Investing
Real estate owners must put the ‘S’ into ‘ESG’
Global Banking & Finance Review®
Company
Legislation and public demand is forcing change and
Legislation and public demand is forcing change and businesses are responding, But there’s a danger the social side might get neglected, writes Chris Bennett of Evora Global
A revolution is slowly unfolding in real estate and across much of big business. People are waking up to climate change and the damage we are doing to our natural world. Some would say it’s a revolution that is overdue and there’s a lack of urgency. I would agree, but moves are being made.
The world’s largest real estate owners are now reacting to legislation driving greater adoption of environmental, social, and governance (ESG) initiatives. In the UK, the once voluntary goals of The Task Force on Climate-Related Financial Disclosures (TCFD) are now enshrined into law and investment managers must reveal critical ESG data to markets. Comparable legislation is coming through in the European Union and also in the US. ESG is now a major boardroom topic.
During lockdown in May 2020, we at Evora Global started running some free to attend webinars on ESG in real estate for building and investment managers. Our first meeting involved just over 20 people, but interest has been growing ever since; our last seminar, held in November, attracted over 1300 sign ups – ESG is on the rise.
ESG is a much maligned topic and often misunderstood. This saddens me and the attempts by some companies to apply greenwash undermines what is a great opportunity for change. I still believe ESG is a great movement and a significant commercial opportunity, it’s why I founded this business back in 2011.
Vantage point
From my vantage point, real estate is now in a very different place to where it was back when we started Evora. The climate denial and scepticism is seldom expressed by serious professionals or business leaders. We are all now asking better questions.
Building and investment managers are ploughing into renewables, the management of emissions and waste – they’re aware of the ‘E’ of ESG. We are starting to transition to a net zero carbon future. Meanwhile, boards are adapting to the governance issues – the ‘G’ is increasingly being demanded by legislation.
So this leaves the ‘S’ in the middle. What about the social side of ESG?
The big S
At Evora, we believe in the fact that real estate and infrastructure investment can create social wellbeing. That considers the health and wellbeing of people in and around these assets. It is an inclusive mentality that recognises the importance of diversity and a responsibility that finance has in shaping our environment for the benefit of people and the planet.
The pressing needs of the climate and legislative demands on boards and senior managers means there’s going to be a lot of focus on the ‘E’ and ‘G’ of ESG. However, there could be a danger businesses neglect the social side, the ‘S’.
In our recent investor survey, we found that 61% of real estate investors were not collecting any data on health and wellbeing in their buildings. This is post-pandemic when good air-quality in building is known to reduce the spread of Covid.
Health and wellbeing at work are major issues. We need workplaces that are well ventilated, have plenty of natural light and green spaces, which encourage walking and more. As we redesign our world to make it sustainable, let’s make it social, too.
After all, why do we really care about the environment? Surely, it’s because we care about the people living in it.
Furthermore, businesses need to think about their impact on wider society and there’s no better place to start your thinking than the people living nearby.
There’s something quite galling about the site of a shiny, new building, filled with high achievers when, next door or outside, there’s poverty and desperation. However, the owner of a building is usually not the developer nor are they the occupier so we have to get creative in how we think about the interaction between building tenants and their surrounding community.
As we drive forward through the 2020s, doubtlessly taking on and implementing an exciting array of new technologies, it’s important that we do not create a society of have and have nots. There is a need for a just transition to Net Zero otherwise we will create an increasingly unequal society.
I don’t think it’s enough to simply avert global warming and climate change. What I see in the decade ahead is an opportunity to rethink for the better. The way in which we live and work.
We want our buildings to be sustainable in the broadest sense. Let’s ensure there’s a big ‘S’ in ‘ESG’.
About Author:
Chris Bennett is co-founder and managing director of sustainability services company Evora Global, whose clients include Legal and General, Hines and M&G. Evora’s SIERA software enables its clients to make investment decisions regarding climate change and sustainability. Founded in 2011, the company has 150 staff and is a major proponent of the use of ESG data.
ESG stands for Environmental, Social, and Governance. It refers to the three central factors used to measure the sustainability and societal impact of an investment in a company or business.
Real estate investment involves purchasing property to generate income or profit. This can include residential, commercial, or industrial properties.
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