![\"\"](\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2021\/09\/Fulya-Kocak.jpg\")
<\/a>Fulya Kocak, Senior Vice President of ESG, Nareit<\/p><\/div>\n
\u201cWhat\u2019s changed is we are genuinely seeing investors making allocation decisions on the back of this, and they are selecting one manager or fund over another because of the strength of the ESG strategy.\u201d said Abigail Dean, global head of strategic insights at Nuveen Real Estate. \u201cStrong ESG performance of a fund is becoming a really core criteria and that definitely wasn\u2019t the case five or six years ago.\u201d<\/p>\n
The growing emphasis on ESG, which Dean described as noticeable and swift, has been driven by the more socially and environmentally conscious goals of investors, tenants and managers themselves. And those goals have intensified with a global pandemic, more frequent climate disasters and a reigniting of the social justice movement.<\/p>\n
\u00a0<\/p>\n
ESG\u2019s three main pillars are important when trying to raise capital for a fund as it has the potential to draw investment from a growing pool of capital focusing more and more on ESG.<\/p>\n
\u201cThere\u2019s gathering momentum from asset managers, like Norges Bank and BlackRock, that are pushing for an ESG focus among companies and funds they invest in,\u201d said Brad Tisdahl, CEO of Tenant Risk Assessment.<\/p>\n
Tisdahl, whose firm evaluates tenant risk for Class A office property owners, including institutional investors, says building owners are also more focused on the ESG compliance of building occupants.<\/p>\n
Interest is growing for REIT investors, too. When 85 equity REITs participated in Nareit\u2019s 2020 ESG survey, 95 percent of respondents by market capitalization stated investors had requested information about ESG, according to Fulya Kocak, Nareit\u2019s senior vice president of ESG issues. Diversity and inclusion, climate change opportunities and risk topped the list of investor concerns.<\/p>\n
<\/a>25 Binney St. in Cambridge, Mass., is designed by Alexandria Real Estate Equities to be the most sustainable laboratory building in the market. Image courtesy of Alexandra Real Estate Equities<\/p><\/div>\n
\u201cPeople can see these issues causing social and economic turmoil and have become more focused on trying to do something,\u201d said Helen Gurfel, head of sustainability and innovation for CBRE Investment Management. \u201cInvestors are asking questions of their managers, and the managers are responding with an intensified focus on ESG.\u201d<\/p>\n
Institutional investors often have their own staff members working on ESG, and many have carbon reduction goals they need addressed.<\/p>\n
<\/a>Dan Winters, Head of Americas, Global Real Estate Sustainability Benchmark<\/p><\/div>\n
\u201cThey are being much more specific about what it is they want to see in the policy and asking us questions specifically about the transition to the low-carbon economy, net zero carbon, and how we\u2019re taking account of that in our strategies,\u201d Dean said. \u201cThey\u2019re asking how we address physical climate risk.\u201d<\/p>\n
CBRE Investment Management takes \u201ca partnership approach\u201d to ESG. They share best practices with investors who are seeking to develop an ESG strategy, and they encourage fund managers and joint venture partners to adopt ESG best practices.<\/p>\n
Investors want to understand how managers integrate ESG into investment strategy and company culture, said Cyndi Thomas, managing director of RCLCO Fund Advisors, rather than considering ESG as a separate strategy.<\/p>\n
ESG is also rising to the top for real estate investors and investment managers because, throughout the business world, C-suite compensation is increasingly being tied to these targets. \u201cAt the corporate level, the focus is diversity, equity, inclusion, transparency and reporting,\u201d Thomas said. \u201cAt the investment level, the considerations include sustainability and climate risk, as well as the overall impact of the investment on the community. ESG is no longer viewed in a vacuum but rather as part of the holistic approach to real estate investing.\u201d<\/p>\n
Focus on funds<\/h2>\n![\"\"](\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2021\/09\/REIT-ESG-Reporting.jpeg?w=476\")
Data based on 100 largest REITs by equity
market capitalization.
