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A Recent Dynamic
Portuguese companies as well as financial entities, are
responding to regulatory and investor demands and are increasingly
using synergies to comply, not only with the new European
regulation regarding ESG (environmental, social and governance),
but also to provide a range of services that provide new business
opportunities, whilst also exploiting a niche in the market that
offers high potential and is still yet to be fully explored and
developed.
The Investor Perspective
From the investor side, the directives that are being
implemented by the EU have already been causing a shift in
investment, with increasingly higher capital flows being redirected
to sustainable investments, with investors and funds being
compliant with ESG common market principles.
Returns
Various reports and studies, from the last couple of years,
acknowledge that ESG investments present similar, or even better
returns, than traditional investing and refute any scepticism
regarding the correlation of better than average returns and ESG
investing.
In 2021, according to Reuters, the MSCI World ESG index has
risen 22%, when compared with the MSCI World index gain of 15%.
This can be explained as the investments being made in renewables;
waste reduction mechanisms, solar energy systems and other
sustainable projects, are increasing at a rapid rate due to more
impressive returns, technology advance and promising opportunities
being backed by the change in world politics towards a common green
agenda.
Further Potential
This market is continuing to grow and present opportunities.
According to Reuters, a record EUR 649,000M were poured into ESG
funds worldwide in 2021, making ESG funds account for 10% of
worldwide fund assets.
Climate Change: the Community and Investors
As climate exchange momentum is at its peak, investors should
consider the perception of their investment not only from the
community perspective but also from the shareholders’
perspective.
New ESG opportunities can help businesses not only to enter new
markets but to also capture new clients by providing more
sustainable products, thereby helping to drive consumer
preferences.
Real Estate and ESG
Real Estate is one of the most valuable asset classes in
Portugal. The potential is evident as to how ESG can provide
investors in Real Estate companies more incentives to; not only get
better terms for investing in purchasing or refurbishing
properties, but also to take advantage of tax-friendly policies, to
boost interest in these sustainable products and at the same time
to benefit from attractive rental yields.
The Property Market in Portugal and Ongoing Investment
Opportunities
According to JLL (a global commercial real estate services
company), more than 190,000 homes in Portugal were sold in 2021,
which represents an increase of 16% versus 2020 and 10% when
compared with 2019.
Current projections maintain that in 2022 this trend will
continue in Portugal, mainly due to demand still being higher than
supply, and due to the fact that in 2021 there was a 10% increase
in licencing permits granted for new builds, in comparison to
2020.
These factors, combined with the high incentives given to
investors who invest in green and sustainable residential projects,
will push and sustain the growth of investment in 2022, despite the
current economic environment and geopolitical uncertainty that the
world is experiencing.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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