in the form of data or statistics) can assure that city infrastructure is managed and organized more efficiently. The output generated by such methods (e.g. This is because investments are beginning to face community oppositions, which is often due to the lack of ESG considerations, resulting in costly delays or changes to the initial project.Īnother expression of the ESG impact on infrastructure is the so-called “Smart cities” initiative, which refers to urban areas for which different innovative technological methods are designed. Additionally, ESG standards are already proving to be decisive in infrastructure closings. Also, for developed countries, it may help to face new challenges, such as the increase of population in urban areas and the environmental concerns. Implementing an efficient ESG-focused infrastructure system is vital for undeveloped countries – it provides access to the most basic services like energy and water for the community. Overcoming new infrastructural challenges As such, it is also relevant to take a quick look at the impact of ESG in infrastructure. Governments around the world are increasingly fostering these new construction methods to improve the carbon print of cities and emissions mitigation. by means of new eco-friendly materials or smart technological heating or ventilation, not only helps the environment, but it also boosts the return of the respective real estate investment, improving investment performance. Therefore, the construction of more sustainable buildings, e.g. For example, the real estate industry is a major consumer of energy. Obviously, real estate and infrastructure are closely related. In practice, the major obstacle is that investors will need to reinvent their traditional investment models to match the needs of the local community. The real estate industry must respond to this challenge by creating opportunities through social impact investing, like multitenant shared spaces or the transformation of underutilized buildings into enthusiastic venues. ESG, aside from fostering eco-friendly buildings, also allows space to include considerations about the impact of properties on the community, covering aspects like diversity. However, the impact of ESG on the real estate industry goes beyond what is mentioned above. ESG is therefore here to stay and will increasingly shape and influence real estate valuation, and therefore real estate investment, as investors wish to allocate their commitments under this banner. This is the investor-driven global ESG benchmark and reporting framework for listed property companies, private property funds, developers and investors that invest directly in real estate 2.
Another indication is the increased participation in the 2020 GRESB real estate assessment. This is evident from the development of the Sustainability guidelines of the European Association for Investors in Non-Listed Real Estate Vehicles (“INREV”) 1 to also adhere to investors’ needs. Sustainability has become increasingly vital to real estate investors.
Medium-to-long term profit is therefore considered and kept with the usual lower risk volatility of a real estate asset. The correlative appetite that investors have for ESG, closes the loophole where more (long term) value is attributed to real estate assets. Awareness is growing that real estate can have a significant social impact either through the form of rehabilitation of public spaces (indirectly attributing value to existing real estate), affordable housing, social housing, and care centers, or through an environmental focus investment on new buildings such as green buildings. The application of ESG standards on real estate (notably by governments and developers in many developed countries) has shown that this asset class is also relevant when these guiding principles are being applied. The trend, however, is growing quite the opposite way. Once upon a time, real estate embodied the epitome of capitalism.
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