Is ESG driving valuation and/or financial decision making in the real estate industry?

Environmental, social and governance (ESG) factors are now an increasingly important consideration amongst companies and investors. Evidence indicates that ESG integration offers a competitive advantage and leads to improved long-term financial performance compared to peers with no, or a less developed, ESG strategy.

In general, ethical investing within the real estate sector is gaining momentum and opportunities for long-term, sustainable investing are now becoming a bigger focus. Gradually too, the terms on which finance is made available to property owners is beginning to feature ESG components beyond the requirement for energy performance certificates at a suitable level

To reflect on this developing trend and explore the impact that ESG might have on their or their investee’s balance sheet, a number of senior figures from the across the real estate industry gathered to discuss the extent to which ESG factors were now being reflected in valuations and how this might evolve.

During that conversation, it became clear that there are many, wider causes for concern for businesses considering how to respond to the ESG agenda, whether creating their own ESG principles to guide their business activities or through external agencies such as investors who have their own ESG objectives.