Real estate: Insights from the 2023 reporting cycle

This report analyses data from the 2023 PRI Reporting Framework, focusing on insights from two modules (policy, governance and strategy and real estate). Real estate investors are increasingly integrating human rights considerations and climate-related metrics into their investment strategies, reflecting an understanding of the direct impacts these factors can have on investments, and vice versa (see Figure 1).

However, some gaps remain, particularly on human rights, where the comprehensive use of frameworks such as the UN Guiding Principles on Business and Human Rights, a baseline for investors to take action on human rights, appears limited. The data suggests that while the vast majority of real estate investors are increasingly integrating asset class specific ESG guidelines into their responsible investment policies, far fewer incorporate responsible investment commitments into constitutive fund documentation. This dichotomy suggests a foundational understanding and acceptance of ESG principles across the sector, but less willingness or capacity to enshrine the same into formal commitments and action.

Green building certifications are most commonly used to inform ESG materiality analysis in real estate, reflecting a consistent approach within the industry. However, this can result in a greater focus on environmental as opposed to social or governance factors given that certifications tend to cover the former in more detail. While it is common for real estate investors to use green building certificates when analysing potential investments, nonetheless most signatories report that only a minority of their assets actually receive the certifications. This is possibly due to the resources required and the limited focus on ongoing operational performance. Post-investment, the data indicates that real estate investors understand the importance of strong ESG risk management and value creation practices. 

However, implementation appears inconsistent, particularly among smaller investors who may lack the necessary resources for consistent action. Similarly, at exit, the data points to how strong ESG practices and performance may influence the attractiveness of assets to potential buyers, with larger investors particularly proactive in sharing ESG-related information

Figure 1: The greater use of metrics related to transition and physical risks 

Source: PRI Reporting Framework. Indicator PGS 45. Denominators: 2859 (global signatory base), 395 (real estate investors). 

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