The EU’s Social Taxonomy and Real Estate Funds

In recent years the “E” (for environmental) of ESG has been front of mind for policymakers and asset managers. The “S” (for social) has started gaining momentum too. In the EU, the Platform on Sustainable Finance (PSF) published earlier this year the draft report on social taxonomy for consultation (the “Social Taxonomy”).

Does the creation of the Social Taxonomy create opportunities for real estate asset managers? For example, could real estate funds investing in affordable housing qualify as socially sustainable under this new classification regime and would they benefit from it?

Europe’s transition to net zero by 2050, with an interim goal for 2030, requires crucial changes in the real estate sector considering the sector is the source of around a third of global carbon emissions and consumer of about 40% of global energy. Environmental transition to greener buildings is expected to result in higher housing prices with the potential harm to certain groups of citizens and putting the EU’s “just transition” efforts under pressure.

Despite being in an early stage of creation of the Social Taxonomy, real estate asset managers should stay tuned and seize the opportunities arising from the Social Taxonomy such as attracting public finance, investor interest and possibly tax benefits.

Click here to read our note on:

• the opportunities created by a Social Taxonomy for real estate asset managers;
• the need to have a Social Taxonomy for real estate; 
• the structure of the proposed Social Taxonomy in the context of real estate; and
• how it could interact with the existing Environmental Taxonomy.