The regulatory environment is forcing organisations to examine their environmental, social and governance policies and behaviour. However, larger firms in the real estate industry have realised that embracing ESG is actually good business anyway.
Speaking at REALX.Global session, Human Capital, ESG and winning cities Christiane Conrads, head of German real estate desk, PwC Legal, pointed out that institutional investors really, “have to do something now from a regulatory point of view.”
But she added that other property players – such as developers and private equity firms – are becoming more aware of the need for ESG compliance because when they are selling to an institutional investor they have to sell a product that conforms to their policies.
“No investor can now neglect this,” agreed Uwe Rempis, head of fund management, and chairman of the management board at LaSalle Investment Management.
Rent and service charge preoccupy smaller tenants
“For less institutional investors [ESG] is not quite there, but it will come. On the tenancy side bigger occupiers are institutional and have their policies but for smaller tenants it is less relevant. Rent and service charge are more dominant,” Rempis said.
He added that there is a need for asset managers to inform tenants about the benefits of incorporating ESG considerations. “Together with the property manager we can educate our tenants and help them improve their sustainability operation so that, overall, we can reach the targets,” he said.
Corestate Capital Group CEO Lars Schnidrig said that for his company the ESG monitoring process started two years ago with environmental reporting. “You have to be able to measure for clients how much CO2 their buildings emit,” Schnidrig said. He said that for Corestate the process continues and that data will be available on the full-breadth of ESG impact in the next one or two years.
“Many clients are asking for an ESG report on their portfolio but if companies don’t have the IT systems it is difficult to comply,” Schnidrig said.
Conrads concurred that having a good database is key to implementing ESG strategy. “You need to start collecting ESG data during the construction phase and to hand it over when you sell the property, like a land registry.”