Majority of commercial real estate assets of European pension funds lack strong ESG credentials

The majority of commercial real estate assets held by European pension funds do not yet have strong ESG credentials, according to a report by Deepki.

As our sister publication reports, European pensions, The Deepki Report on European Pension Funds: Integrating ESG into Commercial Real Estate Investing surveyed 250 European pension fund managers in the UK, Germany, France, Spain and Italy, with a combined assets of €402 billion.

The study, which takes an in-depth look at asset allocation trends in commercial real estate and measures taken to improve ESG performance, found that 64% of European pension fund managers said that only 21 to 30% of the commercial assets in their fund real estate assets have strong ESG credentials.

A further 19% said the figure was between 11 and 20%.

It also showed that when it comes to reaching net zero, 23% expected the majority of their commercial real estate assets to reach that goal in six to 10 years and a further 15% expected let it take 11 to 15 years.

Only 26% have a more optimistic view, expecting to reach this milestone in two to four years, and another 15% in one to two years.

The study also highlighted the growing focus on commercial real estate as a pension fund asset class, with 46% of European pension funds having 21-25% of their assets allocated to real estate. domestic trade.

Another 24% have 16-20% allocated to commercial real estate. The majority (68%) expect the asset class allocation to increase over the next three years.

Commenting on the report’s findings, Deepki CEO and co-founder Vincent Bryant said, “The commercial real estate industry is committed to achieving net zero by 2050.

“Our research highlights the complex challenge facing the sector, with many buildings failing to achieve good ESG performance, and much remains to be done to ensure that assets meet the scrutiny of institutional investors. influencers such as pension funds.”