As communities and companies hope that recovery from the coronavirus pandemic may at last be on the way, the real estate industry and impact investing could play a critical role.
At CBRE Global Investors, Andrew Angeli, head of European real assets research, thinks growing emphasis on environmental, social and governance-focused investing is “farsighted and courageous”, describing ESG as “a megatrend that will impact business, society and ultimately real estate”.
That is encouraging a fresh focus on impact investing, which Angeli defines as a transaction made with the intention of addressing societal or environmental challenges.
Together with Paul Oremus, CBRE GI’s residential fund manager for Europe, Angeli has penned a white paper exploring the role impact investing can play in a Covid-19 recovery and whether the pandemic will now bring “an element of humanity into investing”.
“Setting aside the tragic consequences of the virulent disease, its impact to real estate investors is unavoidable,” their report says.
“Self-isolation and social distancing have had a deep effect on people’s relationships with the built environment. Living, learning, working and playing have all fundamentally been transformed and there will be lasting implications for the asset class, which we are only beginning to understand.”
Much of their focus is on the residential sector, where they cite Urban Land Institute research suggesting that a lack of quality affordable housing is hurting “city competitiveness, economic performance, citizens’ health, wellbeing and quality of life”.
“Sadly, the ongoing Covid-19 crisis is pushing more households closer to the brink,” say Angeli and Oremus.
“Marginalised communities, such as lower income individuals and communities of colour, have been disproportionally impacted… While government intervention to temporarily prevent tenant evictions or enable delayed rent payment provides respite, it does not address the fundamental root causes of housing affordability.”
Real estate and impact investing can help, the pair say, “improving access to safe, stable housing, primarily by constructing or preserving existing units and by regenerating and remediating underserved areas to serve those in need”.
Impact investing is not a solution to all of the world’s problems, say the CBRE GI executives, and furthermore there will be stiff competition for the opportunities with the best returns. But the pair are encouraged that the links between positive returns and positive change are becoming apparent.
“From what we have begun to see, you don’t have to give up value for values,” they say. “ESG-oriented investments and specifically those linked to attainable and affordable housing tenures typically offer predictable, steady returns. Furthermore, such strategies tend to be less exposed to cyclical market forces and systemic risks.”