ESG is currently one of the most exciting topics in the real estate business. It measures how well a company or portfolio is performing on environmental, social and governance issues. There is a direct correlation between his high ESG score and good financial performance, making ESG criteria particularly attractive to modern investors. Here, he outlines how real estate portfolios leverage the power of his ESG to create value.
For the real estate industry, there are many ways for professionals and managers to optimize assets to create attractive, sustainable and resilient investment opportunities and leverage existing inventory to generate income.
It’s easy to think of real estate asset optimization as purely environmental, but it’s not. Environmental aspects are the most obvious, but it is also essential that buildings are socially inclusive, fairly managed and equitable for all. But the focus on climate change and the need to promote long-term sustainability and resilience cannot be ignored.
sustainable real estate
Climate change is a topic of great importance, and its devastating impact on the environment is getting worse every year. Our built environment is where we live, work and relax, so optimizing our built assets for the future should be at the forefront and center of any real estate ESG strategy. Physical climate risks are a major threat and the only way to protect your assets is to future-proof them.
The built environment is particularly vulnerable as major climate events such as earthquakes, typhoons and other extreme weather events are becoming more common than ever. As a fixed entity, a building has to endure many things. Luckily, we have advanced building materials to create safer spaces, advanced technology that can gather data about the use of specific resources, and smart modeling tools that can highlight the strengths and vulnerabilities of assets. We live in an era with Cutting-edge materials can help protect new buildings and future projects, but it’s data and in-depth analytics that can help make existing inventories more resilient. This can increase value and prevent stranded assets from accumulating.
The impact of climate change is a real threat to the real estate industry. Floods, heat stress, sea level rise, wildfires, and other events can result in enormous economic losses in numbers that are increasing each year. Recent climate change USD 650 billion in losses in the world.
As this number rises, portfolio managers, CEOs, and decision makers will focus more on climate resilience, reduce their exposure to risk, and collect as much data as possible to prevent further damage and loss. Obviously, it should help protect assets from currency devaluation. future.
Optimize for greater profit
While we have largely discussed environmental risks to the overall resilience of assets on ESG, there is more that can be done. To enhance value and build resilience, assets should be aligned with many other social and governance goals and criteria, with a focus on transparent decision-making and holistic drivers for social good. must be fulfilled. The entire asset lifecycle should be considered. Here are some key ways you can optimize your assets for greater and achievable returns.
Building resilience
Building resilience is not just a play on words, it is more than just choosing eco-friendly and efficient materials. To build in a resilient way, use materials and methods that can adapt to changing conditions and add value in other ways to have the least environmental impact and add value to local social structures. It is important to choose the site to For example, in cities suffering from intense urban heat, green spaces and thoughtful design are paramount. It is important to reduce the impact of the building and prevent unnecessary stress on the surroundings.
Resource optimization
Resource optimization is the act of making thoughtful decisions that maximize the potential of a finite resource in a way that adds the most value without inflicting irreparable damage. Optimizing with finite resources is acceptable, but only if it does not jeopardize the future. The latest generation of investors appreciate such forward-looking policies.
reduce environmental impact
Similar to resource optimization, reducing the overall environmental impact of buildings and portfolios should be a key ESG strategy for any company. Reducing environmental impact can be done in a number of ways, including using clever design during the planning stage and being prudent and thoughtful during the decommissioning or demolition stages of a building’s life cycle. Nearly every aspect of a building must be assessed for environmental impact to eliminate or reduce the risks it may pose to the natural environment without compromising the overall functioning of the building.
Enhanced passenger experience
Perhaps one of the most important aspects of ESG asset optimization is the overall social experience of tenants and building residents. The ‘social’ dimension of ESG is often overlooked or misunderstood, but it is very important. Happy, healthy tenants should be at the forefront of asset optimization and building design. Spaces within the built environment should be designed with tenant satisfaction as the primary goal. Happy tenants are more likely to extend their leases and actively enjoy being in the environment you create. As it happens, socially inclusive, well-managed and eco-friendly buildings score the highest in our Tenant Satisfaction Rankings.
Improving financial performance
Financial gain should not be the primary driver of ESG compliance, but there is a strong correlation between the two. By developing and deploying a strong his ESG strategy, the portfolio can deliver higher financial returns, especially compared to conventional buildings of the same type. In fact, thoughtful design and careful optimization of energy, water, waste and other features can significantly reduce costs and improve profit margins.
ESG: self-investment
Optimizing assets with the above criteria in mind increases efficiency, reduces the carbon footprint of buildings, adds social value to the community and creates positive change in the local area, hence the value of the portfolio. It can have a significant impact on ESG performance. These positive changes will not only improve the quality of life for those who live and work in the building in question, but will also add significant value to your portfolio.
However, the journey to ESG compliance starts with the first step. The only guaranteed way to develop a sound strategy that checks the right ESG boxes is to start with the first measurement. with ESG benchmarks such as ECORE Benchmark Serviceto understand the ESG landscape and create a forward-looking roadmap for the future.
Read our executive summary on ESG in real estate.
This executive summary on ESG in real estate covers the key things real estate decision makers need to know from ESG compliance to leveraging ESG as value drivers in their real estate portfolios.
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