European real estate investor association INREV has launched a new focus group to promote the integration of environmental, social and governance (ESG) factors into real estate valuations and underwriting, including institutional investors APG, PGGM, KLP and Ivanhoé Cambridge.
INREV said the aim was to standardise the use of ESG data and assumptions in real estate valuations and to create a framework of ESG factors for investment underwriting. The framework would address key issues, such as cost communication between valuers, managers and investors to avoid double-counting.
The focus group includes senior experts from across the real estate industry, including investment managers, institutional investors, valuers and representatives from major accounting firms, including: Norwegian municipal pensions giant KLP; Dutch pension fund asset managers APG and PGGM; Ivanhoé Cambridge, the real estate investment arm of Canadian institutional investor CDPQ; asset managers CBRE Investment Management, DWS and AXA IM Alts; pension funds-backed real estate fund manager Altera; real estate services firms Savills and JLL, and accounting firms PwC and EY.
Constantin Sorlescu, INREV’s director of professional standards, said: “Investors and managers across Europe are setting ambitious ESG strategies; however, they struggle to translate those strategies into tangible financial outcomes. Our new focus group will bridge this gap by helping to evaluate how ESG goals impact underwriting inputs and expected returns.
“INREV has been working on this issue for several years and this initiative is the next important link in the chain. It comes as a direct response to growing demand from the industry for greater clarity on the impact of ESG in real estate underwriting. Our ultimate aim is to move the industry beyond theoretical discussions to a more tangible, numbers-driven approach for ESG valuations.”
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