Commercial and residential properties with green credentials offer attractive investment opportunities.
Meanwhile, investing in commercial properties with a social purpose – affordable housing, schools and hospitals for example – can also meet investors’ environmental, societal and governance (ESG) targets while delivering long-term value, Time Investments co-fund manager Roger Skeldon said.
The global pandemic created uncertainties for the future of commercial real estate, as companies have been forced to move to home working, while there has been an acceleration in the shift of focus to green and renewable energy.
Skeldon said, far from being mutually exclusive, commercial real estate investment offers a genuine opportunity for investors to make a long-term return alongside making a real difference to the environment and society.
He added: “The UK’s built environment is responsible for 25 per cent of the country’s carbon emissions, which might suggest that the sector is not suitable for investors trying to manage climate change risk.
“However, in the last two decades, emissions have reduced by 30 per cent as the efficiency of current building stock improves and are replaced by greener alternatives, and policymakers are placing a huge expectation for buildings to be net-zero by 2050.”
A new report from Aeon Investments, the London based credit-focused investment company, has also predicted the gulf between the financing available to real estate projects at either end of the ESG scale is set to rapidly widen.
It says those projects with poor ESG credentials will increasingly face issues accessing finance, resulting in limited options and punitive borrowing terms in the medium term.
The report - ESG in ‘Commercial Real Estate Lending - said lenders were now at the stage of being able to make the shift to rewarding exemplary projects with better terms, rather than just penalising those that clearly do not follow sustainability principles.