Bain & Company’s 2020 private equity report showed the significant growth of impact investing with a 154% increase in assets acquired since 2015, as well as an increase in the size of funds raised. ESG investing is a real consideration and it is being embedded in companies’ corporate strategies, as James Duncan explains.
This represents a shift to “moral capitalism” and a definite tipping point has been reached: while corporates must show how their operations impact profits, they must also demonstrate how they affect the environment, society and the wellbeing of their workforce.
There has been some scepticism about ESG investing but far from just creating social value, responsible investing has been shown to return profit for investors and shareholders – an important point in galvanising the real estate industry.
Historically the property sector has operated with its eyes firmly on the bottom line. But the market is beginning to recognise how it needs to evolve to stay relevant and to understand that ESG principles are vital for the industry to be sustainable in the long term.”
Historically the property sector has operated with its eyes firmly on the bottom line. But the market is beginning to recognise how it needs to evolve to stay relevant and to understand that ESG principles are vital for the industry to be sustainable in the long term.
Legal & General Investment Management (LGIM) Real Assets is a case in point: it is providing homes for homeless families in partnership with Croydon Council, deploying £100m of UK pension money directly into developing affordable housing and backing its pension promises with social investment – what it terms “inclusive capitalism.”
Property, people and purposeProperty – our homes, workplaces, public spaces, cultural hubs and parks – plays a significant role in the fabric of society. There is a real social impact as a result of building in communities and the real estate industry has a responsibility to the places and spaces it creates. As a sector we cannot shy away from the environmental impact of construction, and those that do will be left behind as legislation and regulation catch up with public opinion.
Housebuilders and their supply chains are now focusing on how the built environment can innovate to become greener through more efficient and sustainable construction methods and mitigating emissions from homes and commercial buildings.
Investors in real estate have a fantastic opportunity to marry their financial targets with ESG objectives – clearly there is significant social value to what property is delivering. Understandably, institutional investors are putting increasing emphasis on the need to measure social impact to guide investment.
However, systems can vary considerably, making it difficult for investors to compare like-for-like. Consequently, many in the sector advocate a standardised measurement system and with companies’ methodology and reporting processes still in their infancies there is time to shape them for the property sector.