When finance greens real estate

Real estate seems to have started its ecological transition relatively early. Indeed, the sector has been one of the issuers of green bonds, i.e. green bonds indexed to environmental criteria, for almost a decade. “At first glance, the property seems to be quite innovative. In fact, you should be more nuanced. Because these green bonds were initially only used to fund a few assets in the portfolio of institutional players.”explains Baptiste Kalas, real estate partner at Mazars.

Beyond the walls, finance

So the real “responsible” shift in real estate will come later, but still mostly in financial instruments. After green bonds, the sector took the opportunity to finance itself with sustainability-linked bonds (SLBs). “This is still debt financing, but this time the interest rates vary depending on the issue. This is interesting in two respects, highlights Baptiste Kalas. On the one hand, this requires annual, and therefore constant environmental work, and not just at the time of release. On the other hand, this means that the share of green assets in the portfolio is proportional to the share of funding received from these operations. » This is enough to fundamentally change the environmental profile of a real estate portfolio, such as that of Gecina, which is now only issuing green bonds. As for the group’s traditional bank financing, three-quarters of it is backed by CSR criteria. Concrete illustration of observable commitments in the sector.

“The introduction of these new financial instruments was initially a matter of market practice, with no regulatory restrictions obliging anyone to use them. This explains the very rapid progress of some image-conscious and probably far-sighted players and the delay of other historically very large CO2 emitters, such as cement producers., — analyzes Stephanie Latombe, partner at Mazars in capital markets. The latter, however, considers the emergence of strong texts such as taxonomy as a watershed. “The transformation of operations, incompatible with the fight against global warming, will soon, if not already, become a matter of survival for these companies. But the step to be taken remains quite high for some of them. » Added to this is the necessary demonstration of commitment and results. “Soon declarative information will not be enough. Therefore, it is critical to verify, and better than in the past, that the goals set by green bonds or SLBs are actually achieved.”she insists.

The expert duo agree that organizations should find many benefits – beyond reducing emissions from their building stock – in choosing these financing solutions. Very often, sustainable bond issues have better interest rates than traditional issues and benefit from better market liquidity. Obviously, these types of financing also represent a communication and marketing argument that companies value, especially during tenders.

Innovation at the heart of green real estate transformation

If there is a financial instrument, it remains to find green assets to put them ahead. ” Not surprisingly, the proceeds from these operations were first used to fund construction projects, as these are where the best environmental performance is most easily achieved. However, new buildings make up only a small part of the fund, so responsible innovations related to renovation, destruction and management are multiplying. “ continues Baptiste Kalas. Thus, the recycling of waste is combined with the development of new materials and methods that are at the same time environmentally friendly, original and sometimes surprising. This is the case with concrete, which captures and retains CO2 by integrating wood into its core, or with concrete partially made with a shell. “Startups introduced a few years ago are now entering the financial markets, which proves the relevance of their solutions. The innovation of these startups, both in engineering and technology, will play a central role in transforming the real estate sector.”convinced Stephanie Latombe.

In addition to new types of materials, technological innovations are being developed that are of great interest to real estate, in particular IoT (Internet of Things) and home automation solutions, so they are based on the use of data. “These systems allow, among other things, to control the energy consumption of buildings and facilitate their optimization. This is a common expectation of large corporate tenants and landlords whose energy performance of buildings, carefully studied, is the subject of reporting and the pursuit of continuous improvement.says Baptiste Kalas.

Structuring the rating score while maintaining independence

Trajectory, measurement, reporting… And here the worlds of finance and real estate come together, and sustainable emissions go hand in hand with financial rating. In the absence of an industry rating agency for real estate, companies in the sector have spontaneously organized themselves under the environmental labeling body, GRESB (Global Real Estate Sustainability Benchmark), with the aim of jointly developing a common benchmark. The standardization of measurement and ranking with the emergence of benchmark players will be the main lever to accelerate the sustainable transformation of the real estate industry. In this regard, Stephanie Latombe would like to draw attention to the last point, and not least. ” What is important now is to ensure that these future organizations are truly independent and not biased against America, as we are now seeing in the movement to consolidate universal rating agencies. »

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