How real estate is supporting the ESG mission

The pandemic has changed a lot of things globally. The chain of events catalyzed environmental and social changes that has led to a converging focus on environmental, social, and governance (ESG) issues. This puts commercial real estate (CRE) in the spotlight, as the industry has a key role to play in this transformation.

The workforce of the modern world is driven by a purpose - to make an impact on the world and be a part of an ecosystem that is driven by the same vision. Ergo, they are inclined towards culture and practices, including environmental and social initiatives while looking for new job prospects.

Environmental and community
According to the UN, the real estate sector accounts for 38% of all energy-related CO2 emissions.1 This is a clear implication that the sector needs to embrace sustainability and have a fast track approach towards ESG. In fact, in the post-pandemic era, ESG adoption is growing rapidly, as the pandemic has shattered the misconception that ESG’s social impact would negatively impact the ROI.

The social impact penetrates beyond the environmental aspects to affect the work community as well. To maintain comprehensive growth, organizations are creating opportunities and promoting diversity and inclusivity. It will reinvent the traditional work culture and cater to the requirements of the workforce community.

Investors
Investors are the ones bridging the financial gap of the real estate industry to meet the evolving demands. They now aim to assess an organization’s impact beyond revenue, focussing on long-term value generation. This necessitates a holistic assessment of the business strategy to consider long-term opportunities and risks. Increased participation in the 2020 GRESB ( Global Real Estate Sustainability Benchmark) assessment - a global investor-driven ESG benchmark and reporting framework for real estate investors - is also proof of heightened ESG focus among investors. It is evident that sustainability plays a crucial role in investment decisions.

Infrastructure
Real estate and infrastructure are closely intertwined as the industry leads in the energy consumption and construction front. Therefore, focussing on improving the construction methods and implementing green solutions becomes the go-to option for real estate. Inclusion of more sustainable solutions, eco-friendly materials, smart technological systems, and more, not only helps the environment but also boosts the ROI. Organizations and governments around the globe are fostering innovative construction methods to tackle carbon footprint and emissions.

India is on its track to fulfilling its Paris agreement goals. It is aimed to be achieved by reducing energy consumption, reducing greenhouse gas emissions, and increasing the usage of renewable energy. The swift move of the real estate industry towards ESG and sustainability further bolsters this mission by introducing significant radical changes.

Citations:

1. Building sector emissions hit record high, but low-carbon pandemic recovery can help transform sector – UN report