CBRE Global Investors launches 'Impact Investing in a Pandemic' white paper
CBRE Global Investors has launched a white paper in its Perspectives series exploring the role of real asset impact investing in an era of Covid-19 recovery.
The response to the current pandemic has proven transformational for how real estate is used and occupied, and has coincided with a pivotal moment in the public discourse around systemic inequalities, injustice in society and fears of irreversible climate change, driving significant demand for solutions that can deliver resilient long-term risk-adjusted returns by serving the most fundamental needs of society.
Led by Andrew Angeli, Head of European Real Assets Research and Paul Oremus, residential Fund Manager for Europe, ‘Impact Investing in a Pandemic’ dispels the age-old investor perception that in order to do good you have to sacrifice returns while asserting that for aligned long-term capital, ESG-oriented investments and specifically those linked to attainable and affordable housing tenures offer predictable, steady returns. Furthermore, such strategies are less exposed to cyclical market forces and systemic risks.
Even prior to Covid-19, Eurostat data illustrated that one in four Europeans are considered “rent burdened” – spending more than 40 per cent of disposable incomes on market rent – with growing housing costs increasing the number of people at risk of poverty; something that is only set to grow further due to the impact of the pandemic. Meanwhile, the Urban Land Institute (ULI), has reported that the lack of good-quality affordable housing is affecting city competitiveness, economic performance, citizens’ health, wellbeing, and quality of life, with the issue especially acute in the intermediate housing segment that includes those households that do not qualify for social housing but struggle to afford to pay full market rates. Now, as major European cities face new-found strains brought on by the pandemic, the need for community resiliency has become ever more critical.
There is significant opportunity for impact capital to play an important role in this sector through public-private partnerships as the government looks to accelerate housing delivery to reduce pricing and therefore ease household financial pressures. By leveraging favourable public-sector intervention, private investors may find a lower cost of capital, reduced tenancy risks and, ultimately, attractive risk-adjusted returns.
Angeli says: “Given that institutional investors have the responsibility to serve their stakeholders over the long term, pivoting towards an ESG agenda today is wise in order to protect future returns. However, it needs to be intentional, farsighted and courageous, and real asset impact investing is a viable route to achieving this. Covid-19 has accelerated numerous existing trends in real estate and this is true here as well, both in the growing demand for affordable housing in cities across Europe and for investments that can deliver both a substantial positive impact on social and environmental challenges alongside a competitive and risk-adjusted financial return.”