ESG Criteria Central to Investment Strategies
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As evidenced by recent Budapest and CEE commercial office transactions, ESG investing (the integration of environmental, social and governance factors into the fundamental investment process) is increasingly a concept and code of practice that investors have adopted as a core part of investment strategies in both the top end and value-add sectors of the office market.
While investors have yield and return on investment as a central priority, commercially successful investment-standard buildings need sustainability accreditation, which is now an integral part of the leasing process and asset management.
Further, investors need to look to a longer-term rise in the value of an asset and the prospect of new national and international sustainability regulations. ESG strategies in all investment areas are now seen as necessary to combat climate change and pandemic issues. There is also a growing recognition by investors of social inequality.
At the turn of the year, the commercial component of Horizon Development’s LEED “Platinum” certified premium mixed-use Szervita Square Building was purchased by Union Investment for one of its institutional real estate funds.
“The successful sale of Szervita Square Building to a German core investor with extremely high quality and sustainability standards proves our international development competence and that core pricing for excellent assets is possible in CEE markets,” said Virág Bihari, partner and majority shareholder of Horizon Development in charge of overseeing the divestment process on the deal. “Szervita Square Building was conceptualized and realized in line with principles of ESG and inclusion,” she adds.
ESG criteria are also central to investment strategies at the value-end of the office market. In a recent deal, the U.K.-based investor Europa Capital says it aims for a complete ESG repositioning for its latest value-add Budapest acquisition, the Akadémia Business Center.
“The objective is not only to create a building suitable for modern occupiers but also to transform the asset to a Net Zero Pathway, removing the reliance on greenhouse gases. The building will also be targeting BREEAM, Wiredscore and WELL certification,” said Europa Capital. It plans to upgrade the property and undertake asset management in partnership with ConvergenCE.
“On the investment markets, only ESG-compliant buildings will make it to the shortlist, as investors and banks will only lend money for sustainable and green building investments,” says Hubert Abt, CEO of the leading CEE serviced office space provider, New Work.
“As a result, investors and operators need to adapt to the standards for impact investments which are defined as investments made with the intention to generate positive measurable social and environmental impact alongside a financial return,” he added.
Matolcsy Applauds Carney’s Sustainability Call
National Bank of Hungary (MNB) governor György Matolcsy has reiterated a call to central banks to take an active role in addressing climate change in a piece posted on the central bank’s website. Matolcsy addressed an opinion piece by Mark Carney, a former Bank of England governor and the UN’s special envoy on climate action and finance, published earlier in the Financial Times. In the opinion piece, Carney argued that USD 100 trillion is the “minimum amount of external finance needed for the sustainable energy drive over the next three decades if it is to be effective.”
Atenor Undertakes Collaboration with CO2logic
Atenor has started collaborating with CO2logic to calculate its emissions at the corporate level in all the countries where it operates. CO2logic offers a CO2-Neutral certification to organizations that calculate, reduce and offset their climate impact. To achieve this, every area in which the company has an effect is scrutinized, including, among other things, the climate impact from energy consumption, company cars, commuting, business travel and purchases such as paper and IT elements. Atenor says it is now taking the next step by using this input to set up a streamlined climate reduction plan and strategy until 2030.
CPI Initiates Green Bond Issue
CPI Property Group has undertaken a sustainability-linked bond issue. The sustainability-linked bonds have been issued to EUR 700 million in value. “CPI PG is proud of our leadership in sustainable financing. The group was the first borrower from our region to issue benchmark green bonds in 2019 and has further strengthened our agenda and capital structure through this innovative transaction,” said CEO David Greenbaum.
CTP Returns to Green Bond Market
The leading CEE logistics park developer and provider CTP has returned to the bond market with what it describes as a strong ESG investor demand for a further EUR 700 million tranche. “CTP decided to return to the markets early in 2022 to secure competitive pricing for our rapidly-expanding development pipeline of sustainable industrial and logistics assets and secure our funding for the rest of the year,” comments CFO Richard Wilkinson. “We saw greater demand than previously, with around 90% of investors having a green investment focus. This demand shows the attraction of CTP’s green credential as the only European industrial and logistics real estate issuer with a 100% BREEAM sustainability-certified portfolio.
116 Electric Charging Stations to be in Stop Shop Locations in Hungary
The Stop Shop retail network operated by Immofinanz will be expanded with 116 high-performance electric charging stations operating at 14 Hungarian locations. The company has been emphasizing its commitment to environmentally friendly operations throughout the region. “It is this competitive advantage that Immofinanz has decided to develop further, as well as expand its existing services with electric charging stations. Customers will not only be able to shop easily, but they will also effectively use the time spent in the Stop Shop to charge their electric car. The cooperation between Immofinanz and the e-station aims to expand electromobility within regions and district towns,” said Viktor Nagy, Immofinanz country manager operations for Hungary.
This article was first published in the Budapest Business Journal print issue of January 28, 2022.
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