Backing ESG progress in private real estate

Private real estate capital has a prominent role in the ESG pact. Indeed, the built environment is responsible for around 30 percent of global carbon emissions – a quite sizable chunk for just one sector. So, the efforts that investors and fund managers are undertaking to bring that number down to net-zero by 2050, in line with the goal set by the Paris Accord, is encouraging. As is the growing acknowledgement of their key role in the creation of thriving towns and cities, and in contributing to the wellbeing of their tenants. Slowly, the dots are being connected between healthy, wealthy communities and building users, and resilient property assets producing value-add returns.

Measuring up on the ‘E’ and ‘S’ components of the ESG equation is a multi-stakeholder responsibility – a real team effort, bigger than any single country, government or business sector – but institutional capital certainly has a driving seat position in delivering long-term positive outcomes for us all.

A new generation of tenants have a growing awareness their environment can have a fundamental impact on general health – physical and mental. If we enjoy the spaces we inhabit, then our productivity rises, too – good for society, good for the economy. But good for property owners’ bottom line? Health and wellness have become a core agenda item in the wider sustainability conversation.

But investors are in the business of money-making and initiatives to increase natural light, provide cleaner air, ensure energy efficiency and keep tenants active, often do not come cheap. So, can the ‘S’ factors of ESG deliver the value-add to offset costs? Although the data set to make that correlation is still immature, there is growing segment of the market with a gut feeling that in the long-term, the current health and wellness focus in real estate will yield financial results for capital owners.

Sustainability in private real estate now extends beyond the environmental to include the social component of ESG. This year’s PERE Sustainable Investing report highlights a shift toward a more holistic, human-centric approach, where responsible investing not only meets green criteria but also creates meaningful societal impact. Engaging with tenants and communities is proving to enhance tenancy, renewals, and rental growth, driving better outcomes for all.