How to avoid hitting the target but missing the point on ESG

Quick wins are to be avoided and a long-term, holistic strategy should be pursued for real estate to have a positive environmental and social impact, delegates heard at Real Asset Media’s Trends 2023: ESG & Impact Networking Breakfast, which was hosted recently by BNP Paribas Real Estate at their London headquarters.

Josh Spencer, Sustainability Transformation Manager, BNP Paribas Real Estate

“It’s all about seeing the bigger picture and ensuring diversity and interconnectedness,” said Josh Spencer, sustainability transformation manager, BNP Paribas Real Estate. “These elements are missing in the current carbon offsetting market, for example, which has become more of a numbers game.”

The drive to get to net zero is leading to the pursuit of monoculture, he explained, because it is easier to measure from a yield carbon perspective. Huge plantations of sitka spruce are springing up everywhere, which is leading to a marked decline in biodiversity.

“When the primary focus is on measurement, there is a risk of failing to see the big picture and the interconnected environment,” Spencer said. “We might hit the target, but we miss the point.”

Net zero is a good start and it is crucial to avoid the worst effects of climate change, but everything else must be taken into consideration too. In the same way, the focus should never be on the single building but on its place in the neighbourhood and the community.

Two other characteristics of resilience are decentralisation and self-sufficiency, which are present in real estate when it has social value. It is all about being local and collaborative, engaging with the community, identifying needs and meeting them and improving everyone’s quality of life.

“We need to create real alignment and drive transformational behaviour down the value chain,” said Ron van Bloois, founder and CEO, Multiple Impact. “A crucial step is the measurement of social impact, but it is still challenging to close the ‘value transfer’ from the PROPCO to the OPCO of society.”

Ron van Bloois, Founder & CEO, Multiple Impact

The path to ESG compliance has many aspects, that go from the legal framework, that seeks to regulate and avoid greenwashing to the valuation of sustainable real estate, from brown discount to green premiums. From the transition from a linear economy towards circular business models to risk management, with climate change analysis at asset and at portfolio level.

Last but not least, technological innovations can provide solutions in different fields, from data gathering to material passports, from vertical farming to green building materials.

At the heart of it all are people, who need to work together to coordinate all these different aspects and take everything into account.

“Collaboration is the best form of innovation and is the key to success,” said Spencer. “You need a strong team of people that consider every aspect, instead of the silo mentality we’ve traditionally seen in real estate.”