ESG stands for Environmental, Social and corporate Governance.
Although it only gained parlance in 2004, courtesy of a U.N. report, the
acronym has rapidly crossed over from corporate social responsibility
and investing into the worlds of real estate, building and home buying.
That’s because up until a few years ago, up until the floods and wildfires
and record-breaking heat waves, ESG had more to do with sustainability,
workplace diversity and responsible investments. No more.
“Calls to curb resource usage and environmental impacts will continue
to rise, especially for the millennial generation — with Gen Z not far
behind,” wrote Danielle Barrs in a blog for EisnerAmper this past March.
Thank the impacts of climate change, the ensuing pandemic and other
crises for such an abrupt shift in what homebuyers and future homeowners
are wanting, and expecting, of their future abodes.
It’s a tide that’s being driven not just by consumers but by politicians
as well. According to Deborah Cloutier, chief sustainability officer at
Legence, an environmental services company in California, “Government
regulators around the world are increasingly passing laws, rules and ordinances
regarding the performance and disclosure of real estate assets
according to environmental, social and governance (ESG) criteria.”
New conditions affecting home design and construction
These new conditions, adds Cloutier, aren’t just happening in commercial
real estate, nor do they apply only, or mostly, to real estate investors.
“These requirements are also instigating much innovation in the design,
development and construction of new buildings, as well as renovation of
existing stock with long lifespans ahead of them.”
As pointed out by Francisco Da Cunha and Filipa Belchior Coimbra in a
blog titled “The Impact of Social Good on Real Estate,” “The construction
of more sustainable buildings, e.g., by means of new eco-friendly materials
or smart technological heating or ventilation, not only helps the environment,
but it also boosts the return of the respective real estate investment,
improving investment performance.”
ESG is here to stay
Da Cunha and Coimbra conclude, “ESG is therefore here to stay and will
increasingly shape and influence real estate valuation.” And the buying
of homes in particular.
After all, the data are indisputable: 40 percent of carbon emissions
come from the real estate industry, of which approximately 70 percent
are produced by building operations and the remaining 30 percent come
from construction.
It’s facts like these, and current and future homebuyers — so-called
“long-termers” — wanting homes that will last on a planet that will still
be alive in 50 years, that are driving the changes. Gigi Limguangco, associate
director for residential services at Colliers Philippines, says, “For us
to transition to a net zero world, a huge transformation must take place
to how we produce, consume and, in the case of real estate, build our
homes. [Net zero being a target of completely negating the amount of
greenhouse gases produced by human activity]
It is for this reason that the design, property
development and construction industries are
always on the lookout for solutions that will
decrease carbon emissions and improve efficiency
of how we build homes.”
“A greener future, I think, for the residential
sector is inevitable.” This belief was stated by
Astrata Consulting Inc. director Jonathan John
Maldupana. “[T]here’s no other way to both
heal our planet and make our spaces more
livable.”
