The widespread interest and adoption of ESG principles are having a profound impact on all asset classes, both public and private, globally. Oftentimes these discussions center on operating companies, but in our opinion, ESG principles can and should be applied to real estate too. In real estate, where the social impact of housing and development have been front-of-mind historically, there has been an increasing focus on the environmental impact as well, particularly around carbon emissions. Increasing government regulation and support for green assets will accelerate this irreversible trend, and we believe sustainable or “green” development will be a key part of the solution.
While the discussion around real estate and carbon is just beginning, it has the potential to radically transform the industry. From a capital markets perspective, rising investor demand for these assets, coupled with current scarcity of product, could produce outsized investment returns. We believe investing in and developing “green” is the right thing to do for the planet, and it may also be the right thing to do for investors.