REIT ESG Dashboard, 2020, Nareit<\/p><\/div>\n
As concerns about the environment and social justice intensify, ESG-dedicated funds continue to grow in force and number throughout the investment universe. But, more and more, ESG permeates all funds and strategies, managers report.<\/p>\n
At the start of 2020, according to the Forum for Sustainable and Responsible Investment, institutional investors, money managers and community investing financial institutions reported considering ESG issues in their investment research, analysis and decision-making across $16.6 trillion in U.S. assets\u2014a 42 percent increase from $11.6 trillion in 2018.<\/p>\n
Alternative investment vehicles (private equity, REITs\/property funds and hedge funds), meanwhile, identified $715.5 billion in ESG assets under management across 905 alternative investment vehicles at the start of 2020, up from $587.6 billion in 2018. The number of property funds\/REITS identified increased to 126 from 108 in 2018, although assets in these funds declined $272 billion to $242 billion.<\/p>\n
PGIM Real Estate\u2019s Impact Value Partners fund has a dual mandate to create competitive returns for investors and provide positive social and environmental impacts. Lisa Davis, the fund\u2019s executive director and portfolio manager, said the fund focuses on transformative development and affordable housing.<\/p>\n
![\"\"](\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2021\/09\/HelenGurfel.png?w=300\")
<\/a>Helen Gurfel, Head of Sustainability and Innovation, CBRE Investment Management<\/p><\/div>\n
\u201cFor impact investing, which in some ways is one step further than ESG, we\u2019re not only screening investments and enhancing our risk management by looking at ESG factors, we\u2019re also seeking to proactively have a positive impact on social outcomes and the environment,\u201d Davis said.<\/p>\n
LaSalle Investment Management\u2019s DTU+E investment strategy, which stands for Demographics, Urbanization, Technology + Environmental Change, has been in place for several years, said David DeVos, global head of ESG at LaSalle, and \u201cis a factor in all of our funds.\u201d The firm is always looking at new opportunities and investment products that enhance that focus.<\/p>\n
Nuveen Real Estate also invests heavily in affordable housing due to investor demand, while managing climate risk and developing clear strategies to minimize those risks and impact on real estate values, Dean said.<\/p>\n
\u201cAs stewards of our clients\u2019 investments, we think it\u2019s a really significant part of our role to pay attention to that,\u201d she said. \u201cAnd that\u2019s the backdrop to setting our \u2018net zero carbon by 2040\u2019 goal.\u201d<\/p>\n
More reporting\u00a0<\/h2>\n
Data based on 100 largest REITs by equity
market capitalization.
REIT ESG Dashboard, 2020, Nareit<\/p><\/div>\n
As concerns about the environment and social justice intensify, ESG-dedicated funds continue to grow in force and number throughout the investment universe. But, more and more, ESG permeates all funds and strategies, managers report.<\/p>\n
At the start of 2020, according to the Forum for Sustainable and Responsible Investment, institutional investors, money managers and community investing financial institutions reported considering ESG issues in their investment research, analysis and decision-making across $16.6 trillion in U.S. assets\u2014a 42 percent increase from $11.6 trillion in 2018.<\/p>\n
Alternative investment vehicles (private equity, REITs\/property funds and hedge funds), meanwhile, identified $715.5 billion in ESG assets under management across 905 alternative investment vehicles at the start of 2020, up from $587.6 billion in 2018. The number of property funds\/REITS identified increased to 126 from 108 in 2018, although assets in these funds declined $272 billion to $242 billion.<\/p>\n
PGIM Real Estate\u2019s Impact Value Partners fund has a dual mandate to create competitive returns for investors and provide positive social and environmental impacts. Lisa Davis, the fund\u2019s executive director and portfolio manager, said the fund focuses on transformative development and affordable housing.<\/p>\n
<\/a>Helen Gurfel, Head of Sustainability and Innovation, CBRE Investment Management<\/p><\/div>\n
\u201cFor impact investing, which in some ways is one step further than ESG, we\u2019re not only screening investments and enhancing our risk management by looking at ESG factors, we\u2019re also seeking to proactively have a positive impact on social outcomes and the environment,\u201d Davis said.<\/p>\n
LaSalle Investment Management\u2019s DTU+E investment strategy, which stands for Demographics, Urbanization, Technology + Environmental Change, has been in place for several years, said David DeVos, global head of ESG at LaSalle, and \u201cis a factor in all of our funds.\u201d The firm is always looking at new opportunities and investment products that enhance that focus.<\/p>\n
Nuveen Real Estate also invests heavily in affordable housing due to investor demand, while managing climate risk and developing clear strategies to minimize those risks and impact on real estate values, Dean said.<\/p>\n
\u201cAs stewards of our clients\u2019 investments, we think it\u2019s a really significant part of our role to pay attention to that,\u201d she said. \u201cAnd that\u2019s the backdrop to setting our \u2018net zero carbon by 2040\u2019 goal.\u201d<\/p>\n