Significant Opportunities in the Environmental, Social and Governance Investment Space – Fund Management/ REITs


The most popular: Article Portugal, June 2022

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A recent dynamic

Portuguese companies, as well as financial entities, respond to regulatory and investor demands and increasingly use synergies to comply, not only with the new European regulations on ESG (environmental, social and governance), but also to provide a range of services that provide new business opportunities, while exploiting a market niche that offers great potential and has yet to be fully explored and developed.

The investor’s point of view

On the investor side, the directives implemented by the EU have already caused a shift in investment, with increasingly higher capital flows being redirected towards sustainable investments, investors and funds being in line with market principles. common ESG.

Return

Various reports and studies, dating from the past two years, acknowledge that ESG investments have similar, if not better, returns than traditional investments and refute any skepticism about the correlation between above-average returns and ESG investments.

In 2021, according to Reuters, the MSCI World ESG Index rose 22%, compared to the MSCI World Index’s gain of 15%. This can be explained by the investments made in renewable energies; waste reduction mechanisms, solar energy systems and other sustainable projects, are increasing at a rapid rate due to more impressive yields, technological advancements and promising opportunities supported by global policy developments towards a common green agenda.

Additional potential

This market continues to grow and presents opportunities. According to Reuters, a record €649,000 million was poured into ESG funds globally in 2021, making ESG funds account for 10% of global fund assets.

Climate change: the community and investors

As the momentum of climate trading peaks, investors should consider the perception of their investment not only from the perspective of the community, but also from the perspective of shareholders.

New ESG opportunities can help companies not only enter new markets, but also win new customers by offering more sustainable products, helping to shape consumer preferences.

Real estate and ESG

Real estate is one of the most valuable asset classes in Portugal. The potential is evident for how ESG can provide investors in real estate companies with more incentives to; not only to obtain better conditions for investing in the purchase or renovation of property, but also to take advantage of tax-friendly policies, to stimulate interest in these sustainable products and at the same time to benefit from attractive rental yields .

The real estate market in Portugal and current investment opportunities

According to JLL (a global commercial real estate services company), more than 190,000 homes in Portugal were sold in 2021, which represents an increase of 16% compared to 2020 and 10% compared to 2019.

Current projections maintain that in 2022 this trend will continue in Portugal, mainly due to demand still exceeding supply, and the fact that in 2021 there was a 10% increase in license permits granted for new construction, compared to 2020.

These factors, combined with strong incentives for investors investing in green and sustainable residential projects, will drive and sustain investment growth in 2022, despite the current economic environment and geopolitical uncertainty facing the world.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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