From rising inequality to climate change and a global pandemic, global challenges are out there and investors want to be part of the solution. During the evening of the 27th of September, FS Sustainability and FS Real Estate together with Sophie Kazmierczak, Sustainable Finance Manager at NEXT Generation Invest, discussed impact investing strategies in real estate that positively impact our people and planet.
NEXT Generation Invest is a young, dynamic player in real estate with a special focus on impact investing. Impact investments are made with the intention to generate positive, measurable social and environmental impact alongside a financial return. There are many impact themes to be explored within real estate as urban spaces and the built environment sustain people in all facets of life – homes, workplace, health, education and leisure.
Looking at our current situation in Germany and Europe, demographic changes, climate change and social inequalities are constantly placing new, unmet demands on housing and social infrastructure. Addressing affordability and adequacy as well as social inclusivity and environmental sustainability in the context of urbanism is central to an impact-oriented real estate investment strategy.
The social dimension to impact investing is obvious but has often been neglected by investors, leaving the bulk of the burden in the hands of the public sector. In Europe, for example, governments and cities have struggled with implementing affordable housing and strengthening social cohesion within cities.
During the event we discussed the important role of the private sector as part of the solution. Private capital can be channelled to real estate impact investing strategies, for example addressing the lack of affordable and adequate housing in cities. In this way, the real estate industry can, and should be part of the solution.
But there is more: the environmental burden carried by buildings remains enormous. 16 percent of total CO2 emissions in Germany come from the building sector (as of 2021). This translates into plenty of opportunities for asset owners and managers of buildings. Green retrofits can not only support our path to zero carbon but also enhance value and return on the asset level.
We also talked about questions including how real estate investment strategies can yield impact, how to align purpose with profit and shed a light on the influence of regulatory changes with respect to the EU Taxonomy and Sustainable Finance Disclosure Regulations. While many asset managers may need to align their strategy within the next few years in retrospect, NEXT Generation Invest is always looking to be a few steps ahead. We also addressed one major challenge to the impact investing landscape: measuring the value-added impact achieved with the investment.
Kazmierczak gives the piece of advice to students of Frankfurt School to look for purpose in their career path and emphasizes that responsibility in the financial sector plays a key role in tackling global challenges. We concluded that impact investing is a view to investing that requires rethinking dictums, such that economic activity should not purely be driven by profit motives and self-interest but as well serve the welfare of our society.