Real estate investment and ESG criteria
To help individuals and institutions invest in real estate, BNP Paribas REIM develops for its clients investment funds, which are dedicated to purchasing buildings, managing them properly (rentals, maintenance, renovations, etc.) and to redistributing any rent obtained back to the client. These buildings can be offices, healthcare establishments or residential complexes and shops.
The goal is to generate a financial performance for the end investor. In a similar way to how they would invest in equities, BNP Paribas REIM's clients are choosing to invest in brick and mortar, buying real estate funds, like SCPI (Real Estate Investment Trusts) or OPCI (Undertakings for Collective Investment in Real Estate) that are present in France. A new overarching objective for these funds is the the ESG performance of these assets. In addition to their particularly attractive financial performance, these funds enable investors to contribute to the energy transition and greater social inclusion.
According to Nehla Krir, Head of Sustainability & CSR at BNP Paribas REIM, there is no doubt that the real estate sector is undergoing a true revolution. For several years now, the sector has been thinking about reducing its environmental impact. For example, in France, it accounts for more than 40% of energy consumed and 19% of greenhouse gases emitted. Nehla Krir explains it is possible to reduce these emissions: “As an asset manager, it is crucial to know how to assess our impact and work to improve it. This is done across all stages, from the acquisition of the property, during its construction or renovation, to its management and resale.” Growing investor appeal, increasingly restrictive regulations and changing tenant behaviour mean that real estate stakeholders are taking an increasing interest in the engagement of large property managers, such as BNP Paribas REIM. “Everything is lined up to ensure the transformation of a sector that represents a quite strong inertia”, says Nehla Krir. “That is why we have adopted a pragmatic approach over the last few years that has aimed to gradually make each fund more sustainable. If only because our own evolution impacts the entire ecosystem of our partners who must follow the movement”.
BNP Paribas REIM:
Two concrete examples: The EIPF fund and the BNP Paribas Diversipierre fund
Responsible real estate funds are intended either for individual clients – in the form of OPCI or SCPI - or for institutional clients, both types being European funds.
The EIPF fund (institutional)
Created by BNP Paribas REIM, the EIPF fund is the first European impact real estate fund that complies with the objectives of the Paris Agreement, i.e. reducing carbon emissions by 40% across its European portfolio, over 10 years.
The BNP Paribas Diversipierre (retail) fund
Since 2020, the OPCI BNP Paribas Diversipierre has received the SRI label. Each building is evaluated according to 13 categories and 94 criteria: Energy, carbon footprint, pollution, tenant comfort, etc. During the pre-acquisition audit, if the rating assigned is too low, the asset cannot be included as one of BNP Paribas Diversipierre's assets.
These two funds also illustrate BNP Paribas REIM's willingness to work on existing real estate. “75% of the buildings that will exist in 2050 have already been built. It is more important to improve existing buildings than to build new ones, and this is what we are doing with the EIPF and BNP Paribas Diversipierre funds,” explains Nehla Krir.
How does BNP Paribas REIM define sustainable criteria in its real estate management?
BNP Paribas REIM evaluates and validates the sustainability of its real estate investment funds in three ways:
- ESG (Environment, Social, Governance) criteria
- New European SFDR regulations, which require a clear and formal commitment from investment funds, which pulls the market towards real transparency and responsibility
- Public labels, including the SRI (Socially Responsible Investment) label, designed for individuals by making it easy for them to identify responsible funds.
To carry out this assessment, BNP Paribas REIM teams rely on technical and environmental research offices, as well as real estate brokers trained in responsibility criteria. “ESG criteria -around 60- are monitored and evaluated throughout the management of a building. The acquisition and sale stages increasingly require extra financial, environmental and social data,” underlines Nehla Krir.
A beneficial and cost-effective commitment for everyone: “We believe that a responsibly managed asset provides better long-term performance. Indeed, the goal of sustainability requires anticipating risks, from construction itself to relationships with stakeholders. The health crisis demonstrated this: Responsible funds are those that best withstood the changes. For us, we are able to convince clients because this is one of the specifics of real estate, which, unlike stock market action, is tangible and discernible. Any action taken to improve the ESG performance of a real estate asset is measurable and can be transparently communicated to investors” , concludes Nehla Krir.
The health crisis demonstrated this: Responsible funds are those that best withstood the changes.
Improve ESG performance through Big Data
The views of Vincent Bryant, CEO of Deepki, a partner company of BNP Paribas REIM, who has developed a software solution to help companies improve the ESG (Environmental, Social and Governance) performance of their buildings through Big Data.
Vincent Bryant (VB): Deepki offers a software platform that aggregates and analyses all property data: construction, energy performance, rental management, weather, waste, accessibility and more. All of this data exists, but it is never up to date or in the same place. This date is collected and combined into a single platform in order to construct a detailed understanding of each building's ESG performance.
VB: We came into contact with BNP Paribas REIM five years ago, in 2016, when we were asked to assess their assets and categorise them for their environmental performance. BNP Paribas was already very conscious of this field and our Big Data based approach pleased them. Since then, BNP Paribas, including REIM, has become one of our largest European clients. Today, we work on almost all of BNP Paribas' property assets in Europe.
VB: BNP Paribas was one of the first groups to launch several digital and ESG initiatives. Despite the size and complexity of its heritage, BNP Paribas is running its programme at a very high speed. Every year, REIM improves the performance of its funds. It is one of the most advanced banking groups. This is easily explained: BNP Paribas has the will, resources and capacity to mobilise an entire ecosystem of external players and partners and has been among the first to invest in this topic. The Group has the ability to become the leader in responsible real estate and we are pleased to support them on this journey.
Photos : ©navee / BNP Paribas