In recent years, the concept of environmental, social and governance (ESG) has gained attention in various industries in Europe. The real estate sector, known for its impact on the environment and communities, has been at the forefront of this transformative movement. In Portugal, known for its rich cultural heritage and beautiful landscapes, the integration of ESG practices into the real estate sector is becoming increasingly important.
ESG in real estate: an overview
ESG in real estate encompasses a variety of practices and initiatives aimed at improving the industry’s impact on the environment, society, and corporate governance. These principles go beyond financial metrics and emphasize sustainability, transparency and social responsibility.
- environmental sustainability: Reducing a building’s carbon footprint, promoting energy efficiency, sustainable construction materials, and reducing waste are essential aspects of environmental sustainability in real estate. In this context, we highlight the increasing implementation of solar panels, electric vehicle chargers and natural lighting in real estate to help investors improve energy efficiency and save money.
- social responsibility: We ensure that real estate projects positively contribute to local communities by providing affordable housing, green space and amenities that improve the overall quality of life in the best possible way. Social impact is now the main focus of his ESG policy in Portugal.
- governance: Uphold high ethical standards, transparent business practices, and accountability in decision-making processes to instill trust among investors, stakeholders, and the general public.
The growing importance of ESG in Portugal
Known for its unique blend of historical charm and natural beauty, Portugal is an attractive destination for real estate investment. As global awareness of climate change and social issues increases, incorporating ESG principles is critical to sustainable growth in the real estate sector.
- regulatory environment: The Portuguese government has enacted policies to promote ESG integration, in line with EU directives. These regulations include energy efficiency standards for buildings, incentives for renewable energy deployment, and guidelines for sustainable urban development. Portugal is still in the preparation stage of its ESG bill, which only includes the obligation of energy certificates for the sale or rental of new real estate buildings and real estate (Decree Law No. 101-D/2020, dated 7 December) . . Under the current legal framework, there is still no link between poor classification and the sale or rental of a property, as it is possible to sell or rent a property even with poor energy performance classification. Nevertheless, it remains an important factor when institutional investors make decisions. Portugal’s parliament and government will play a key role in enacting new legislation that will strengthen energy efficiency improvements in buildings as a legal obligation. It is worth noting the efforts to encourage and support renewable energy, such as the installation of solar panels on buildings, HVAC systems and windows, which are partially supported by Fundo Ambiental. This law is still behind reality, so in the coming years Portuguese law will include in the law the necessary provisions to implement these standards in buildings, so that buildings can be sold, let or You may also be eligible for system financing.
- investor preferences: Institutional investors are increasingly considering ESG factors in their decision-making processes. Real estate developers and companies that prioritize sustainability and social responsibility are more likely to attract long-term investment.
- tenant demand: Today’s tenants, especially the younger generation, tend to prefer properties that are environmentally friendly and socially conscious. Developers who adapt to these evolving tastes can increase demand and value for real estate.
- economic resilience: ESG practices can lead to cost savings through energy efficiency measures, lower operating expenses, and increased real estate durability. As the world moves towards more sustainable practices, ESG-compliant buildings have the potential to remain competitive and resilient in the marketplace.
Future tasks
While the benefits of ESG integration in Portuguese real estate are clear, several challenges need to be addressed to realize the vision of a more sustainable future.
- Renovation of existing buildings: Much of Portugal’s real estate landscape consists of historic buildings with limited adaptability to modern sustainability standards. Balancing preservation with necessary upgrades can be a big challenge.
- awareness and education: Both industry professionals and the general public need to be educated about the value of ESG in real estate. Many stakeholders may still perceive ESG initiatives as costly or unnecessary. Moreover, many companies across Portugal still covet his ESG knowledge. Although many companies already have clearly defined ESG policies, competent ESG practitioners are still employed to implement those policies. This therefore represents a major investment opportunity for law firms and specialized European ESG services companies that offer this knowledge in Portugal.
- access to financing: Implementing ESG measures such as energy efficient technologies (i.e. efficient energy performance windows, building insulation, HVAC, solar panels) requires upfront investment that not all developers can easily afford. You might. Access to financing options that support sustainable practices is critical.
- regulatory gap: Although regulations exist, gaps and inconsistencies in enforcement may need to be addressed to ensure a level playing field for all real estate stakeholders. In Portugal, DLA Piper is shaping the way forward by introducing green clauses into Portuguese real estate contracts. In particular, standard clauses regarding her ESG certification of assets and the insertion of obligations for each party (either a transaction or a lease) in the performance of the contract. Brand new best practices and legal measures that may soon be enacted in ESG.
Joint solutions for a sustainable future
Cooperation between different stakeholders is of paramount importance in shaping the future of ESG in Portuguese real estate.
- Government and regulatory bodies: Continued alignment with EU directives and the introduction of targeted incentives can encourage real estate developers to adopt ESG practices. There may be some adoption of legislation introducing building certifications such as BREEAM, LEED and WELL. The UK’s BREEAM certification (Building Research Facilities Environmental Assessment Act), the US’s LEED certification (Leadership in Energy and Environmental Design), and the US’s WELL certification (WELL Building Standard) are well-known internationally. Key certifications for real estate.
- Developers and construction industry: By adopting innovative construction techniques, sustainable materials, and energy-efficient design, we can transform the industry’s environmental impact. As an example, although there is still no legal obligation to install solar panels on buildings, Portuguese investors and developers are looking to implement such innovative technologies to enhance energy cost savings and improve sustainability. The truth is that we use energy-efficient technology.
- Investor: Institutional investors can use their influence to drive ESG compliance by considering sustainability criteria in investment decisions.
- community and consumers: Demand for sustainable and socially responsible real estate may prompt developers to prioritize ESG initiatives that align with community needs.
conclusion
The future of ESG in Portuguese real estate holds promise and potential. By fostering a collaborative environment involving government agencies, developers, investors and communities, Portugal can create a real estate landscape that is in line with global sustainability goals. Through ESG integration, Portugal can not only protect its cultural heritage and natural beauty, but also set an example for other countries on the path to a more sustainable and responsible real estate industry.