It will be interesting to see what the impact of the devastation brought by Hurricane Ian has on property owners' property and casualty costs, she said.
Still, while there are tools, most notably from GRESB, a global ESG benchmark for real assets, that help measure energy usage and carbon footprint of properties today, none of them are useful in the real estate investment process, which has a long time horizon, Ms. Peyton said.
"Given the reality of the investment, what manager wants to be the first one to start pricing climate risk 20 years out? Who wants to raise their hand to do that?" she said.
Among managers reporting ESG assets in P&I's real estate manager survey, Nuveen topped the lists for worldwide and U.S. institutional, tax-exempt assets with $143.5 billion and $105.8 billion as of June 30, respectively, and came in second for REIT assets managed under ESG principles with $12.1 billion as of the same date, P&I data showed.
ESG is not only an investment risk but can enhance performance, said Carly Tripp, Charlotte, N.C.-based CIO of Nuveen Real Estate, in an emailed response to questions.
"Tenants continue their 'flight-to-quality' to the top assets in the market that offer modern amenities and that have lower carbon emissions than legacy assets, a point that will only amplify in importance in the coming years as more firms look to their real estate to improve their ESG performance," Ms. Tripp said.
"And as tenants reduce their overall space needs, they can actually afford significantly more on a per-square-foot basis resulting in many to consolidate into these higher-quality assets," she said. In the office sector, for example, Nuveen expects there will be a roughly 15% reduction in office demand over the next few years as a result of hybrid office and remote working that started due to the pandemic.
New construction and assets that can be effectively renovated to compete in the "amenities arms race" will continue to outperform, Ms. Tripp said.
Real estate managers are increasingly adding ESG-related investment strategies.
Earlier this year, Man GPM launched a joint venture focused on net-zero energy homebuilding, said Anthony Cazazian, New York-based managing director and head of U.S. residential real estate.
"We drew a line in the sand and were fortunate enough to have like-minded joint venture partners," Mr. Cazazian said. "Our goal for the JV is to build up to 1,000 homes across a handful of projects across metros."Man GPM's joint venture partners include Dutch real estate manager Bouwinvest Real Estate Investors and global technology company ZF Friedrichshafen.
Man GPM had $3.4 billion in global real estate assets, including $267 million in worldwide real estate assets managed under ESG principles as of June 30.