Global appetite for investment in commercial real estate remains strong, and ESG is playing a critical role, according to the annual Institutional Real Estate Allocations Monitor from Hodes Weill & Associates and Cornell University. This year, 39% of institutional investors have a formal ESG policy in place, up from 36% in 2017, the study found. Smaller investors are less likely than larger institutions to say such policies have an impact on their investment practices.
Institutions in the Asia-Pacific (APAC) and Europe, Middle East and Africa (EMEA) regions are showing a particular penchant for commercial real estate investments, and those regions are also more strongly focused on environmental and social governance issues than the US, where just a quarter of institutions report that they are influenced by ESG policies.
The findings underscore comments from Sander Paul van Tongeren, co-founder and managing director at GRESB, who said last month that investors are increasingly seeking standardized and validated ESG data to “assess the sustainability of their real estate assets.”
The real estate market is responding to this investor interest by increasing their public environmental and social disclosures. GRESB, an organization that assesses the sustainability performance of real estate and infrastructure portfolios and assets, released its Global Real Estate Sustainability Benchmark in September; the report showed more asset level reporting on this type of data than ever before.
The Hodes Weill report’s findings that institutions in the APAC region are more strongly focused on ESG issues may be one reason why real estate entities in Japan and Hong Kong were shown in the GRESB 2018 benchmark to have seen a marked uptick in ESG transparency.
