Topic

Private markets are experiencing an uptick in the integration of Environmental, Social and Governance (ESG) factors, and Real Estate stands out both in volume and quality of opportunities.

November 19, 2021

Navigating the ESG Landscape– A Typology of Sustainability Strategies in Direct Real Estate Investment

Below is an excerpt from ISS ESG’s recently released paper “Navigating the ESG Landscape– A Typology of Sustainability Strategies in Direct Real Estate Investment”. The full paper is available for download from the Institutional Shareholder Services (ISS) online library.

KEY TAKEAWAYS

  • Private markets are experiencing an uptick in the integration of Environmental, Social and Governance (ESG) factors, and Real Estate stands out both in volume and quality of opportunities.
  • There is no single standard that can be applied across different regions, requirements or policies to guide investors in the implementation of ESG integration practices in direct Real Estate.
  • Key trending ESG parameters include climate impact; compliance with regulatory bodies (national and global); impact on the UN Sustainable Development Goals (SDGs); energy conservation; and occupant health and wellness.
  • There is an increasing overlap between the requirements of regulatory bodies and building certification systems, as each attempt to ensure a holistic ESG performance.
  • Investors are paying closer attention to the physical risks for real assets within their portfolios, as the global impacts of climate change begin to be felt.
  • A typology of ESG strategies suggests that plain vanilla approaches are rare, with a substantial overlap between the motivation behind different approaches.

The following charts show the proportion of Real Estate companies with a respective percentage of portfolio floor space certified to a sustainable / green building standard, based on data from the ISS ESG Corporate Rating.

Explore ISS ESG solutions mentioned in this report:

  • Identify ESG risks and seize investment opportunities with the ISS ESG Corporate Rating.
  • Assess companies’ adherence to international norms on human rights, labor standards, environmental protection and anti-corruption using ISS ESG Norm-Based Research.
  • Understand the impacts of your investments and how they support the UN Sustainable Development Goals with the ISS ESG SDG Solutions Assessment and SDG Impact Rating.
  • Use ISS ESG Climate Solutions to help you gain a better understanding of your exposure to climate-related risks and use the insights to safeguard your investment portfolios.

By Hendrik Leue, Head of Bespoke Research & Advisory Solutions, ISS ESG Namrata Doshi, Senior Associate, Bespoke Research & Advisory Solutions, ISS ESG.

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