Strengthening Value Through ESG
Survey results indicate four key ESG elements that need improvement:
Dialogue and transparency with counterparties
Occupier and investor priorities and timeframes for ESG goals can differ substantially. Be clear with your stakeholders and counterparties about your objectives to find common ground for collaboration. Widespread use of green lease clauses will support both transparency and improved sharing of relevant data. Alignment on ESG priorities can help mitigate the risk of buildings becoming obsolete and undesirable to occupants.
Data collection and performance measurement
High-quality building data is required to show progress toward many ESG goals and is critical to many of the issues cited as having the most impact on transactions. Both investors and occupiers are eager for more information, so leveraging operational building performance data to offer insight into the costs and benefits of green building features should be a priority. Utilizing technology and digital solutions to automate data collection is becoming essential.
It’s not just about emissions
ESG strategies should cover all issues relevant to real estate decision-making. Reducing greenhouse gas emissions was the top ESG priority for survey respondents. However, it is demonstrably clear that other issues such as health and well-being, pollution and exposure to controversial companies are very important to real estate decision-makers. Therefore, the best performing real estate likely will incorporate features covering a range of both environmental and social issues supported by clear governance.
Retrofitting vs. new build
Just 15% of real estate assets worldwide currently align with the Paris Agreement’s goal of net-zero emissions to limit global warming to no more than 1.5°C above pre-industrial levels by 2050.5 Assessing building data can help identify which assets are candidates for retrofitting versus those that are nearing obsolescence. While the carbon offset of new construction and retrofits can vary greatly, retrofitting a building generally saves over 50% of embodied carbon, according to the Institute for Market Transformation.
5 ”Building Performance Standards aim to reduce carbon emissions across the U.S.," CBRE Econometric Advisors, Nov. 3, 2022.
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