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ESG Practices, Spurred By Pandemic, Will Play Role In Future of Real Estate Investment

BY Kelsi Maree Borland
July 01, 2021

Environmental, Social and Governance (ESG) practices aren't new. Over the last decade, commercial real estate players have increasingly considered the environment and sustainability when underwriting investments and operating properties, but the pandemic has catalyzed rapid growth in ESG adoption. In 2020, public funds, private equity firms, high net worth investors and nonprofit companies aggressively increased ESG commitments, and many are acknowledging the critical role that ESG practices will play in the future of real estate investment.

Companies Increase ESG Goals In 2020

The pandemic pushed ESG policy and practices into the spotlight. According to research from JLL, mutual funds and EFTs invested $288 billion globally in sustainable assets from January through November 2020, a 96% increase over 2019. The UN also noted that corporate net-zero pledges increased three-fold year-over-year.

"We have absolutely seen an increase in commitments over the course of 2020. The number of corporations that committed to science-based-targets, for example, equaled the previous five years combined and the fund flows into US ESG funds, according to Morningstar eclipsed $50 billion, up from $21 billion in 2019," says Lori Mabardi, senior director of ESGR research at JLL. "The global conversation around the need and urgency to shift from a shareholder economy to a stakeholder economy has been underway for some years but reached a new apex in 2020."

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