Every year, more and more real estate investment companies (SCPI) obtain the Socially Responsible Investment (SRI) label. But what (really) does this label hide? And what is its impact on the performance of your SCPI?
The ISR label was created in 2016. And since then, it has become an essential tool for sustainable finance, with more than 1200 labeled funds which respect Environmental, Social and Governance (ESG) criteria.
Stone paper is no exception to the rule. Because since October 2020, real estate funds are also eligible. The decision is not surprising. For several years now, public authorities have been trying to green the building sector.
And for good reason: the latter puts more than 123 million tonnes of CO2 and represents 44% of energy consumption in France, according to figures from the Minister of Ecological Transition.
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Marketing issue
The ISR label is a first response, believes Phong Hua, associate director of the management company Iroko. It allows investors to identify funds that integrate environmental, social and governance (ESG) criteria into their management.
And success seems to be there for the moment. This label is very popular with savers, but also fund managers, notes Clément Renault, CEO of Louve Invest. As proof: more than 45 SCPI have already won this precious sesame.
And this figure is expected to continue to grow. For SCPIs, there is a strong marketing challenge, since for equivalent returns, investors almost systematically favor funds labeled ISR, observes Clément Renault.
In other words, funds that have obtained this label are more attractive to the general public. And this is reflected in the amounts collected. As of June 30, SRI-labeled funds thus represented 47% of net collection, according to ASPIM.
However, SRI is not the main concern of investors. Investors are above all looking for yield. If in addition the SCPI which interests them has the ISR label, this reassures them in their choice, indicates Clment Renault.
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Additional costs
But does the ISR label have a positive or negative impact on the performance of SCPIs? Short answer: yes. But the latter is rather weak. On average, it is estimated that this label reduces the performance of SCPIs by approximately 0.2%notes Clment Renault.
In question, the costs associated with obtaining and maintaining the label. To obtain this sesame, it is necessary to carry out work on the real estate stock, which can generate additional costs in the short term, explains Phong Hua.
The investment universe of SCPI ISR is also more restricted. Iroko, for example, does not buy old buildings, or only if they are less than 10 years old, which limits opportunities.
However, this method has other advantages. Our investment policy focuses on recent buildings, which do not require structural work but rather replacements of equipment with a high energy impact, explains Phong Hua.
The SCPI installs, for example, destratifiers, LED bulbs or systems that allow the building’s consumption to be controlled. On average, this allows our tenants to save 30% energy, continues the manager.
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Long term opportunity
So should we avoid SCPI ISR? Not necessarily. Because investing in SCPI is done over the long term. However, the investments of labeled SCPIs place them in an excellent position to outperform the long-term market.
When an SCPI invests in its real estate portfolio, the latter improves, which can translate into added value upon resale, particularly if the managers have been able to anticipate environmental standards, indicates Phong Hua.
However, these are becoming more and more strict. The tertiary decree, for example, requires all landlords of premises of more than 1000 square meters to reduce energy consumption by at least 40% in 2030, 50% in 2040 and 60% in 2050.
Another argument: ISR SCPIs are more attractive for savers, but also for tenants, who increasingly wish to occupy buildings that are environmentally friendly and energy efficient.
Finally, labeled SCPIs have so far demonstrated a better capacity to collect. This can allow them to seize good opportunities, especially when property prices fall, as is the case at the moment.
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Which SCPI ISR to choose?
This is where the problem lies. The ISR label is very generic. And each management company has its own strategy, its own commitments and its own grid of criteria. Result: it is often difficult to compare these funds with each other, points out Clment Renault.
On July 18, the ISR label committee, responsible for proposing avenues for improvement, submitted its copy to Bercy. But although several modifications were suggested, the creation of a grading system to facilitate the comparison of funds was not retained.
So how to make the right choice? Don’t just be interested in the ISR label. Take the time to study the strategy of the SCPI, the nature of its real estate portfolio, the fees it applies as well as the reputation of its manager, advises Clément Renault.
A recommendation which is all the more valid as not all SCPIs choose to request this label, even if they are eligible for it. This is for example the case of Kyaneos Pierre, which rehabilitates thermal strainers.
The reason? These SCPIs most often prefer to avoid additional administrative procedures. In addition, they avoid certain obligatory expenses to maintain the SRI label, such as reporting costs.
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