Real estate from esg to impact investment

Impact investing as a central aspect of the "real estate" asset class. The picture shows Alexanderplatz in Berlin

For Immobilien Europa Direkt (IED), sustainability is at the heart of its investment strategy. That is why the fund has been participating in the "Global Real Estate Sustainability Benchmark (GRESB)" since 2017 and has now achieved a "4-star" rating.

For Immobilien Europa Direkt (IED), Zurich Invest AG and Schroders say it's not just about such a GRESB rating, but that sustainability is a deeply held core value. For in today's world of social change and climate crises, ecological burdens would have to be reduced as well as positive influences promoted. "This affects not only our social future, but also our investment horizons. Targeted impact investing therefore goes beyond ESG factors and proactively aims to benefit society and protect the environment while achieving attractive returns."

More and more investors want investment options that focus on sustainability and are interested in a wide range of social and environmental issues so that their investment decisions also contribute to a more sustainable society. Impact investing allows investors to engage according to their values and thus achieve a positive impact on the environment and society – in line with the investment goals they have set themselves, say the promoters.

Impact investing refers to investments that both generate attractive returns and make a positive social and environmental contribution. Therefore, it is important to understand and specifically develop the social purpose and environmental significance of an investment. This results in stable returns over the long term.

"That is why impact investing must also be a central aspect of the real estate asset class", Zurich Invest AG and Schroders emphasize.

United Nations Sustainable Development Goals

In 2015, the member states of the United Nations adopted Sustainable Development Goals (SDGs) as part of the 2030 Agenda for Sustainable Development. These sustainability goals provide a guide for public and private organizations to rank the impact of their activities and report on their results. With this in mind, it is important to choose one's sustainability goals so that they are consistent with an organization's activities and purpose. This ensures that positive impacts are achieved that are visible to all stakeholders.

Sustainability goals in IED fund management

At Schroders, three were selected from the total of 20 United Nations Sustainable Development Goals (SDGs) to provide a framework for the impact pillars in the real estate sector. They are:

  • Decent work and economic growth,
  • Sustainable cities and communities,
  • Measures for climate protection.

Impact investing can be used to create an impact in all segments of the real estate market. An asset manager must recognize their contributions in each asset and be able to reduce negative impacts and increase positive impacts accordingly. An appropriate approach must also take into account the needs of occupants, analyze the supply chain, and include the use of natural resources and materials, as well as aspects of waste management. Those who do this consistently will make better management decisions and improve returns in the long run, he said.

In the past, many investors believed that social and environmental benefits could only be achieved at the expense of financial returns. Schroders believes returns at market levels are also achievable with impact investing. In addition, Schroders is even convinced that environmental, social goals lead to higher investment performance overall because they already take future challenges into account. "We also apply this approach in the management of the Immobilien Europa Direkt fund, which has already led to excellent results. Impact investment pays off at all levels", according to Schroders.

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