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18 July 2016

The French market is conducive to responsible investment

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In late April, the French government unveiled the schedule of available subsidies for photovoltaic (PV) projects from 2016 to 2019. To my surprise, with 1.35 GW (or the power of the largest nuclear reactor in France) for solar on the built, these are much more important than we could imagine.

This makes France the best country to invest in solar integrated building in Europe. This also demonstrates the enthusiasm of France to become a leader in the green economy and to meet its commitments to reduce nuclear power generation to 50% by 2030, a real change in infrastructure for the country .

The solar in France has had a great success in 2011 with an installation of more than 1.7GW in one year. Purchasing rates (around 60c / kWh were excessive and therefore unsustainable for the government.) While technical errors may have scalded investors in commercial real estate at the time, the industry has changed enormously since 2012 and the solar integrated building is a real optimizer of environmental and societal performance but also financial for investors in commercial real estate (the facilities are appraised using a capitalization rate of 7%).

It is true that investors in photovoltaic installations can hardly benefit from the returns on investment of 2011 which went up to 20%, but it remains nonetheless that there are enormous opportunities in this area. For example a logistician can change all are sealing for free by incorporating a photovoltaic installation.

For Leo Barlatier, president of Barjane: "the inclusion of solar panels on our developments is systematic. We have found a real correlation between environmental and economic performance and reduce the impact of our investments on climate change, a win-win ".

Indeed, even if tariffs have dropped by more than half, the average price of the last calls for tender remains one of the most attractive in Europe, especially considering that installation costs have dropped by half and will continue to fall until 2020 (at least according to the International Agency for Renewable Energy). In South-East France, for example, it is not uncommon to find 14% IRRs guaranteed by the government for 20 years and indexed to inflation. Insofar as the facilities are guaranteed (including productivity), the risk associated with this type of investment is minimal. That's why the Hammerson Board has decided to install at least 20,000m2 of PV on the roofs of its shopping centers to meet the expectations of their investors.

For Louise Ellison, Global Sustainability Officer for Hammerson4.31 € | + 0.00%: "Energy security is a material issue for all commercial real estate operators. There is no quick fix, but integrated solar installations have an important role to play. That's why we are installing panels this year on our existing properties as well as those under construction and will continue to consider solar as an integral part of our medium-term sustainability strategy. "

Real estate investors, and especially listed REITs, must ensure that their products remain attractive. Indeed, there is a growing risk that investors do not consider products with a high climate impact. It is undeniable that there is a relationship between liquidity and sustainable development. Blackrock CEO Larry Fink, for example, recently said that his investors were looking for companies with a sustainable development action plan. If you do not have one, now is the time.

Rather than focusing on quarterly financial returns with a short-term logic, developers and investors in commercial real estate must make responsible long-term investments. Sustainable development is no longer an option; it is essential for the survival and profitability of businesses.

Even if the subsidies are lower than before, the French market is conducive to solar investments. The new technologies available on the market are remarkable. The key is to find which ones will be best suited to your needs. The sun will never stop shining so now is the time to act to accelerate green growth in a world that will need 7 planets in 2050 if we do not change our modus operandi.