Real estate interest in ESG claimed to be ‘stronger than ever’

For more information, contact [email protected]

WASHINGTON (January 19, 2021) – A new report from the Urban Land Institute’s (ULI) Greenprint Center for Building Performance shows that the real estate industry will take an increasingly focused view of environmental, social and governance (ESG) strategies in 2021. ULI is a global, multidisciplinary real estate organization whose work is driven by more than 45,000 members dedicated to responsible land use and building thriving communities.

The ULI Sustainability Outlook 2021 is the Institute’s first-ever look-ahead on issues that are specific to ESG-related concerns in the real estate industry. Members from ULI’s Sustainable Development Council (SDC), along with ULI Global Chairman Owen D. Thomas and ULI Trustee Ken Hubbard, contributed to this report.

“While the health crisis and social unrest dominated much of our attention in 2020, sustainability has remained at the forefront,” said Thomas, chairman, Boston Properties. “In fact, as this sustainability outlook shows, the events of the past year have led to health and wellness as well as a social equity cementing themselves as key components of sustainability. While this poses new challenges for how we in the industry will measure portfolio risk, value, and performance, it also reinforces just how intertwined our work is with so many aspects of people’s lives.”

The Sustainability Outlook 2021 focuses on three key questions sent to the interviewees: what sustainability topics are on the rise, why do they matter, and what should the industry do about it? Based on the ULI member input received, Greenprint compiled a “top-ten” list of sustainability issues that the industry will be facing over the next year:

1. Real estate’s increasing role in advancing sustainability throughout the market: The buildings sector currently contributes nearly 40 percent of carbon emissions globally and nearly 70 percent of emissions in urban areas. The industry’s leadership in prioritizing sustainable development and operational practices can help inform sustainable policies at all levels of government, especially locally.
2. Increased appetite for ESG investing: The appetite for ESG (environmental, social, and governance) investing continues to soar, with record inflows amid the COVID-19 pandemic. Real estate firms are now issuing more opportunities for those investors to place their capital.
3. Heightened emphasis on health and social equity: The COVID-19 pandemic and recent protests for racial justice in the United States have elevated the need for development that emphasizes health and social equity. Health and well-being certifications are increasingly being sought to assure building users that their spaces are safe to enter and occupy. Land use, zoning, and the location of public amenities are critical to better distribute equity.
4. A baseline expectation for energy efficiency in real estate: Energy efficiency remains a high priority and a feature that has become so prevalent that it is considered a “given” by tenants, owners, managers, and developers. New technologies that make buildings healthier and more energy efficient will negate the need to compromise one goal to achieve the other – both are viewed throughout the industry as key elements of sustainability.
5. Tenants driving sustainability innovation: Commercial tenants consume an average of 40 percent to 60 percent of the total energy used in buildings. Further, premier technology tenants have set ambitious climate goals which will likely raise the bar for overall tenant contributions to building performance. Several programs have been designed to help tenants conserve energy and reduce energy costs, emphasizing the importance of collaboration among tenants, building owners, and service providers.
6. Emissions reductions through embodied carbon of building construction materials: The built environment’s carbon footprint is from both building operations and building materials – and lowering building emissions requires an emphasis on both. Unless the industry starts addressing the need to reduce embodied carbon in building materials, by 2050—factoring in all new construction expected over the next 30 years—emissions from embodied carbon will equal those from operations.
7. Increasingly grid-interactive buildings: Buildings are increasingly becoming more grid-interactive as a way to lower building emissions through optimized building operations, with an emphasis on alternative power, including onsite distributed energy resources, offsite renewable energy, and utility-provided green power.
8. Resilience and climate risk as a priority for investments: Whether or not their assets have already been directly affected by the impacts of climate change, investors see climate considerations as a necessary layer of fiduciary responsibility to their stakeholders, and are realizing that building for resilience, on a property, portfolio, and citywide basis, is paramount to staying competitive. Information about city-scale risk, including fiscal policy constraints, critical infrastructure investment, repair, and replacement, and the level of commitment to improving resilience are all key factors for consideration.
9. Water as a resource to be conserved and leveraged: Water prices are increasing at a rate higher than inflation and are rising faster than other utilities because of infrastructure costs and water scarcity or drought. There is a growing awareness throughout the private and public sectors of the correlation between saving water and safe water; as a result, conserving water is an issue that merits attention and investment.
10. Waste reduction over a building’s life cycle: The rising interest in waste reduction has resulted in the creation of building tools and certifications that are specific to waste across from building construction, operations, and demolition. By delivering more flexible, adaptable, and deconstructable buildings, assets can become more productive, more agile, and less damaging to the environment.

“The current moment requires us to be steadfast in the pursuit of a future that is more inclusive, healthy, green, and resilient,” said Marta Schantz, Senior Vice President, ULI Greenprint Center for Building Performance. “We appreciate insights from ULI members to highlight these top ten topics shaping sustainability in 2021. From ESG investing to grid-interactive buildings, and from climate risk to healthy buildings, it’s an exciting time for the real estate industry to advance sustainability.”

You can find the ULI Sustainability Outlook 2021 on ULI’s Knowledge Finder platform.

About the ULI Greenprint Center for Building Performance

The ULI Greenprint Center’s mission is to lead the global real estate industry towards improved environmental performance, focusing on energy efficiency and reduced carbon emissions. ULI Greenprint is a member-driven organization that achieves its goals through measurement, action and education. Through measurement, benchmarking, knowledge sharing, and the implementation of best practices, ULI Greenprint and its members strive to reduce greenhouse gas emissions by 50 percent by 2030 and to achieve net zero carbon operations by 2050. ULI Greenprint is a research center within the ULI Center for Sustainability and Economic Performance, which also oversees ULI’s Urban Resilience Program and the Building Healthy Places initiative. For additional information, visit uli.org/greenprint.