Private Equity RE Funds Feel Pressure from Investors to Create ESG Policies

Institutional investors have been slowly increasing their mandates for environmental, social and governance requirements, forcing real estate funds to adapt.

The unfolding global coronavirus pandemic is grinding economic activity to a halt and throwing the near-term outlook for commercial real estate investment into deep uncertainty, overshadowing all other issues. But when the market does return to some sense of normalcy the shakeout of the pandemic might only heighten the growing pressure private equity real estate fund managers have been facing from institutional investors to strengthen environmental, social and governance (ESG) requirements on their funds.

According to survey data published in Preqin’s H1 2020 Outlook published in early March, 31 percent of global investors already have an ESG investment policy in place and another 13 percent expect to have one in place within the next 12 months.

“There has been an astounding increase in interest in ESG amongst institutional investors over the last 12 to 24 months,” notes Greg MacKinnon, Ph.D., CFA, director of research at the Pension Real Estate Association (PREA). “It has really been a sea change in attitude.”

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