Given that ESG and real estate make happy music together, investors should focus their own portfolios toward the pair. As per the previous NAREIT data, most REITs are reporting ESG metrics. As such, running a screener and taking a look at what firms are directly doing is an easy way to gain exposure.
However, that does take time. With the surge in ESG demand, Wall Street has continued to roll out new products with an SRI tilt. Real estate is no different.
The Invesco MSCI Green Building ETF (GBLD) focuses on property owners/builders that are leading the way with LEED certification, green buildings and energy efficiency. The fund is new, so returns have roughly tracked the broader REIT indexes. However, over time, GBLD should be able to pull ahead as property values, rents and occupancy continue to climb as the ETF’s holdings win on the ESG front.
Additionally, investors have ESG real estate options from fund houses like TIAA-CREF, Nuveen, BlackRock and others. In some cases, real estate mutual funds don’t explicitly say “ESG” on their labels, but they are managed in a way that includes the metrics in their investment decisions. Some due diligence may be necessary to find the right fit.
In the end, ESG is working in the real estate sector. Property developers that focus on the theme are seeing results to their bottom lines. And that’s a good thing for investors. Taking the ESG plunge with your real estate holdings should generate better returns.
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