ESG and Timing: Key Themes from the 10th National Business Post Property Summit 2023

On the theme of ‘ESG: Meeting the Challenges of the Changing Regulatory Environment’, moderator Ivan Yates sat down with Ian Conlon, a Partner in the Funds & Investment Management group and Head of the Irish ESG advisory team and Mary Liz Mahony, an Of Counsel in the firm’s Property and Construction team.

This note summarises the key themes from this fireside discussion:

1. Succeeding in an ESG Future

According to Mary Liz, the changing legal and regulatory environment is challenging for the real estate sector in Ireland for a number of reasons. Those challenges can be broken down by considering three questions:

• Firstly, stakeholders need to understand the totality of the legal, regulatory and investment environment in which they operate. Are they aware of what is mandated not only by Irish and EU law but also what investors and end-users have stipulated?
• Secondly, delivery. Delivering on ESG compliance means considering, for example, the sustainability of a project from construction right through its life cycle.
• Finally, stakeholders need to be able to demonstrate compliance. Do they possess the data to clearly demonstrate to investors and end-users that their building is ESG compliant and remains compliant throughout its life cycle?

2. Time to Act

Ian stated the European Union is the global leader in addressing climate change via the package of policy initiatives contained in the European Green Deal. One of these measures is the Sustainable Finance Disclosure Regulation (SFDR) which in only two years has already had a significant positive impact on the European funds space.

Assets in European sustainable focused funds have exceeded €5 trillion. Over 40% of all new funds established in the European Union are seeking categorisation as either Article 8 or Article 9 funds. This is the direction of travel going forward.

Developers who wish to attract investment from Article 8 or Article 9 funds will need to prove their ESG requirements. Those in the real estate sector who are slow or resistant to change will find their finance options becoming more and more limited.

Downstream, while regulation is coming thick and fast, including recasts of the Renewable Energy Directive and the Energy Efficiency Directive in the last month, it is the proposed Recast Energy Performance of Buildings Directive which will have the greatest direct impact on the real estate sector. The time is now for stakeholders to assess all existing stock to prepare for the Zero Energy Building (ZEB) requirement by 2050.

3. Reasons for Positivity

Ian concluded that a compliant and ESG enthusiastic real estate sector would attract investors too. The social element of ‘ESG’ is becoming more of a focus for investors who are looking to make social impact. Investment in social housing is one example of how they can achieve this goal but the housing development will need to adhere to ESG requirements.

Learn more about our Property and Global ESG Advisory teams.