REIT ASIAPAC
Is Sustainability An Afterthought ?
Participation in GRESB , the real estate sector ’ s favourite ESG benchmarking tool , leapt by 22 % in 2020 and now covers 1,229 portfolios worth more than US $ 4.8 trillion . GRESB says this reflects an industry responding decisively to accelerating investor demand for comparable ESG data .
The ambitions are laudable , but the challenges loom large – and the biggest problem , as I see it , is that sustainability is still stuck off to the side of business process and reporting , rather than front and centre .
I see the scenario play out all the time . The investment manager receives a query about sustainability and funnels it off to the ESG team to answer . This immediately tells me two things . Firstly , the investment manager doesn ’ t know the answer ; and secondly that the sustainability team is not central to the investment management process .
Meanwhile , in response to the mantra ‘ measurement leads to better management ’, sustainability specialists are trying to get their heads around the data . What should they be measuring ? Kilowatt-hours of energy per square metre is an obvious starting point – but this is an output , not an input . The amount of energy a building consumes per square metre is the answer , not the question . Measuring the inputs is where we will get the answers that enable action .
The Measurement Challenge
It goes without saying that a data centre , cold storage facility and big-box warehouse will all have different energy consumption . Should we be measuring the consumption of energy or how often people unnecessarily switch on the lights or leave the cool room doors open ? And does any of this really matter if sustainability is supplementary , rather than core to your business ?
Take one real estate asset owner wanting to reduce energy consumption . The eye-watering emissions produced by a bright neon sign illuminating the side of a building was an obvious place to start . The data was clear , but the brand management team said the sign was a sacred cow . Because ESG was not core to the business , brand awareness trumped energy efficiency .
We do , undoubtedly , need clear and standardised metrics – whether that ’ s for carbon emissions , diversity or the proportion of workers paid a living wage . As it currently stands , companies can decide what ESG metrics they will report .
1