The 'S' is crucial for ESG differentiation
ESG: Environmental, Social, and Governance is rapidly growing in importance for the real estate sector. However, there is still much to be done in terms of collecting ESG information. Property management, which works with buildings on a daily basis, plays a crucial role in making an impact by taking concrete steps towards sustainability, health, well-being, and safety in the built environment. The 'E' is increasingly becoming a given, and the 'S' is evolving as a distinguishing factor.
In 2022, many owners and tenants of offices, homes, or commercial buildings still do not know how much energy they consume. Reliable data collection requires measurements of CO2 emissions, meter conversions, and smart metering systems. Without this information, it is difficult to make agreements, such as green lease contracts. Green lease agreements are of limited use if tenants do not know their own consumption.
Sustainable certification has become common practice, but until recently, it was mainly a snapshot at the completion of a (renovated) building. This is changing rapidly because market standards such as BREEAM, WELL, and Fitwel, as well as benchmarks like GRESB, are increasingly demanding ESG evidence. Furthermore, the emerging ESG regulations of the EU (EU Taxonomy, CSRD, SFDR) are reinforcing this trend. Those claiming to have an ESG-proof fund or real estate company must be increasingly able to demonstrate this. Regulators are becoming stricter in combating greenwashing.
Increased willingness to share ESG information
Gaining insights into actual energy consumption has always been a sensitive issue between tenants and landlords. Tenants, for example, in the housing market, are more willing to provide owners with insight into their energy consumption, provided that actual energy-saving measures are taken.
Small, inexpensive measures such as LED lighting, water-saving faucets, or air quality sensors can make a big difference. Only through active dialogue can these measures be implemented.
The COVID-19 pandemic has highlighted the importance of ESG, particularly in terms of health and safety. Rising electricity and heating costs have compelled both individuals and businesses to examine their own consumption. However, some investors are still complacent. There is still a perception that a few measures are sufficient, while in reality, long-term implementation processes are necessary to achieve a positive effect. This is where property management plays a crucial role.
The 'S' as a distinguishing factor
Social sustainability - the 'S' in ESG - should not be overlooked. Office tenants must focus more than ever on employee satisfaction and attracting talent. In residential complexes, tenants prioritize sustainability, health, and safety more than ever. Property management plays a central role in tenant satisfaction, communication, and stakeholder engagement. In this way, the real estate sector can step forward and demonstrate its commitment to social responsibility.
Unique selling points can be generated in all ESG areas. In other words, nowadays, everyone wants 'green' and health-promoting real estate. Those who can genuinely provide this are well-positioned, even amid the 'perfect storm' currently impacting the economy.
Investing in property management for ESG
Investing in property management is essential to consistently apply and implement ESG criteria in practice. No matter how much fund managers focus on sustainability, the actual steps in ESG are ultimately taken by property management. Only when real estate is managed in an ESG-proof manner and the built environment is used in a sustainable, healthy, and safe manner can real impact be achieved. In this regard, forward-thinking property managers are best positioned to stay one step ahead of tomorrow's regulations rather than playing catch-up.
