Near to public transport, sustainable energy, or an agora open to the public: these are just a few of the most common aspects of sustainably designed real estate projects today. However, what makes a project even more remarkable is that sustainability is no longer just a commodity or a sign of corporate social responsibility, it is also a core element of the finance plan.
‘We were involved in sustainable development before there was pressure from investors. Now there is pressure from investors,’ said Sara Neff, head of sustainable development at Lendlease. The Paris Agreement set a target for limiting global warming to +1.5°C by 2050, to ensure the transition to a sustainable economy. This objective requires innovative policies for green finance. The Final Report on European Taxonomy now provides a framework for the different players in green finance (issuers, project developers, investors, companies) so that they understand what is considered green or sustainable activity.
In short, traditional finance concentrates savings on the most profitable projects, without really considering the environmental aspects. In contrast, green finance promotes projects that do not harm the environment, or that encourage the development of a circular, efficient, inclusive, and clean economy. It is about encouraging or compelling almost all companies to behave in a way that is compatible with climate concerns.
Sustainable real estate is not something new. But what has changed in recent years is the perception of risk associated with climate change. This has prompted investors to direct their money towards more secure, more efficient green assets. New measurement tools, standards and labels (BREEAM, LEED…) are helping them raise the bar on environmental and economic performance.
Performance comes from sustainability
A sustainably financed real estate operation often attracts better tenants. More sustainable buildings also allow for higher rents, up to 10% higher, according to a JLL survey of London offices.
Five to ten years ago, sustainability was a subject of great debate: ‘It’s a good thing, but I don’t want to pay for it,’ says Stephen Tross, head of international investments at Bouwinvest, a Dutch investment company that manages around €16 billion in assets. ‘Today, you don’t sacrifice performance for sustainability, you create performance with sustainability.’