In TLP’s fifth solocast, we are with our very ownThe Limited Partner PodcastHost,Jake Wiley.He is a podcaster, author, entrepreneur, CPA, former CFO, and head core client relationships for Private Equity Real Estate and Alternative Investments. Today’s podcast episode is focused on ESG (Environmental, Social and Governance) policies and how it affects institutional and non-institutional real estate investments.
What is ESG?
Jake discusses ESG, a framework used to evaluate companies based on their performance in three areas: environmental, social, and governance. While the focus in the marketplace is currently on the environmental aspect, social factors look at a company's impact on people and society, and governance examines a company's leadership structure, policies, board composition, and executive compensation. Despite the importance of all three areas, the conversation at the conference mainly revolved around the environmental aspect of ESG.
Institutional Investors are Looking at ESG
Institutional investors are increasingly demanding ESG (Environmental, Social, and Governance) strategies from their investment managers, leading to deeper due diligence and more detailed reporting on ESG policies. Companies are also facing regulatory pressure to report accurately on their sustainability practices to avoid greenwashing. The trend is particularly evident among mid to large institutional players, who enjoy favorable rates and invest in large-scale deals to maximize returns. The fees they collect from these deals help cover overheads, with the equity on the backend being tighter. The result is that ESG investing is becoming more sophisticated and increasingly central to investment strategies.
Opportunities in Non-Institutional Properties
Jake discusses the increasing demand for ESG strategies among institutional investors and the regulatory environment in the US to prevent greenwashing. He suggests that non-institutional property sponsors should see this trend as an opportunity and try to get ahead of the wave. They should consider combining several of their properties to create an institutional-grade portfolio that could be sold to institutional investors looking to improve their ESG portfolio. Jake believes that this is the first time in a long time that such an opportunity exists, and those who can provide solutions will be in high demand.
What is an Institutional Grade Investment?
According to Jake, an institutional grade investment is typically safe, large, and of high quality. Institutional investors are looking for favorable market conditions in both the asset class and the local economy, and they want to minimize their risk. These properties tend to be valued at $50 million and above, although smaller assets can be pooled together to create a portfolio that is valued at a higher dollar amount. Properties must also be in good condition with minimal risk of deterioration or obsolescence.
Who is Jake Wiley?
Jake is a podcaster, author, entrepreneur, CPA, former CFO, and head core client relationships for Private Equity Real Estate and Alternative Investments.
With nearly two decades of professional experience building businesses, solving problems, and implementing solutions, Jake has the ability to serve his clients from the perspective of having sat in their seats.
He founded a Louisiana-based Residential Solar Finance and Installation Company, which was later acquired by Palmetto where he led strategic initiatives until late 2018 and then moved on to be a Chief Financial Officer and Chief Compliance Officer at an RIA fund focused on commercial solar.
He has been investing both passively and actively in Real Estate for more than 16 years, raising private funds for strategic value-add investments and long-term holds. This is a true passion of his, so much so that he has a Podcast, The Limited Partner Podcast, where he gets to interview and talk to some of the best of the best in the space to learn how they are making it happen.
His diverse industry experience in both corporate and startup companies, as well as layered work experience as an executive, founder, and advisor, allow for unique, well-rounded, and informed perspectives that he is always happy to talk about.