Most CRE Investors Now See ESG As Crucial

In its 2022 Global Investor Outlook Report and other research, Colliers has found that “sustainability is no longer a ‘nice to have.’”

“Environmental, Social and Governance (ESG) considerations, particularly environmental ones, are prominent on the investor agenda, with three quarters of investors integrating environmental factors into their strategies,” the report said.

“I think the surprise is the rapid adoption of ESG policies,” Aaron Jodka, director of research US capital markets at Colliers, tells GlobeSt.com. “I think there’s a general misunderstanding that the US-based investors are less concerned about ESG, and our survey suggests that is not the case. The building environment is a contributor to the broader market and real estate investors are paying attention to that. Their investors are also looking at that, whether it’s a pension fund or other types of institutional investors. It matters. Our survey showed that we’re still playing catchup on ESG-specific investing in the US, but environmental factors are now playing a part in the majority of asset performance reviews.”

In the Americas, only 14% of investors have no ESG focus, while 57% have some focus and 29%, strong focus.

“It comes down to understanding a building’s impact on the broader environment,” Jodka says. “Understanding carbon emissions, energy use, how to manage and mitigate those. From a social standpoint, understanding how real estate can be used to adjust social agendas and contribute to a larger impact.”

There are existing certifications like LEED and WELL, but at this point, according to Jodka, it isn’t clear whether they will be sufficient in the long run.

“We’re going to see different cities lead with their own policies and investors will have to adapt and adopt,” Jodka says. “But looking to Europe for guidance, there are assets specifically chosen for investments because they meet an ESGB policy and there are others that need significant investment to meet local standards to operate and remain a competitive asset.”

In the US, Boston, New York, parts of California, and some other areas hit hardest by climate change are moving ahead with emissions standards.

“Cities will have to grapple with that. And real estate investors can be part of that solution, which is exciting depending on where you are in that investment sector, whether you’re a capital source or the developer or builder that is developing properties that are sustainable for the future of climate change and ESG policies,” he adds. “There are government regulations and other components too—not easy to navigate.”

As time progresses, though, ESG will likely become an important part of defining core assets.