Ninety-five per cent of pension funds and other institutional investors believe that alternative credit investments can be used to make positive social and environmental impacts, according to Aeon Investments.

Its survey of institutional investors in Europe and the US who collectively have around USD 574bn in assets under management (AUM), also found that 66 per cent believe that over the next two years real estate lenders will increasingly have closer ongoing engagement with borrowers through the life of the loans they originate, looking at the removal of harmful materials, monitoring of delivery of social housing goals, and mitigation strategies around flood risks, for example.

Seventy-six per cent of institutional investors believe that between now and 2024 real estate lenders will increasingly offer much better terms to projects with exemplary environmental, social and governance (ESG) credentials. Some 68 per cent of those surveyed believe that the gulf between the financing available to real estate projects at either end of the ESG scale is set to widen rapidly.

Commenting, Aeon Investments managing director, Khalid Khan, said: “The structured credit market is fully embracing ESG. Although there is still much work to do here, and the industry needs to safeguard itself against claims of greenwashing, there is no doubt, for example, that those real estate projects with poor ESG credentials will increasingly face issues accessing finance, resulting in limited options and punitive borrowing terms. This will cascade down in the structured credit market.”

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