Stephen Boyd, senior director – U.S. real estate and leisure at Fitch Ratings, participated in a video interview in conjunction with Nareit’s ESG JumpStart Workshop: 2022 Webinar Series.
Boyd noted that the impact of ESG considerations on REIT ratings decisions has been “pretty modest” to date but is expected to become increasingly important going forward.
“Already in this recovery we’re seeing a bifurcation in demand in the office sector, for example, where the A trophy assets are really outperforming the lower quality B and C assets” because A assets have the most modern, LEED-certified spaces that tenants are demanding.
At the same time, ESG considerations are already an important factor for institutional equity investors and lenders, and that will only increase, Boyd said. A case in point is that green bonds grew to about 10% of investment grade issuance last year, and that is only likely to expand, he noted.
Boyd also commented on how REITs have led the way in terms of adopting best practices for ESG. What’s going to become increasingly important for REITs going forward, he added, will be integrating ESG and views on ESG into the asset selection and portfolio management process.