The new disclosure regulation has been in place since mid-March – but real estate funds are far behind demand, according to EY Real Estate’s ESG snapshot. Only a fraction of the market participants are currently working with formulated sustainability goals.
The new disclosure regulation (2019/2088) of the European Parliament and Council states that since March 10 this year real estate funds have to indicate whether they are promoting sustainable or ecological characteristics (Article 8), aiming for sustainable investments (Article 9) or no sustainable fund have in their portfolio (Article 10). EY Real Estate published an ESG snapshot at the beginning of March for the occasion and wrote in it: “The question we asked the participants in the newly available ESG snapshot is how the real estate industry reacts to these requirements and what conclusions they have drawn become.” In total, more than 100 market participants were interviewed.
Consensus among respondents: Investor interest in ESG funds will be enormous
81 percent of those surveyed stated that they would expect investors to be mainly interested in ESG funds and real estate in the near future, and around 75 percent expect more new sustainable properties on the market in the future. 39 percent of the study participants assume that a large part of the existing funds and properties will be transformed into an ESG offering in the future.
Still, 56 percent said they didn’t have a single Article 9 fund in their portfolio by March 10, and 41 percent said they didn’t have an Article 8 fund. At least 35 percent of those surveyed had at least one Article 8 fund in their portfolio at the time of the survey, but only 18 percent had an Article 9 fund.
Around 95 percent of those surveyed are still working on their sustainability strategy
With regard to the control and management of progress within their sustainability strategy, only five percent stated that they have already achieved this – 35 percent say they are developing a strategy and a full 19 percent are still in the orientation phase of strategy development. After all, 40 percent said they were in the “establishment phase” of their sustainability strategy. The study does not provide any information on the respective strategies. However, 60 percent of those surveyed are apparently not planning to convert existing funds and are therefore switching to new issues of ESG funds.
Big difference between requirements and reality
This difference between demand, requirements and reality results from a problem. Because of course, given the expected high demand for ESG funds, market participants are very interested in including them in their portfolio – but the existing data does not seem to be sufficient for them: Only 44 percent of those surveyed said that they “feel able ”To use the available data as a basis for calculating sustainable economic activities and just 23 percent thought they were well prepared for the requirements that came into force on March 10th.
After all, 47 percent see themselves well prepared for the EU taxonomy that has recently come into force, although only 45 percent of those surveyed already took it into account at the time the data was collected.
EY Real Estate: The good intentions of the market participants are not enough – clear goals are required
Florian Schwalm, one of the authors of the study, told the “real estate manager”: “The need for sustainable transformation is recognized in large parts of the real estate industry.” A year ago, EY Real Estate stated in an article that the building sector is responsible for around a third of Germany’s total CO2 emissions, but that there are many ways to curb this. Schwalm is quoted further: “However, there are no concepts for concrete implementation […] Here you will have to act quickly and face the operational challenges. ” The study authors acknowledge that this is a “tough test” of the real estate industry. In order to be able to meet their demands on themselves and on the environment, intention alone is not enough – clear goals are required, says Schwalm.
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