net zero
The European Union has a Net Zero target for 2050. Image – Canva.
  • Changes are expected to impact domestic institutional investors who are closely following rising requirements in Europe
  • Already, buildings with the lowest energy performance are illegal to rent in the UK, a concept the EU is likely to follow
  • Construction sector contributes to about 40% of carbon footprint in Europe

There are warnings that the number of European investors in Australia will decline given the European Union (EU) is tightening the criteria for ‘green’ real estate investing.

The changes are expected to impact domestic institutional investors who may be influenced by the nature of the rising regulatory requirements in Europe.

Under the tightened criteria, European investments need to determine if they can invest in Australian developments and assets under a new suite of EU regulations – such as SFDR Article 9 and EU Taxonomy.

Aleksandra (Sasha) Njagulj the Global Head of ESG for Real Estate for DWS, a global real estate investment and asset manager, said real estate portfolios must be promoted as sustainable to meet certain rigorous criteria.

“This will require Australian property owners, managers and developers to meet the performance and labelling requirements,” said Ms Njagulj.

“Otherwise, this could see some assets being ‘stranded’ for European investors.”

Aleksandra (Sasha) Njagulj, DWS

Presently, buildings with the lowest energy performance are already illegal to rent across the UK, with the same concept likely to be adopted across the EU.

“Australian property owners and managers would need to provide EU investors with more accurate asset labelling with respect to the ESG aspects of their assets.”  Ms Njagulj added.

“NABERS system is well placed for this, as it covers key metrics, such as energy and water consumption, based on real usage data.”

Ms Njagulj added the building sector produces around 40% of the overall carbon footprint, putting pressure on Europe to reduce its output as part of the 2050 net-zero carbon commitment.

DWS’ Head of Portfolio Management, European Real Estate, Jessica Hardman, noted that some investors and managers in Australia were expecting the Europena moves to make it here.

“By way of example following Europe introducing Sustainable Finance Disclosure Regulations (SFDR), the UK regulators are consulting with the local institutional real estate industry to adopt and develop their own ESG metrics and product disclosure rules. Australia may need to do similar in the future.”

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