ESG-led and climate-change mitigation still leading investor strategies, despite Covid-19.
Given real estate is responsible for almost 40% of energy and process-related emissions across the globe, and global building stock is set to double by 2050, Savills says a proactive approach at every stage of building is the only option.
Food security will drive future real estate activity: Savills highlights New Zealand as most secure country, with large variations between European and American nations.
Savills has examined the effects of climate change on various aspects of real estate activity in a series of articles and interviews launched as part of its Impacts research programme, where the international real estate advisor has studied the various social, environmental, demographic and technological ‘tipping points’ immediately facing global real estate.
International investors, including Oxford Properties and Nuveen Real Estate, have confirmed to Savills that even in the light of the Covid-19 pandemic they remain fully committed to ESG-led strategies to tackle climate change given the long-term threats it poses to the future performance of assets. As Paul Brundage, Executive Vice President, Senior Managing Director Europe & Asia Pacific, at Oxford Properties told Savills on the subject of climate change: “We’re past the tipping point. We’re in it, and have to deal with it.”
“For the largest investors in real estate, the impact of climate change is now not just about ‘doing the right thing’ and recognising that assets with strong ESG-ratings tend to out-perform the market, it’s about the resilience of the location of assets due to the physical risk of environmental incidents”, comments Sophie Chick, director in Savills World Research and co-lead of the Impacts programme.
“Social action from populations around the world last year is forcing governments to act. Covid-19 is almost like climate change sped up: it’s shown how natural forces can affect the entire globe, but also showcased that in the face of existential threats governments and industry can take swift and decisive action which they would perhaps never have contemplated before in order to solve them. The innovation displayed by the real estate industry in recent weeks to deal with the pandemic now needs to be applied to tackling its rising carbon emissions and contribution to the climate crisis at every stage of a building’s lifecycle. Given government regulation in this area is only going to increase a proactive approach is the only option.”
Alongside the threat of flood and wild fire, one of the key climate change risks is food security, says Savills. Ultimately with real estate being determined by the location of people, and those people dependent on being able to access food, examining food security will become a crucial part of real estate investment and development activity. Savills has therefore analysed and ranked 38 countries around the world on four pillars of food security (availability, access, stability and utilisation) in its first Food Security Index, published as part of Impacts (see chart right). The Index shows that food security varies widely around the world, with large variations in country performance even between the most secure regions of Europe and North America, although New Zealand is the most food secure country overall.
Please click here to view the chart.
Emily Norton, head of Savills rural research team, comments: “The recent Covid-19 crisis has demonstrated the fragility of food distribution supply chains in many countries around the world, but as the climate crisis accelerates, supply networks will face much more persistent problems; in the long-term development locations will be increasingly limited to where populations can safely and securely access food supplies.”