Click here for the full paper: Paul Oremus – European Pension Awards 2020
Affordable housing has long been a critical issue in European cities. Rising rents, increased demand and a lack of high-quality housing stock for those on middle incomes had already created a perfect storm. Then came COVID-19, which the World Bank estimates will push 88 million people into extreme poverty, and debate about the necessity for good quality homes and addressing systemic inequality became a priority discussion. COVID-19 has also reinforced the importance of community and impact on the environment at large. With most countries living under lockdown, loneliness, and its impact on public health, is more acute. Residential housing projects that place community and social interaction at their heart are ever more attractive. Historically, impact investing hasn’t been seen as a worthwhile investment to make sizeable returns. But a shift in the mindset of investors, accelerated by the onset of COVID-19, has resulted in increased pressure to invest with purpose, necessitating a rethink. In fact, by investing in affordable residential real estate it’s possible to make a real difference to people, communities and the environment whilst also obtaining competitive returns. It not only makes ethical sense, but financial sense too.
Values Delivering Value
In Europe, the housing market projects that look set to provide the best future returns have sustainability, affordability and quality at their heart. At CBRE Global Investors, we have launched a new European housing strategy based on impact investing specifically to target this area. For example, Rhapsody is a 239-home build-to-rent project in Amsterdam. The development is energy negative – it generates energy rather than simply consuming it – and provides many indoor and outdoor places for residents and people living in the neighbourhood to meet and engage. This is a great example of how residential projects can be sustainable, affordable and a unifying force within neighbourhoods. Our experience with projects such as this has honed our housing strategy in other European cities going forward. We have high ambitions. Every year we hope to add at least 1,000 more new affordable homes to the major cities in the European market, and this is just the start. Rising energy costs and the heightened focus on environmental impact has increased the likelihood of a future system that will see “the polluter pay”, with incremental costs to both companies and homeowners as a result. By providing energy-negative homes today, we are future proofing our residential projects for tomorrow. As policies change to help combat climate change, investing in sustainable, affordable housing will become more prevalent in generating strong, long term returns.
Impact investing is going beyond the label ‘sustainable’ or ‘ESG’. Investors are looking for products that set clear targets and have transparent measurement and reporting in place. We work with The Good Economy, a leading social advisory firm specialising in impact measurement and management, who advised on a comprehensive Impact Framework identifying how we can create additionality, improve measurement and will be testing our reporting. Social impact goes hand in hand with sustainability and wellbeing. For us at CBRE Global Investors, investments must meet our ESG standards, with which come strict criteria. There needs to be communal spaces and environments that benefit the local community, and tenants need to be content with good governance in place. We believe in impact investing, not just because of its proven success in delivering returns but because it has the ability to cooperate with the government to accelerate more, higher quality affordable housing. Values don’t have to come at the expense of value.