The growing ESG opportunity in real estate
How adopting sustainability can be a win-win situation, according to experts at The Asset’s 2nd ESG Forum
5 Dec 2019 | Darryl Yu

ESG (environment, social and governance) factors are increasingly playing a role when it comes to real estate development in Asia, according to a panel of experts at The Asset’s 2nd ESG Forum in Hong Kong.

With the growth of sustainable financial markets such as for green bonds, several real estate issuers in Asia have been quick to ringfence key assets suitable for ESG financing. Panellists from companies such as Swire Properties and New World Development shared that they had sought green bonds and sustainability-linked loans to fund their key projects.

“Over the long term, there will be a premium for sustainable products that are out there today,” explains Ashley Hegland, sustainable development adviser at Swire Properties.

Key in pushing for ESG integration within real estate is the growth of third-party verifiers that help in guiding property companies in creating sustainable properties. Building raters such as LEED (Leadership in Energy and Environmental Design) are just some of the companies evaluating the cleanness of a building.

“China is starting to evaluate buildings using sustainability ratings. Currently, we have dozens of certifications, and we have grown with that development,” observes Alessandro Bisagni, founder & president at BEE Incorporations.

As a result of the growing trend of ESG within the real estate property developers such as New World Development have been reshaping their approach “We are investing in climate studies to evaluate the risks for our projects,” explains Venisa Chu, senior manager of sustainability department at New World Development.

Overall the push towards ESG and sustainability as a whole within the real estate space is a positive as it may affect the overall credit profile of the company going forward. According to Adrian Cheng, director, Asia Pacific corporates team at Fitch Ratings, “As a rating agency, we are looking at how ESG risk will affect the credit worthiness of the company.”

Moreover, firms specialized in real estate investment may be more likely to purchase an ESG certified property as it would satisfy the requirements of investment stakeholders. “A lot of US and European institutional investors are very interested in the ESG side. Probably around 99% of these investors are asking about ESG,” shares Tom Miller, senior managing director, head of development and sustainability at LaSalle Investment Management.

Overall, the push of the real estate sector to adopt sustainability is a positive not only for developers but also for other stakeholders connected to the properties. “It’s about creating an environment in which your tenants can benefit from ESG practices,” shares Ada Wong CEO of Champion Reit who explained that they are helping their tenants get a better understanding of how they can benefit from sustainable practices.

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