Utilizing ESG to prove you can do well and do good
The COVID-19 pandemic spotlighted and intensified major global challenges, spanning complex moral dilemmas like climate change and the ways in which business decisions affect employees and communities. The need for accessible, transparent data has never been more in demand during these times of change and crisis.
Easily accessible data on environmental, social and governance (ESG) factors is continually growing in importance to a company’s long-term value. ESG principles play a significant role in risk assessment, benchmarking, and investment considerations.
ESG data is an invaluable tool in building strength in numbers. The need to digitize and access this information is becoming increasingly indisputable—and the real estate industry is certainly no exception.
The physical effects of climate change have already proven to have a fiscal and long-term natural impact on the CRE industry. Not only are there threats to the environment at large, but climate-related factors like heat waves, extreme rain and drought, and wildfires drawing dangerously close to urban areas pose significant risks to the real estate industry. Infrastructure is at a huge disadvantage to the uncontrollable aspects of climate change. Responsible ESG data management and accounting is one major way to leverage information to increase stability across fiscal, physical, and social climate risks.
Financial Sense
ESG awareness is becoming inseparable from profit – and companies like BlackRock are already proving the benefits of this interdependence. BlackRock, for example, has invested in decarbonization, climate analytics and nature-related financial disclosures. Similarly, large firms such as JPMorgan are investing in ESG platforms specifically, recognizing the value that this data has on their portfolios and for helping stabilize local and global climates. The commitment to net zero emissions and comprehensive ESG analysis as an investment strategy are motivators for profit generation.
ESG goals are aligning more closely with financial growth and profit development. Technology that allows for the seamless assessment of ESG data has the power to not only have a positive mainstream impact, but also fundamentally change financial operations and intentions.
Risk Assessment
Climate change poses significant threats to the environment, destabilizing human systems and global ecosystems. Equally as relevant, though often less discussed, is how those threats evolve with a changing society and government. The public and private sectors must transition to adapt to a changing climate.
Businesses are being impacted by climate change, from built infrastructure hazards to the efficiency of supply chains. As companies around the world have started taking on the challenge of transitioning to a net zero business model, the advancement to nature-based solutions is more difficult than ideally expected. CEOs across industries are asking for business engagement, biodiversity, and behavioral shifts. Accountability to employees, responsible climate financing, and impactful sustainability practices require more than green investing. Policy changes – company-wide, federally and all in between – are necessary for implementing the level of change that is required of us.
Utilizing the collective power of cities and communities can be useful in fighting pandemics, climate change, and socioeconomic issues. The Intergovernmental Panel on Climate Change (IPCC) recently reported on the unavoidable global climate hazards to come, identifying not only risks to the environment but also to people and infrastructure. The IPCC believes this “can be avoided by involving everyone in planning, attention to equity and justice, and drawing on Indigenous and local knowledge.” This valuable information can come from the diligent collection and management of data.
Our global environmental and social systems need environmental, social and governance data intelligence to be able to best adapt to a changing climate. ESG data can provide valuable insights into the future of climate risk, climate action, and climate change.
Social Responsibility
Developing a strong company culture empowers employees. Responsibly benchmarking ESG data contributes to improving employee performance, retention, productivity and morale – all of which are connected to the values of ESG tracking. The internal processes can become reflective externally, evident in companies becoming desirable for their work-life balance and employee support systems. For this reason, investors and other stakeholders are demanding transparency and accountability in the ways companies value their team.
The U.S. Securities and Exchange Commission (SEC) has placed ESG strategies high on the list of priorities when analyzing products and services, with a spotlight on corporate social responsibility and impact investing. Some of these rules include mandated disclosure on ESG strategy and reporting on progress of that strategy. The continued implementation of more ESG regulation and standardization at the state and federal level highlights the importance of this work.
Data Makes a Difference
There is a lack of available and accurate ESG data across all industries, making it challenging to report effectively. As the demand for ESG data continues to increase, especially in light of the COVID-19 pandemic, we can expect that the data needs will continue to rise in tandem with the need for risk assessment. Having the right ESG data is essential to financial success, risk management and societal contribution. Knowing how to leverage your ESG data for good will have a ripple effect on doing well with global ESG reporting metrics.
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