Growing ESG focus expected to drive greater investment in property

The majority (86 per cent) of UK pension schemes think an increasing focus on environmental, social and governance (ESG) considerations within property development could drive more institutional investment in this space, according to a survey from Downing.

The research showed that pension schemes are already seeing a much bigger focus on ESG by property development finance companies, with 76 per cent expecting this trend to increase over the next three years and 20 per cent expect it to increase dramatically.

The investment manager suggested that there is also a “growing willingness” among defined benefit (DB) pension schemes and institutional investors to invest in illiquid assets, in light of the premium yield they can offer.

Indeed, the research also found that 70 per cent of pension schemes expect this trend to grow, with 24 per cent forecasting a dramatic increase.

This is in line with previous findings from Downing LLP, which suggested that around 86 per cent of UK pension funds expect investment in residential property development to increase over the next five years.

Commenting on the findings, Downing partner and head of specialist lending, Parik Chandra, said: “ESG is increasingly a key factor in decision making for property development finance companies, as well as pension funds and institutional investors.

“The increased focus on ESG by property developers helps them raise finance and is good news for pension funds and institutional investors who have ESG targets to address.”

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