ESG criteria (Environmental, Social, and Governance) are increasingly being used in the valuation of real estate investments. These criteria allow the economic analysis procedure to be supplemented by an assessment of the environmental, social, and governance impacts on the company offering the investment.
In this way, investors can direct their capital towards activities which, in addition to generating added value in economic terms, are careful not to compromise the ability of resources to generate value over time and the ability of future generations to meet their needs.
The process of analysing the investment opportunities proposed on Walliance is therefore not only based on the economic profile but also takes into account three criteria that define the sustainability of the investment itself.
Environmental: the criterion referring to key resource efficiency indicators concerning the use of renewable and non-renewable energy, the use of raw materials and water resources and land use, waste production, greenhouse gas emissions as well as the impact on biodiversity and the circular economy.
Social: the criterion referring to the pursuit of a social objective, contributing to the fight against inequality, promoting social cohesion, social integration, and industrial relations, or an investment in human capital or economically or socially disadvantaged communities.
Governance: the criterion that refers to the soundness of the company's management structures (e.g. board of directors), staff relations, staff remuneration and compliance with tax obligations, anti-corruption, and staff remuneration policies.
As one of the sectors most responsible for global emissions, environmental, social, and governance factors have also become very important in real estate.
Walliance wants to continue to select real estate projects that have a positive environmental impact, that fit harmoniously into the geographical contexts in which they are built, that address current social needs, and that respect the possibilities of future generations. In order to make investors aware of the degree of attention that individual issuers pay to ESG criteria, Walliance - although not an addressee of Regulation (EU) 2019/2088 on sustainability reporting in the financial services sector - prepares and makes accessible, within the Project Tab, a report on the sustainability of the project, which reflects the results of the ESG criteria questionnaire that is submitted to the bidding company by Walliance, prior to concluding the analysis of the project itself.
The four ESG profiles
On the basis of the analysis carried out, Walliance assigns one of four ESG profiles to the issuer, explained below.
Neutral: companies that put profitability above all other objectives, remaining neutral with regard to ESG and sustainability issues, but without harming the environment or society.
Sustainable: companies that are sustainable, i.e. that do not compromise the long-term well-being of people and the environment by reducing or managing negative impacts.
Value creation: companies with the potential to create value (in a positive sense) for people and the environment through their business activities.
Impact: companies that are created specifically to respond to a social or environmental challenge, in an intentional, measurable, and additional way.
The level of attention that bidding companies pay to ESG factors is not an obstacle to Walliance's project selection process, but only an opportunity for further investigation.