Green urban real estate investment pays off for pension funds: expert

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Searching for the document, which was last updated in December 2021 and is currently undergoing a peer review process, the authors found that seven major Canadian pension funds were responsible for 60 % of total value of direct real estate transactions involving pension funds – despite controlling only six percent of assets of all pensions analyzed.

The authors then identify a common approach used by these Canadian pension plan investors to achieve above-market returns from these investments. By combining global asset diversification with local impact strategies that involve developing and greening urban properties internally, these Canadian pension funds have achieved high returns while stimulating the development of major urban centers.

“It seems that the strategy used by large Canadian direct investors is very targeted,” says Beath. “They buy properties in the downtown areas of major urban centres, modernize the building and keep them or sell them. It’s a basic rinse, wash and repeat [approach]. The fact that they are getting good returns from this strategy is pretty clear – that’s why it keeps repeating itself.

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Beath believes the research should end speculation about whether environmental, social and governance investment strategies bring real value to real estate investments. “In real estate, the evidence is clear. You can pursue a green urban development strategy and get a better return on investment.

When it comes to alternative investments in general, Canada’s major pension plans have managed to achieve above-market returns by relying on in-house expertise, according to the document. While it can be difficult for smaller projects to emulate the approach taken by larger ones in terms of infrastructure and private equity investments, Beath notes that emulating strategy in real estate can be made by anyone capable of purchasing a single building.

“The fact is that smaller diets pick and choose the characteristics of the [largest Canadian pension plans] which are accessible to them. . . . It’s not that they can’t invest in infrastructure and private equity, it’s that they can’t do it directly.

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