ESG Tracking in Real Estate (Introduction)

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Intro

As many turn to the green real estate industry, the importance of tracking ESG data in relation to the changing regulations, commitments, and environment are pertinent for property managers, both commercial and residential. When first integrating ESG into your real estate practice, there are three main components that need to be kept in mind: screening, due diligence and benchmarking, and continued tracking. The latter is one of the most important aspects of the ESG data collection process as it tracks progress and identifies pain points of buildings.

When tracking real estate, technology is a key differentiator.

Technology differentiation in real estate ESG tracking can come in two forms, hardware and software. The tangible technology is important for integrating devices to mitigate risk and track data. An example of this would be smart leak detectors on important pieces of infrastructure, like residential plumbing or sprinkler systems, that would be able to shut off the leak before a lot of water damage is done. These hardware devices can be integrated with ESG tracking software to track risks and improve overall building management. Having collected data pertaining to ESG risks and carbon emissions, real estate managers could not only do environmental positives, but also see where their buildings need updating. Although these two technologies can work independently, they work the best together, especially with seamless integration that would allow data to be continually collected and identifiable.

Daan Mooij via Unsplash

Real estate companies are naturally users of sustainability data. Buildings are long-lived assets and for the most part, unmovable. Thus, they are subjected to exogenous risks, such as societal wear-and-tear and climate-related events, like flooding or extreme heats. By using ESG data to track and monitor these factors and the risk associated with them, real estate owners can mitigate previously inevitable risks that come with owning property.

Conclusion

ESG is also important for understanding the longevity of investment opportunities. Investors want information that will clearly state risk exposures and benefits of investing in certain real estate, especially relating to climate change, energy price volatility, water scarcity, and shifts in environmental legislation. If an owner wants to sell a property, ESG will be an imperative qualifier when deciding which properties to invest in as it will showcase the lifespan of the building. ESG integration in real estate is becoming increasingly easier with the rise of tracking technology and should be prioritized by building owners to increase long-term value of their assets.