A good chunk of real estate managers' portfolios are currently managed under ESG principles, according to data from Pensions & Investments' annual real estate money manager survey. ESG assets accounted for $372 billion, more than half of real estate assets managed for U.S. institutional, tax-exempt investors as of June 30.

For worldwide real estate, ESG made up 43% of assets at $841 billion of managers' worldwide assets, and 24.8% of global real estate investment trust assets at $120.7 billion. For many real estate managers, incorporating ESG into their investment processes is a work in progress, industry executives say. "Step one is to say, 'Look it matters,'" said Martha Peyton, Irvine, Calif.-based managing director and global head real assets research at multifamily real estate manager Aegon Asset Management, which has $25 billion in real assets under management and under advisement. "Step two is more complicated."

A number of countries, municipalities and real estate managers have made net-zero pledges and those pledges have made their commitments real, Ms. Peyton said. "How do owners of property ... managers in the real estate sector, how are they going to get there? That is the question that is on the table now," Ms. Peyton said. Another question is how to incorporate climate risk into real estate managers' analysis, Ms. Peyton said. Still, while there are tools, most notably from GRESB, a global ESG benchmark for real assets, that help measure energy usage and carbon footprint of properties today, none of them are useful in the real estate investment process, which has a long time horizon, Ms. Peyton said.

Among managers reporting ESG assets in P&I's real estate manager survey, Nuveen topped the lists for worldwide and U.S. institutional, tax-exempt assets with $143.5 billion and $105.8 billion as of June 30, respectively, and came in second for REIT assets managed under ESG principles with $12.1 billion as of the same date, P&I data showed. Real estate managers are increasingly adding ESG-related investment strategies. "Our goal for the JV is to build up to 1,000 homes across a handful of projects across metros."Man GPM's joint venture partners include Dutch real estate manager Bouwinvest Real Estate Investors and global technology company ZF Friedrichshafen. Man GPM had $3.4 billion in global real estate assets, including $267 million in worldwide real estate assets managed under ESG principles as of June 30.

While the real estate money management industry is still dominated by white men, P&I's data shows that real estate managers are making some progress on the "S" or social part of ESG. As of June 30, women made up 22.2% of senior management, up from 18.5% from a year earlier and people in minority groups accounted for 15.7% as of June 30, up from 12.7% in the year-earlier report. Only four firms that responded to P&I's annual real estate money manager survey are women- or minority-owned as of June 30.

Source : Business Insider