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Redefining the Standard for Climate Impact Investing in Real estate

Fidelity

Fidelity - Research team

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An asset class built for impact

More than any other asset class, real estate is perhaps most conducive to impact investing. However, investors have questioned just how much of a difference real estate impact strategies can have on decarbonising the real economy. Meanwhile, finding a uniform way to define, measure and verify ‘impact’ can be challenging.

No universal rules

Against this backdrop, investors can take very different approaches to impact investing depending on the organisational ESG goals they are trying to achieve. As such, having a clear strategic approach is critical because it defines the framework through which progress can be measured. Unlike traditional portfolio construction, impact investing has both performance and impact risk components.

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Source: European Association for Inversters in Non-Listed Real Estate (INREV), 2020.

The route to ‘additionality’

At the heart of impact investing measurement is the concept of ‘additionality’, which stipulates that the investment must “increase the quantity or quality of the social and/or environmental outcomes beyond what would have otherwise occurred,” according to the European Association for Investors in Non-Listed Real Estate (INREV, 2020). There are several pathways to achieving this objective, from embodied carbon reduction (during construction and maintenance) to energy efficiency and carbon offsetting.

How to approach decarbonisation through real estate

In this environment of disparate approaches where real-world additionality is paramount, the decarbonisation journey is rarely a smooth, straight line. So how can investors navigate the challenges ahead?

In this whitepaper we explore:
 

  • How to define impact investing
  • Real world additionality approaches
  • A hypothetical operational net zero carbon building pathway
  • The role of metrics and standard setting
  • Climate impact risks and opportunities

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