories this week. Savills has done research to look at which cities are attracting CleanTech and ClimateTech companies: places like Boston and Cambridge that offer funding, a good business climate, strong Universities and a “green buzz”.

Intreal did some ground-breaking analysis comparing the performance of Article 6 and Article 8 funds, and found that contrary to expectations the funds that promote social and environmental characteristics actually start earning positive returns earlier than the funds that don’t have to integrate any sustainability concerns in their investment process.

The importance of technology in the fight against climate change was highlighted by Climeworks, a company that operates the world’s largest direct air capture facility in Iceland, capturing CO2 in the air, mixing it with water, pumping it underground where it mineralizes and turns to stone. The CO2 is removed from the atmosphere for thousands of years. Partners Group, a private markets firm, has signed a 13-year deal with Climeworks that will remove over 7,000 tonnes of carbon dioxide from the atmosphere on the company’s behalf. Partners Group said it wants to send a strong signal to other financial sector firms that they should do more to clean up the environment.

Click on the video above to see the full discussion