Real estate industry: ESG compliant ones are competitive

Frankfurt on the Main (ots)

Real Estate Benchmark Study 2021 by PwC Germany: 43 percent of asset managers want to convert existing products according to ESG criteria. Only 7,7 percent without a holistic transformation of organization and strategy. Around 8 out of 10 asset managers consider sustainable products to be competitive

The discussion about sustainability in the real estate industry is gaining momentum: Germany is to become greenhouse gas neutral by 2045 instead of 2050, and the European Union's Sustainable Finance Action Plan is also putting the industry under pressure to act. It has to transform, real estate is associated with high CO2 emissions. ESG factors (environmental, social, governance) are therefore becoming increasingly important for the real estate industry - and become a competitive advantage: more than 80 percent of decision-makers in the real estate industry now consider sustainable products to be competitive. This is one of the core results of the current Real Estate Benchmark Study 2021 by PwC Germany. The decision-makers also see advantages for their risk profile in sustainable products. Above all, capital management companies (KVGs) took part in the PwC survey, but also market participants such as crowd investing platforms, real estate financiers, unregulated asset managers, insurance companies and custodians, most of them headquartered in Germany.

The majority of companies are planning a strategic realignment

Further study results: More than 50 percent of the decision-makers surveyed are planning product-related, strategic realignments based on current market developments. More than a third want to adapt their structural and procedural organization and also consider ESG criteria to be relevant for this. In contrast, only 7,7 percent of those surveyed are currently pursuing a holistic transformation of organization and strategy.

At the same time, more than 84 percent of decision-makers describe themselves as “early movers” when it comes to sustainability in their strategic positioning in the market. And: None of the companies sees themselves as laggards - they are obviously already dealing more intensively with sustainability.

“The real estate industry has recognized the strategic relevance of sustainability and has started to implement the whole thing. However, the majority initially want to tackle the transformation at product level in order to then adapt processes and structures organizationally, ”says Thomas Veith, Real Asset Leader Germany at PwC Germany.

Decision-makers want to orient product strategies more closely to ESG criteria

Asset managers are aware of the strategic relevance of sustainability: a total of 43 percent of the companies surveyed want to convert their existing products based on ESG criteria. And more than half of those surveyed (55 percent) would like to base new products on ESG criteria. “Here it becomes clear that ESG has outgrown its infancy on the product side. We expect significantly more new, ESG-compliant products in the coming months, ”says Sebastian Kreutel, Director at PwC Germany and author of the study.

The real estate industry agrees that ESG will become the new market standard in the short to medium term due to regulation. 78,3 percent of those surveyed do not see this as a threat to their company. All companies see regulation as an opportunity, at least in part. For them, however, regulatory requirements also mean increased implementation effort.

Remarkable: Due to a changed market environment and other investment preferences among investors, the demand for green and sustainable investments will continue to increase. A total of 64,3 percent of those questioned (50 percent partially agree, 14,3 percent fully agree). Furthermore, the demand will be further fueled by the Sustainable Finance Action Plan of the European Union, because product providers are obliged, among other things, to be more transparent.

COVID-19 has little impact on the industry's ESG affinity

PwC also asked how the coronavirus pandemic is affecting ESG implementation in companies. Around two thirds of those questioned attributed a medium to strong influence primarily to social aspects (medium: 16,7 percent, strong: 50 percent). When it comes to the environment, only 16,7 percent considered the influence of COVID-19 to be strong (medium: 33 percent, little and very little: 25 percent each). Only 19 percent of those surveyed said that governance aspects have changed significantly as a result of COVID-25, 16,7 and 33 percent (49,7 percent) answered with “little” and “very little”.

19 percent of the asset managers agreed with the statement that COVID-38,5 had intensified the affinity to the topic of ESG: partly and 7,7 percent fully agreed. A total of 53,8 percent of those surveyed partially (30,7 percent) or disagreed (23,1 percent).

“The real estate industry was already concerned with sustainability before 2020, earlier than other industries. How the pandemic will play out, however, is uncertain. What is certain, however, is that it is well advised to continue to apply proven sustainability concepts in the coming years and, if possible, to expand them ”. explains Thomas Veith.

Four theses on ESG criteria in the real estate industry

In their outlook, the authors of the study develop four theses on sustainability in the real estate industry: First, holistic sustainability strategies will come to the fore. Second, the data required for this will be available to decision-makers in the medium term, for example through sustainable contracts and smart metering. Thirdly, the demand for sustainable investments will continue to grow, and fourthly, new (niche) investment strategies will establish themselves on the market, for example sustainable refurbishment. Thomas Veith emphasizes: “Profitability and sustainability are not mutually exclusive. The real estate industry is facing great challenges, but also great opportunities. The coming years will show which market participants have the necessary flexibility and innovative strength for a new generation of investments. "

Press contact:

Dennis Pagel
PwC Germany
Tel .: + 49 211 9817939

Original content from: PwC Germany, transmitted by news aktuell