by – Knight Frank
This year’s UN Climate Change Conference, better known as COP26, meets this week in Glasgow, bringing together almost every country on earth in an effort to tackle climate change. Our expert research teams analyse how the world of real estate is adapting and how the property market will look in the future.The average London home will cost £626,000 by the end of 2026 as office workers revert to prioritising proximity to the office and amenities, with demand highest to live in London’s leafy urban villages. This price inflation out-paces national house price growth of 20 per cent over the same period to £324,000, according to a new forecast.
Environmental Social and Governance issues are influencing the built environment, as well as investors, who are increasingly considering these non-financial factors as part of their business strategy.
We get market-leading insight from the research team into these factors influencing change in the property market and examine how the world of real estate is responding.
“Scrutiny over ESG investments and assets will increase, therefore metrics and transparency on assessment will be more crucial to decisions.”
The E in Environmental, Social & Governance will continue to drive policy, regulation, and investment, but now with greater urgency given the stark warnings by the UN’s Intergovernmental Panel on Climate Change in August. According to the UN, more than 130 countries have now set or are considering a target of reducing emissions to net zero by mid-century with some increasing the urgency. In the wider context, 7,000 corporate signatories representing more than US$120 trillion in assets have signed up to the Principles for Responsible Investment. The commitment from corporations will continue to grow.
Efforts to measure and monitor these initiatives still have a long way to go to ensure resources are directed to the right places. Progress has been made by the Task Force for Climate-Related Financial Disclosures (TCFD) and almost 5,000 companies have signed up to these. The UK government made TCFD aligned disclosures mandatory for most prominent listed commercial companies in December 2020 and the Financial Conduct Authority (FCA) has just closed a consultation on extending the requirement to FCA- regulated asset managers and other asset owners – at entity and product level. We expect more governments to mandate this type of reporting.
Inflows into ESG funds grew sevenfold to US$15 billion between 2019 and 2020. However, “greenwashing” is increasingly concerning with the America’s Securities and Exchange Commission, among other regulators, cracking down on ESG-labelled products.
The European market for sustainable investments contracted by US$2 trillion between 2018 and 2020 following the introduction of anti-greenwashing rules. This risk and how much ‘good’ they are doing has been recently highlighted in articles by Tariq Fancy and The Economist, to name a few. Scrutiny over ESG investments and assets will increase, therefore metrics and transparency on assessment will be more crucial to decisions.
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