Making an ESG impact

UBS recently reported on the key findings from its Alternative Investments Conference’s panel discussion on how environmental, social and governance (ESG) criteria are positively changing real estate investment decisions.

Under a report titled ‘How do real assets contribute to tomorrow’s world?’, UBS shared its key conclusions that there was clear investor appetite for sustainable real estate investments, driven both by changing laws and regulations establishing minimum required levels of energy efficiency and social consideration, and also investors putting increasing priority on such matters. This of course sounds very familiar to Shariah compliant investors, where ESG criteria are embedded in all investment decisions.

The report went on to conclude that the market is currently materially underdeveloped in the provision of such responsible investment products, which yet again provides an opportunity for the Islamic finance industry to step up.

Interestingly, the report went on to focus on how real estate investors can make a positive impact in their decisions, referring to the United Nations Sustainable Development Goals. Identified by the UN as ‘The 17 Goals to Transform Our World’, such goals recognize that responsible economic growth is necessary to achieve its targets, of which making cities and communities inclusive, safe, resilient and sustainable is just one.

UBS shared its belief that achieving such objectives went beyond the perhaps obvious choice of positive impact investing itself, for example acquiring life science buildings, medical housing or aged care living.

Applying this to all aspects of a property’s effect on those in and around it would extend to the consideration of, among many items, providing publicly accessible spaces, having active engagement with the local community and ensuring that all property staff receive an appropriate salary and benefits. ESG investing should be all-encompassing.

Valuing partnerships to achieve the targets, the UN and the IsDB announced in May the launch of a series of seminars during 2021 to explore what role Islamic social financing can have in helping to achieve the sustainable development goals.

These virtual seminars include a forthcoming event on the 3rd August, which will focus the IsDB’s Awqaf Properties Investment Fund as an example of the major benefits and challenges of using Waqf as a development model.

It is great to see this level of engagement and I am sincerely hoping that the Islamic finance industry will continue to support the aims of both the UN and of course investors themselves in demanding such sustainable real estate opportunities and the benefits that flow from this for all.

This article was first published in IFN Volume 18 Issue 28 dated the 14th July 2021.