ESG Transforms CRE: 3 Lessons Learned from BlackRock, S&P Global, and AFIRE
How is ESG transforming the commercial real estate sector globally? Measurabl discussed this popular question with ESG leaders from BlackRock, S&P Global, and AFIRE to understand how it impacts each business group.
Here are three major takeaways from the discussion:
1. ESG Has Transformed from Voluntary Efforts to an Entire Set of Global Requirements
Across the world, fines and penalties have been put into place for those who are not achieving certain reductions across their assets. These commitments are now viewed as the responsibility of an organization and part of its due diligence.
“What I believe is happening is we're shifting into the institutional investor seeing ESG not as a nice-to-have,” said Gunnar Branson, CEO of AFIRE. “Now we're shifting into responsibility and the idea that not paying close attention to this very real risk or risk of devaluation of an asset, risk of an asset no longer being leasable or being obsolete. This is something that now is pretty much a green sea for institutional class real estate."
2. Data Quality for ESG Metrics is Essential
The importance of data quality ultimately comes down to being able to trust and rely on the accuracy of this information to make significant transactional decisions. Across the real estate industry, this non-financial data is being held to the same esteem as our traditional financial data.
“If we have a robust understanding of what is happening within an asset and we have the ability to identify what those quick wins look like, we can therefore think about granular strategies that at an asset level we can start to see data feeding into our action plans,” said Katherine Sherwin, Vice President of Sustainable Investing Manager at BlackRock Real Assets.
ESG metrics are now the baseline of an asset’s overall performance. If the data for these metrics is accurate, you can integrate them appropriately and not only protect your returns but enhance them.
"ESG is a major focus of the organization because clients across all segments that we speak to are really looking into this in detail and that's across equities fixed income and real estate." - Michael Orzano, S&P Global
3. More Capital Directed at ESG-focused Investment Strategies
Michael Orzano from S&P also spoke about the large amount of interest in ESG focused investment strategies along with the multiple indices covering equities across the board becoming extremely useful for deploying investments.
“ESG is a major focus of the organization because clients across all segments that we speak to are really looking into this in detail and that's across equities fixed income and real estate,” said Michael Orzano Senior Director, Global Equity Indices of S&P. With ESG at the forefront of the marketplace, more capital is being directed towards it.
S&P plays a major role in informing the capital markets and providing access to investment tools. The rollout of green real estate indices are representative of the core listed real estate pace.
So what does that mean for us? Moving forth, we should expect further compliance demands related to ESG regulation, our data is only as good as the quality backing it, and ESG-focused investments will continue to attract more capital. We must listen and react to what the market is telling us.
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