In June, virtual data room provider Drooms hosted a webinar titled ‘Rethinking ESG: What Works? What to Avoid?’ Johanna Fuchs-Boenisch, chief executive officer of susteco solutions GmbH; Brigit Gerritse, head of research and strategy at REDEVCO B.V.; Lutz Kandzia, head of unit ESG at Hanse Merkur Grundvermögen and Pia Maria Goossens, director of business development at Drooms, convened to discuss the evolving landscape of ESG practices in the real estate sector. What follows is a summary of the discussion.
Understanding the current ESG landscape
The experts noted a surge in activity and creativity surrounding ESG topics. Regulatory requirements, investor demands and the recognition of long-term value creation drive this momentum. However, economic and political crises pose setbacks and companies continue to grapple with confusing regulations and financing technical investments. Johanna Fuchs-Boenisch emphasised the need to view ESG as potential long-term savings, not just obligations.
Measuring ESG performance
Companies rely on benchmarks like BREEAM, GRESB and CRREM to track progress. Achieving zero carbon by 2040 – a target set by REDEVCO B.V. – exemplifies ambitious targets. However, the lack of standardised ESG ratings remains an obstacle. Lutz Kandzia called for industry-wide agreement to facilitate data comparison: “Everybody is talking about ‘ESG ratings’, but there is no industry standard. This is a big obstacle today, which I personally cannot understand. There can be hundreds and hundreds of ratings, but a certain set should be agreed across the industry so we can compare the data.”
Effective ESG measures
The experts highlighted key steps to undertake:
- Implementing comprehensive ESG strategies
- Incorporating renewable energy sources in common spaces
- Leveraging building management technology for efficiency and sustainability
Pia Maria Goossens said that “many haven’t yet dealt with the low hanging fruit. Yes, there is a lot to be done, but simple measures that can be implemented easily shouldn’t be ignored.” Joanna Fuchs Boenisch concurred: “Picking the low hanging fruit and just getting started is so tremendously important. The confusion shouldn’t stop anyone from starting.”
The webinar’s audience were asked what the most effective ESG measure implemented in their companies have been – 44% agreed that shifting to 100% renewable energy sources was their most effective measure.
Challenges in implementing ESG initiatives
Implementing meaningful ESG progress faces several hurdles. One major challenge is the perceived trade-off between profitability and sustainability. Some argue that ESG investments must yield a return on investment (ROI), but this mindset needs to shift. ESG should be seen as a natural investment, akin to maintaining a building.
Another challenge is the lack of data and digitalisation. Collecting relevant data and using it as a foundation for decision-making remains a daily struggle for investors. Lack of clarity in regulations compounds this issue.
Rethinking ESG priorities
ESG has become an overused buzzword in the industry. The experts explored reprioritising its elements (E, S and G). While environmental focus is crucial, social aspects also matter. All agreed that the order matters less; what’s essential is that all three elements go hand-in-hand. Brigit Gerritse said: “Of course, E is in the focus, but the S needs more attention. When a building doesn’t have a social value, it won’t have a future.” She also mentioned how due to the nature of the industry and the distanced relationship between owner and tenant, owners often believed the social aspect was up to the tenant. This is now changing.
Looking ahead
Opinions were canvassed from the webinar’s audience in terms of what ESG trend they hope to see develop in the industry in the next five years. Responses included hopes for enhanced government support (42%), adoption of a circular economy (37%) and expansion of ESG in sustainable finance (21%).
Getting started
For those preparing for ESG regulation, the experts unanimously agreed that those companies that have yet to start should do so immediately, even if just in baby steps. They emphasised the importance of setting clear goals, collecting necessary data, implementing green lease contracts, and focussing on low-hanging fruits. Embracing digitalisation is also paramount as it’s an opportunity to enhance ESG practices.
The on-demand webinar is available to view here.
Luke Buckingham is a business development manager at Drooms
