2021 outlook: Nuveen sees impact investing rising in importance

The pandemic has brought increased focus on the social aspects of ESG strategies in particular, according to the real estate investment manager.

The covid-19 crisis has made impact investing a greater priority in 2020, a trend that is expected to continue well into next year, according to Nuveen Real Estate.

“Impact has never been more important than it is right now for investors and investment managers,” said Colin Throssell, head of Europe at Nuveen Real Estate, the property arm of the Chicago-based investment manager. “The pandemic has definitely accelerated a number of socioeconomic trends that were already evident but it’s brought them to the fore, and it’s brought them to the fore in real estate in particular.”

Those trends include isolation, urbanisation, automation and the low carbon economy, he said.

Colin Throssell Nuveen
Colin Throssell: believes property investing can help address socioeconomic issues like isolation and affordable housing

The social aspects of environmental, social and governance investing have consequently taken on increased importance for property investors during the covid-19 crisis, Throssell added.

“It feels to me like the environmental agenda was already very high up there even pre-pandemic and probably had far more focus than the social impacts of impact investing pre-pandemic. Actually, the social aspects have really caught up over the pandemic period.

“We’ve known for quite some time there’s very clearly an impact risk. Environmental change has got a huge potential impact on real estate values in the near and medium term. So, we’ve got to address that in the assets we’re investing in. But equally there’s this transition risk that the economic future of assets will be very much tied to environmental and social outcomes.”

For example, in a post-covid world, Throssell saw co-living investment as “a good way of addressing some of these longtime isolation issues and actually co-living does also help you deliver to a degree some of that affordable housing aspect as well, because you can somewhat densify the space in which people are living”.

Another consideration was the fact landlords have been depicted negatively in the press during the pandemic as being concerned only with the economic aspects of owning property. “So, if we as landlords and investors want to change that dialogue and be seen as a greater force for good, then actually being an active stakeholder in the society in which an asset sits and in the broader community that utilises the asset is really key to that.”

That said, “the last thing we would want anyone to do is, in broad terminology, greenwash or impact-wash a fund. We want to make sure it’s done absolutely right and with the right governance around it”.

“It’s well-founded, because it would be an easy area to exploit,” Throssell commented on greenwashing or impact-washing concerns. “It does come down to good governance” in the form of strong reporting and performance metrics, and an independent review structure to ensure impact investing objectives are in fact being met.

“The abandoned letter of ESG is actually really crucial if you’re going to deliver on the E and S aspect.”

Nuveen has seen “a big uptick” in inquiries from investors relating to impact investing during the covid-19 crisis, Throssell said. Much of this increased interest has come from European institutions, particularly in the Netherlands and the Nordics, which have long been “hotbeds” of environmentally- and socially-focused investing. Although the US has historically been less active in impact investing, investors there are also catching up, as will be groups in Asia, where growing and developing economies in the region will continue to mature, he added.

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