Falling through the cracks: SFDR’s impact on real estate investment

A new research paper exploring the implications of SFDR for the non-listed real estate investment industry sheds light on the challenges of complying with SFDR and how it may distort investment needed for real carbon reduction. 

Key insights of the paper include: 

• SFDR's ambitions to direct capital towards more sustainable investment through increasing transparency are welcomed by real estate FMPs and FMAs and viewed as a push in the right direction to accelerate decarbonisation
• Many real estate FMPs and FMAs with a long track record and commitment to a sustainability agenda for real estate, report that complying with SFDR is cumbersome as it is designed for static, shorter term investments rather than dynamic, longer-term investments such as real estate
• SFDR does not easily accommodate strategies that transition existing assets from being inefficient to efficient which may have significant unintended consequences for increasing sustainability in real estate and decarbonising the wider economy and society
• Most real estate products with either an impact or sustainable investment strategy are designated as Article 8 of SFDR alongside products with less ambitious ESG objectives
• Although real estate represents only 3% of the financial markets, it accounts for 39% of all emissions. Refocusing and tailoring regulation -including SFDR -on the asset classes with the greatest capacity to reduce emissions and deliver a more sustainable economy could reap faster and higher dividends for regulators

We look forward to discussing the implications of SFDR at the Cannes Seminar on 15 March.

To learn more about SFDR visit our dedicated page.