• 52% of real estate investors believe the challenges of implementing ESG requirements will lead to capital outflows while 44% think it will grow
  • Green certification viewed as the biggest environmental issue for their firm
  • Auxadi launches second annual real estate outlook report

The majority of investors expect to see a fall in the volume of capital held in private equity real estate funds over the next five years due to managers struggling to incorporate ESG requirements into their investment processes, according to a new study1 commissioned by Auxadi, a leading provider of accounting, tax and payroll services to real estate and private equity fund managers and multinationals.

The research found that just over half of real estate investors (52%) expect challenges around ESG compliance will lead to a fall in assets under management (AUM).  However, opinion on this issue appears to be divided as 44% predict that AUM will grow as managers demonstrate their ability to comply with tougher regulatory demands and improve their sustainability credentials.

According to the findings, real estate investors have become more bearish in the past 12 months on the industry’s ability to promote ESG as a means of attracting new capital.  In 2021, Auxadi’s survey showed that the majority (56%) of respondents saw greater ESG adoption as a means of growing AUM while the minority (40%) believed it would fall.

The report, ‘Real estate: balancing new risks and opportunities in a changing investment landscape’, is the second annual outlook commissioned by Auxadi, and was based on interviews with 100 senior-level real estate investors based in the UK, Continental Europe and North America with average assets under management of €14.2 billion.

Highlighting its growing importance as a benchmark for investors, over half (53%) of respondents cited obtaining green building certifications for their assets – such as LEED and BREEAM2 – as the biggest environmental issue for their firm, up 18% from 35% last year.  Sustainable property management (50%) and energy efficiency (43%) were the second and third biggest issues respectively.

Rima Yousfan, Head of Funds at Auxadi, said: “Real estate managers have clear net zero commitments but will face some significant hurdles in retrofitting existing assets and ensuring newly built ones are zero carbon across their lifecycle. 

“Our research highlights a divide between those that are confident in the progress being made and those who feel that solutions have so for remained elusive. Investors are increasingly likely to vote with their feet and back those managers that are demonstrating their ability to invest in solutions and implementing successful measures to move to net zero.

“So far, the focus appears to be on data gathering and achieving energy labels such as green building certification. Over time, we expect this will transition to the widespread roll-out of impactful energy reduction measures.”

Real estate: balancing new risks and opportunities in a changing investment landscape

Click here to view a copy of Auxadi’s Real estate: balancing new risks and opportunities in a changing investment landscapeto learn more.

Notes to editors

1  Research conducted by Pure Profile among a panel of 100 senior-level private equity investors in May 2022. Respondents were split evenly between the UK, Continental Europe and North America.

2 Leadership in Energy and Environmental Design (LEED) and Building Research Establishment Global Environmental Assessment Method (BREEAM).

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Founded in 1979, Auxadi is a family-owned business working for multinational corporations, private equity funds and real estate funds. It’s the leading firm in international accounting, tax compliance and payroll services management connecting Europe and the Americas with the rest of the world, offering services in 50 countries. Its client list includes many of the top 100 PERE companies. Headquartered in Madrid, with offices in US and further 22 international subsidiaries, Auxadi serves 1,500+ SPVs across 50 jurisdictions.

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Sam Stewart
Citigate Dewe Rogerson
samantha.stewart@citigatedewerogerson.com

Chris Jarvis
Citigate Dewe Rogerson
chris.jarvis@citigatedewerogerson.com

All information contained in this publication is up to date on 2022. This content has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice.No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this content, and, to the extent permitted by law, AUXADI does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.