Financial Times webinar replay: Navigating ESG value in the diverse world of real assets
As many real asset investments are made through private markets, there is a lack of information available, which makes assessing the ESG value of specific assets very challenging. A real asset is physical and tangible, deriving worth from intrinsic value, including but not limited to -
- commercial and residential real estate;
- land, farmland;
- traditional and technology infrastructure;
- and commodities.
Demand to invest in real assets is growing, they offer stable cash flows, low or negative correlation to public financial markets and reduced exposure to inflation- cementing their place as part of a diversified investment portfolio. Simultaneously, on a societal, individual and institutional investment level, environmental, social and governance values have become a priority along with the elevated profile of net-zero carbon emissions amongst asset managers. This raises the question of how to measure ESG impact when investing in real assets.
Investors have the opportunity to exert considerable influence over companies and assets they own and are increasingly being called upon to act as ESG stewards. This applies to real asset investments too, especially when looking at real estate, infrastructure, agriculture projects, there is opportunity to shape the prioritisation of sustainability features, especially when starting from scratch with a new project. Even with new legislation like the EU sustainability framework for asset managers, this task is hard enough in publicly traded markets where benchmarks and frameworks are relatively developed. As a real asset can be so many different things, with very different and specialised characteristics, measuring ESG impact requires further thought about criteria, what should be prioritised, and ultimately an established framework.