Look beyond the green for value

A look inside PERE's Sustainable Investing special supplement.

Sustainable Investing

Explore more articles from our special supplement

Ivanhoé Cambridge on building resilient cities

TH.RE on zero carbon buildings

LaSalle on the evolving pace of ESG

PGIM on real estate with a social conscience

LaSalle on sustainability around the world

Invesco on the holistic approach to ESG

M&G on developing a plan for the future

Gaw Capital on the sharing economy

Sustainability – what does the word make you think of? Put this question to many people and they are likely to fire back terms like carbon reduction, energy efficiency, greenhouse gasses, solar panels and recycling. In short, anything that conjures up an image of environmental friendliness. But the over-riding message that jumps out from this year’s PERE report is that the conversation around sustainability is considerably wider. The ‘s’ – social – in ESG is firmly part of the equation in the world of private real estate investing.

For there is a rapidly growing realization among the savviest investors and managers that responsible investing involves the physical assets they own and manage not only meeting a list of green criteria, but having a meaningful impact on society, on the health and well-being of their tenants and occupiers, and helping create urban neighborhoods that will thrive and remain relevant in the long term. An altogether more holistic, “human-centric” approach to sustainability.

To some this might sound a little bit too touchy-feely to be a serious investment discussion point, but the voices in the pages that follow reflect a serious commitment to social and economic impact investing. Well intentioned though it may be, returns need to get delivered and it can be rather more challenging to demonstrate a direct link between socially driven initiatives and positive investment outcomes. But look at it this way – it is simply best practice to keep the end-user happy in your buildings. By capitalizing real estate that people want to live, work and play in, leases are more likely to get renewed, tenancy lengths to increase and rental income to grow.

Desirability means less chance of obsolescence. And there is little doubt that occupiers are more discerning than ever about what they want from real estate space. So investors take note; community and tenant engagement is likely to be making a difference to your bottom line. But don’t take your eye off the ‘green stuff.’ The World Green Buildings Council has set a target – all new buildings must be net-zero carbon by 2030 and all buildings by 2050. So it is good news that GRESB has just reported a 4.9 percent reduction in the sector’s greenhouse gas emissions year-on-year, the highest in six years, and a 2.5 percent average reduction in energy consumption in 2018. Progress is being evidenced, but there is always more to do. The race to reach the summit of sustainability continues.

Helen Lewer

Special Projects Editor