ESG (Environment, Social, Governance) is already transversal to all businesses, and real estate is no exception. It started with offices, but extends to all asset classes, and 2/3 of real estate investors are already adopting ESG criteria in their investments, according to a study by CBRE.
During the webinar “ESG – A lime to action for the real estate industry”, Duarte Cardoso Ferreira, Director of Strategic Consulting at CBRE, explained that the environmental component of ESG involves managing assets taking into account climate risks, depending on the businesses to have more resilience in this regard, protecting biodiversity, setting energy and zero carbon savings targets, using more sustainable materials or applying new regulatory requirements.
At the social level, it is important to improve diversity, equity and inclusion of people, implement policies that have an impact on them, or understand the social impact of products and organizations. And real estate is an integral part of neighborhoods, cities, and therefore has a great impact on them, namely in terms of affordable housing, health or well-being.
With regard to governance, it is important to develop a clear corporate strategy for responsible corporate behavior, focusing on corporate social responsibility, benchmarking or technology – critical to achieving ESG goals.
Duarte Cardoso Ferreira stated that «2020 was decisive for these factors to be much more present in real estate investments». According to the expert, “companies that are progressing in ESG perform better. Employees want to work for companies with a purpose, public commitments to meeting zero carbon targets are increasingly common, regulatory pressure led by Europe continues to grow, such as reducing emissions by 55% by 2030, and events 2020 have created a catalyst for environmental and social change», he summarizes.
And concludes that «it is important to plan, transact, build, manage and measure. The entire chain must be aligned with the same principles».
Building sustainability certification has advantages
It is true that there are still relatively few assets with sustainability certifications, but their number is increasing. In a study, CBRE showed that this stock in Europe has already gone from 11% in 2016 to 20% in 2021, which “shows great market dynamics”. The occupancy of certified offices increased from 24% 5 years ago to 31% in 2021, «confirming the trend that the “leasing” activity is increasingly focused on certified buildings».
CBRE concludes that there are advantages to certifying buildings. Bernardo Freitas, responsible for Sustainability and Strategic Consulting at CBRE, highlights that «when a building is more sustainable, it is possible to capitalize on this in the business, comparing certified properties with non-certified properties». For example, leasing is faster in certified buildings, with higher rents, and “an increase in demand for this type of building is evident”.
These assets still achieve superior returns, as they stand out from the rest, but soon, buildings that do not adopt these sustainability policies will have returns below the average. Cristina Arouca, Director of the Research department at CBRE, warns that «the adoption of these criteria can still be reflected in a prize, but it will quickly translate into a discount for those who do not adopt them».
