While Environmental, Social, Governance (ESG) practices might have been limited to branding plays a few years back, it’s now a core component of business strategy. Facing increasing pressure from board members, C-suites, and other stakeholders, many organizations are on a mission to decrease their carbon footprints and create more sustainable business practices for good.
While the urgency for sustainable initiatives has become more and more apparent, there are short-term and long-term benefits for commercial real estate teams who take action and go green. If you’re among those trying to make a business case for ESG investment (or among those who need convincing that it’s a worthwhile venture), keep reading as we break down the journey from short-term to long-lasting benefits of decreasing your real estate portfolio’s emissions and achieving carbon neutrality.
One of the more obvious benefits of investment in sustainable real estate is the brand boost. Commercial real estate companies who have demonstrated some sort of ESG effort and commitment to the environment tend to be more attractive, both to the customer and investor.
According to a recent ESG study from Nasdaq, stakeholders are increasingly interested in sentiment analysis to help guide their understanding of an organization. Sentiment analysis is essentially an indicator of how a company’s outlook is perceived. More forward-thinking, positive companies have higher sentiment scores. According to the study, constituents who spoke about ESG practices in earnings meetings ranked higher in sentiment scores. All this to say, organizations who are forthcoming with their ESG initiative and information are often perceived better.
The same Nasdaq study also supports the notion that the more frequently an organization discusses ESG strategy, the less volatile their earnings are. This held true in an analysis of the S&P 500 and the MSCI USA ESG integration Leaders. According to the study, “Volatility decreased by 60.1% for S&P 500 companies in the 75th percentile vs. 25th percentile in ESG policy mentions.”
When buildings transition to a more energy-efficient way of operating, operating costs won’t be as high. A study published by GSA claims that operational costs for green buildings are 19% lower than the current industry average.
As investors and other stakeholders become increasingly interested in sustainability, so do employees. As younger generations enter into and mature within the workforce, the value of sustainability begins to hold increasing weight with talent attraction and retention. Companies that are making a demonstrated effort to reduce their carbon footprint and be transparent about their progress will have a leg up in recruiting in the years to come.
In the end, one of the most impactful – and obvious – benefits of sustainable real estate is the reduced risk of environmental harm and larger-scale corrective business regulations should pollution and climate risk continue to escalate at the current pace.
New regulations surrounding emissions and pollution should be expected. It’s not a question of “if” – it’s a question of “when.” Is your company proactively preparing to meet higher ESG goals and “green” standards? If not, you’re already behind the curve, and you can expect to incur expenses trying to play catch-up in your ESG journey when mandates are put in place.
While the concept might seem elusive or hard to quantify, employee satisfaction and wellbeing are certainly important metrics to consider when measuring progress in the corporate real estate, workplace, facilities, and sustainability functions. Better air quality (both in and outside corporate buildings) and better alignment with a company’s ESG principles and values can lead to happier, more satisfied employees.
The reality of an energy-efficient portfolio is that it takes time, money, and buy-in, which aren’t always easy to come by quickly. It’s important to start from the true beginning, which is knowing where you stand. When you use data and analytics to gather information and gain context on your portfolio’s carbon emissions and energy efficiency when comparing your ESG performance relative to your peers and your markets so that you can begin to build a business case and advocate for your projects.
To learn how industry giants like Mastercard are leading the way with ESG issues and sustainable real estate, watch our webinar on the intersection of ESG and real estate on demand.