Sustainability is becoming an increasingly important factor in non-listed real estate investment decisions but there are still considerable barriers to progress, according to a new report published by INREV.
The Sustainability Report highlights key areas such as education and industry-standard metrics that need to be improved as well as establishing clearer evidence of a link between sustainability and financial performance.
"Investors and fund managers are working hard to put in place sustainability aspects but this report shows that some basic building blocks could be improved to ensure these initiatives are incorporated more productively across the industry," said Matthias Thomas, CEO of INREV.
"Much of this relates to the lack of education specific to non-listed property funds in this area, which is seen as hindering the integration of sustainability into investment decisions."
The report concludes that INREV could support these efforts by providing more information tailored to non-listed on sustainability related to regulation, the availability of market benchmarks and research on the link between sustainability and financial performance.
The report also shows that good progress has been made by some market participants. For example, some companies have started to develop and implement their own benchmarking systems, although these are in the early stages. Respondents also said that sustainability credentials are commonly questioned throughout the investment cycle.
Looking forward, respondents said they expected to see a strong focus on implementing strategies for existing assets rather than concentrating on the small proportion of new stock being added to funds each year.
"The next few years will see how the industry intends to implement sustainability strategies. We have seen the growth of niche 'green' funds but there is more evidence that fund managers will be more focused on rolling out sustainable practices throughout their companies and across their funds," said Thomas.
The report is based upon interviews conducted with a cross section of nine European institutional investment and 12 fund management firms. The INREV Sustainability Working Group will now take the results of this report to produce a program of work on this topic.