The role of credit in transforming European real estate to meet future ESG standards

For real estate, this a capital intensive, expensive process. We believe that, as the stock of real estate evolves, a performance spread will emerge between assets with strong and less strong ESG credentials, while those assets which cannot command a minimum level of rent will not meet the economic return threshold for investment, potentially leaving swathes of under-performing areas economically unviable for ESG investment, reinforcing a wealth divide. For credit investors, whose primary focus in maintaining the performance of their portfolios is to avoid and mitigate asset specific tail risk, this will be a key driver of returns.