As we enter 2024, the world continues to confront financial and environmental challenges on a global and societal scale.
Globally, efforts to meet the Paris Agreement’s objectives are falling behind, with the green transition’s investment levels not meeting the necessary targets. This was highlighted by the World Bank’s Senior Managing Director, at the recent EU Sustainable Investment Summit, where the critical need for accelerated private investment in sustainability was underscored. The Commission identified a 1.5 trillion euro annual funding need for the 2030s if the continent is to meet its objectives, and private capital will be key in reaching that number
At the same time, financial concerns, particularly regarding retirement income security, are intensifying amid an ageing population, emerging as a major issue. During the last mandate, the Capital Markets Union (CMU) Action Plan has been a driving force behind numerous initiatives aimed at building an economy that benefits people by enhancing the flow of capital in the EU single market.
These efforts have yet to trigger significant result on the ground, and the forthcoming legislative period will be crucial in ensuring these initiatives deliver tangible benefits for citizens, and in doubling up effort to bring about truly integrated European capital markets.
Recognising the magnitude of these challenges, the listed real estate sector stands as a strong ally. Its capacity to address both the financial and environmental needs of our times positions it as an indispensable player in the broader strategy to navigate these pressing and decisive issues.
Listed real estate shall become a key additional source of financing for the European real economy and help deliver on the green transition while playing a crucial part in providing retirement security to millions of people.
Listed real estate shall become a key additional source of financing for the European real economy and help deliver on the green transition while playing a crucial part in providing retirement security to millions of people.
Rendering the buildings’ stock energy-efficient
The listed real estate sector plays a transformative role in advancing sustainable development goals. By rendering the buildings’ stock energy-efficiently, listed real estate companies are crucial in reducing our carbon footprint. This is paramount as the building sector is responsible for about 40% of Europe’s energy consumption.
As the second most taxonomy-aligned sector, the real estate industry has played and will continue to play a crucial role in the green transition. Increased capital investment and an appropriate regulatory environment are essential to support the energy-efficient renovation of Europe’s buildings.
In light of the EU’s ambitious legislative efforts to direct investments towards sustainability during the last mandate, the upcoming legislative period must focus on the effective implementation of these measures and on actually driving Europeans’ savings where they’re needed. The market’s clear demand for regulatory stability cannot be overstated.
When it comes to implementation, crucial strides need to be made towards greater alignment, benefiting both the industry and investors alike. Efforts to harmonise standards are imperative to ensure the real energy performance of buildings is accurately represented. The current reliance on Energy Performance Certificates (EPCs) or Near Zero Energy Buildings (NZEB) standards leads to varied interpretations, thereby diluting the industry’s sustainability initiatives.
There’s also an urgent necessity to establish clear, sector-specific standards that not only reflect the industry’s sustainability efforts accurately but also incorporate relevant indicators to enhance the measurement and reporting of progress in the energy transition.
A sound investment choice both for institutional and retail investors
Besides advancing the climate objectives, listed real estate emerges as a key investment vehicle for long-term wealth, facing demographic challenges and social change. It stands out as a sound investment choice both to retail and institutional investors, offering a balance of stability and growth while generating positive social impacts.
Investing in listed real estate today is investing in needed buildings and infrastructure[1]: data centres, healthcare and senior housing facilities, warehousing, or student housing – infrastructure Europe needs.
In addition to bringing long-term investments to the European economy, it provides a predictable stream of income through regular dividends and capital appreciation, making it a compelling choice for a wide range of investors such as pension funds. Furthermore, in line with the spirit of the currently under negotiations retail investment strategy (RIS), listed real estate stands out as a notably simple, transparent, and secure option for retail investors, with excellent value for money, and aligning well with the policy objectives.
It is therefore to be seen as a key investment vehicle for achieving both financial security and sustainable goals. By empowering to invest in this asset class, we can safeguard the financial futures of millions and simultaneously contribute to a greener planet. Therefore, by prioritising policies that facilitate investments in listed real estate, including cross-border, we can further harness its tremendous potential for the benefit of society and Europe as a whole.
As the voice of the listed real estate sector, the European Public Real Estate
association (EPRA), and its membership, remain steadfastly committed to addressing the financial and climate challenges that lie ahead. Along with EU institutions and a broad spectrum of stakeholders, we are eager to engage in meaningful dialogue, sharing the unique insights, strengths, and dedication of our sector.
Read more about EPRA (European Public Real Estate Association) Public Affairs here: https://www.epra.com/public-affairs/publications
