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ESG as real estate value driver

Recently, environmental and social issues have become a public and political priority, and as such, of material value for investors. An informed and regular approach to identification and management of ESG impacts shall protect investment portfolios and not only enhance resilience and guard against the risk of accelerated obsolescence and value erosion – and will also provide better financing conditions within a larger pool of new, more responsible capital, attracted to the industry to make a positive ESG impact.

In our previous ESG Real Estate Insights series, we have noted that the real estate sector, which generates approx. 36 percent of GHG emissions and consumes around 40 percent of the total power balance1, greatly contributes to climate change. The high level of emissions is, among others, a result of using such energy-consuming materials as brick, concrete, steel, etc. However, in 2019 compared to the previous year, CO2 emissions from the operation of buildings have increased to their highest level yet at around 10 Gt CO2, or 28 percent of total global energy-related CO2 emissions.2 Emission reducing activities are incorporated in the European Green Deal, which goal is for the EU to achieve climate neutrality by 2050. The emergency of global mega-trends, understood as large-scale social, economic and environmental changes, should make the real estate sector change its approach towards a more sustainable development.

All of these brings us to the key question: What is the value of a sound real estate ESG strategy?

1 European Commission: New rules for greener and smarter buildings will increase quality of life for all Europeans, April 2019.
2 UNEP Buildings Global Status Report.

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