“It is unequivocal that human influence has warmed the atmosphere, ocean and land.” So said the scientists on the United Nations (UN) International Panel on Climate Change (IPCC) in their sixth assessment report released in August 2021.
07.12.2022 | 08:10 Uhr
1 Using their strongest phrasing ever to stress that human actions are responsible, this report heightened the sense of urgency to act on climate change.
Not surprisingly, the real estate industry has been under pressure to focus attention on sustainability. After all, building operations and construction account for approximately 40% of global energy-related CO2 emissions. 2
Morgan Stanley Investment Management’s (MSIM)3 Global Listed Real Assets (GLRA) team4 believes environmental, social and governance (ESG) factors and a real estate company’s approach to sustainability will significantly influence its future risk and total return prospects. Given this view, we believe it is imperative to focus on analyzing sustainability factors and integrating these risks and opportunities into an assessment of value.
1 IPCC. “Climate Change 2021: The Physical Science Basis. Contribution of Working Group I to the Sixth Assessment Report of the IPCC”, August 2021.
2 United Nations Environment Programme. “2021 Global Status Report for Buildings and Construction: Towards a Zero-emission, Efficient and Resilient Buildings and Construction Sector”, October 2021.
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There are special risk considerations associated with investing in the real estate industry securities such as Real Estate Investment Trusts (REITs) and the securities of companies principally engaged in the real estate industry. These risks include: the cyclical nature of real estate values, risks related to general and local economic conditions, overbuilding and increased competition, increases in property taxes and operating expenses, demographic trends and variations in rental income, changes in zoning laws, casualty or condemnation losses, environmental risks, regulatory limitations on rents, changes in neighborhood values, related party risks, changes in the appeal of properties to tenants, increases in interest rates and other real estate capital market influences. Generally, increases in interest rates will increase the costs of obtaining financing, which could directly and indirectly decrease the value of a strategy investing in the Real Estate Industry.
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