11/11/2016 | By Allen Kenney
In the latest episode of The REIT Report: NAREIT's Weekly Podcast, Gabe Buerkle and Michael Hudgins of EII Capital Management talk about the importance of sustainability in the eyes of real estate investors.
EII recently published a report on the evolution of sustainability programs at REITs.
Hudgins said some real estate investors still show some concern about the return on investment in green technologies and business practices. He noted that in the case of major public pension plans, regulatory hurdles can actually prevent them from investing in companies implementing sustainability programs if the fund managers believe it could mean sacrificing returns.
Buerkle said REIT management teams generally view sustainability as a sound long-term investment. Additionally, many companies are proceeding cautiously until they have a better idea as to what kind of rating and reporting standards will gain favor with the market. He also pointed out that the enthusiasm for sustainability in real estate tends to vary by property type.
Despite concerns about returns, investors are still showing an interest in learning about companies' plans for becoming more sustainable, according to Hudgins. He cited research indicating that investors believe that companies that adopt sustainable business practices can improve their business performance relative to their peers.
Investors "do have a view that sustainable practices bring benefits," Hudgins remarked.
Importantly, Hudgins said evidence shows "little compromise" for real estate companies that make sustainability a priority.
"Given your investable universe for companies that are… committed to sustainability in the REIT space… those companies have shown that they can outperform over longer-term periods," he said.