Institutional investors place heavy emphasis on sustainability

New figures have shown that institutional investors e.g. banks, insurance companies and

pension funds, place a heavy emphasis on “sustainability” when making property investment

decisions. Frank Vogel comments.

Frank on advantages of sustainability

"As I have made the transition from asset manager developing investor, I have come to

recognise the value of “sustainable development.” This term refers to the fact that

increasingly, developers are incorporating “energy efficient” features into their buildings.

Investing in sustainable property can provide investors with a number of key financial

benefits.

This strategy can make it easier for investors to avoid falling foul of national property

regulations and paying financial penalties. Also, evidence shows that buildings with

sustainability features hold and add financial value for investors. Furthermore, due to

changing global attitudes to energy consumption, sustainable developments can prove more

attractive to corporate tenants and their employees, allowing investors to secure significant

return on investment."

Investor Intentions

Global commercial property firm CBRE has just released its 2016 EMEA Investor Intentions

Survey. This research questioned institutional investors, real estate investment trusts

(REITs), private equity and venture capital companies across the Europe, Middle East and

Africa (EMEA) on how they intend to invest in property throughout the coming year.

An example of sustainable architecture in Sydney

Industry portal Property Magazine International reports that CBRE asked respondents “does

sustainability matter when real estate investing.” Almost nine in ten (89%) answered that

when choosing property assets to fund, sustainability is either “critical,” “one of the most

important criteria,” “definitely matters,” “a consideration” or “used as a rejection barometer.”

Institutional Investors

Analysing the report’s findings, we see that sustainability is becoming increasingly important

to institutional investors. More than a third (39%) of those questioned believe that

sustainable asset selection is either “one of the most important criteria” or even a “critical”

consideration of choosing which properties they wish to invest with.

Venture capital and private equity firms, which typically adopt more short term investment

strategies, place less emphasis on green property investment. Only 14% of these investors

said that they see a property’s sustainability features as one of the most important factors in

deciding whether to purchase the asset in question. Notably, however, CBRE found that

EMEA investors are coming to place a heavier emphasis on sustainability than their

international counterparts.

Frank's commentary

"The short term approach is specifically the reason why venture capital and private equity

place less emphasis on green investments. In the short term green investments cost more

money. You have to earn back your investment in a longer period of time. Unfortunately a lot

of these investments are still not economically viable without Governments subsidizing the

use and purchase of the green solutions.

The low oil price does not seem to help since the alternative is even more cheap. However,

for the large oil companies the low oil price is also a double edged sword since it accelerates

the investments in other alternative energy sources and green developments in building and

construction.

Opportunities are there but it will take time."

Who is Frank Vogel?

Frank Vogel is a financial asset manager and real estate investor based in Amsterdam, The

Netherlands. He is also a philanthropist and founder of MF Foundation, which strives to

contribute to a better world through a range of financial projects and other initiatives.