The Amsterdam-based European association for investors in non-listed real estate vehicles, Inrev, a new Professional Standards Paper on 9 April 2024, aimed at aiding investors and investment managers in assessing sustainable investment practices under the Sustainable Finance Disclosure Regulation article 2(17). The release of this paper comes amidst a growing need for clarity and guidance within the industry, stated Inrev in the report.

The paper addresses a significant gap in understanding regarding the definition of ‘sustainable investment,’ a concern acknowledged by Inrev due to the considerable confusion prevailing in the market. This confusion stems from the existing regulatory frameworks, such as the SFDR and the EU Taxonomy, which often allow room for interpretation and custom thresholds, leading to market variations and increased complexity. According to Inrev, investment managers are actively seeking clear and consistent guidance to apply regulatory definitions of sustainable investments uniformly across different real estate investment structures.

“This paper provides a set of guiding principles for sustainable real estate investments, based on the sustainable investment framework under SFDR,” stated Inrev.

Guidelines

The guiding principles outlined in the paper are based on the sustainable investment framework under SFDR and take into account evolving market expectations, incorporating insights from various experts, the Inrev ESG committee, and specialist groups within the real estate industry. The primary focus is on real estate assets, aiming to clarify the application of sustainable investment principles at the asset level, irrespective of the legal investment structure or asset location. Additionally, the paper suggests additional indicators to define sustainable investments in real estate, aligning them with current market ambitions.

The paper also offers a practical step-by-step approach covering social/environmental contributions, do no significant harm (DNSH) themes, performance attribution and impact (PAI) indicators, and good governance principles. Furthermore, it includes a checklist tailored for funds disclosing under SFDR article 9(3), assisting real estate transition funds with carbon reduction strategies by addressing key aspects such as selecting relevant science-based standards and defining clear methodologies.

The 15-page Professional Standards Paper is available .