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Skimping on sustainability will lead to significant ‘brown discounting,’ report finds
Research - APRIL 13, 2022

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Skimping on sustainability will lead to significant ‘brown discounting,’ report finds

by Kali Persall

A large number of European pension funds anticipate that commercial real estate that falls short on sustainability will suffer significant value depreciation in the next five years due to a phenomenon known as “brown discounting,” according to a new report by global ESG data intelligence firm Deepki.

“Brown discounts” are rating adjustments for properties that lack sustainability and that demonstrate obsolescence or deferred maintenance risk. Properties that require additional capital spending for improvements or to transition to net zero can receive a reduction or a “brown discount” on their value.

The Deepki European Pension Fund Report: Integrating ESG into commercial real estate investment surveyed 250 European pension fund managers in the United Kingdom, Germany, France, Spain and Italy, with an aggregate €402 billion ($437 billion) of assets under management. Sixty-two percent of these European pension funds believe that the impact of brown

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