Article
Amid economic uncertainty, ESG remains the metric that matters
January 24, 20235 Minute Read
In times of economic downturn, uncertainty results in businesses adjusting their priorities to remain resilient. For investors that are sceptical about ESG, this could create additional headwinds and cause hesitation. However, we believe these trends to be short-lived. ESG is no longer merely a ‘nice-to-have’ element in corporate strategy; it is embedded into market practices and as such, visible in various aspects of decision making.
Findings from our 2023欧洲投资者意向调查supports this conclusion:
Respondents showed a clear willingness to adopt ESG criteria both to protect the future value of real estate assets, and the environment. The most popular ESG strategy among respondents is to upgrade existing assets to meet the standards of sustainability certifications. We expect that this focus on upgrading existing assets will increase as energy prices remain elevated due to geopolitical tensions. While this will initially be a priority in Europe, it is anticipated that green investment in commercial real estate will rise in importance worldwide.
Figure 1: Preferred methods of ESG strategy implementation
Source: European Investor Intentions Survey, CBRE Research, January 2023
One-third of investors are willing to pay premiums for ESG optimised assets. More importantly, more than half of those willing to pay a premium, stated the premium could be more than 20% (in comparison to a comparable non-compliant asset).
Figure 2: Of respondents willing to pay premiums to acquire ESG assets, what % are they willing to pay?
Source: European Investor Intentions Survey, CBRE Research, January 2023
This is being supported by investor expectations of occupier preferences and rental premiums for ESG compliant assets. In our latestEuropean Analysis, we were able to quantify the impact of sustainability certifications on office rental levels – showing a 6% rental premium for European offices with sustainability certifications, compared with equivalent non-certified buildings.
The bottom line
Commercial real estate investors are operating in a fast-changing business environment. But ESG remains the metric that matters. Poor environmental performance, particularly in today’s economic environment, is seen as an investment risk with a potentially significant impact on a property’s long-term performance. For these investors, the development of a forward-looking strategy that builds on sustainable investment principles allows them to sustain competitive advantage and ensure long-term returns.
Read our2023 European Investor Intentions Surveyto find out more.
