Sustainability and environmental, social, and governance (ESG) factors have become a strong focal point for real estate investors. Amidst transformative regulation and social values, these considerations have endowed real estate assets with meaningful, measurable long-term value and have become a significant driver for investment.
Some of the reasons include:
- People want to work in sustainable buildings. This has a bearing on tenant attraction and retention, as well as the productivity of tenants within the building.
- Rental income potential. Buildings with strong environmental credentials attract higher capital amounts and rentals.
- Improved resilience and flexibility. Inherent in the ESG process – and in the context of tightening regulation – is a risk assessment element. This future-facing approach, and the ability to adapt in a culture of constant improvement, supports more robust and resource-efficient processes. Climate-related risks are also high on the agenda, causing structural damage and business disruption – and the environmental element of ESG safeguards the interests of tenants and landlords in equal measure.
- Compliance focus. ESG implementation that aligns with regulation removes pressures and disruptions around non-compliance.
- Growth opportunities. The growing importance of ESG creates potential for better access to licenses, approvals, finance and capital, and reputational advantage for those who implement these principles. This means enhanced growth opportunities.
- Reduced operational costs. For example, in utilities consumption and spend. This is also coupled with the potential for an uplift in productivity.
- Capital allocation. A sustainability focus directly translates to prudent long-term capital allocation.
Using smart building technologies to overcome ESG challenges
In setting and achieving ESG targets, stakeholders face many challenges. Regulatory timelines around net-zero, shifting tenant expectations, and emerging standards around financial disclosure reporting create pressure. Monitoring and reporting demands resources – with an impact on cost and performance on the ground.
Additionally, collecting ESG data often involves large numbers of assets across many locations. Tenanted assets add another layer of complexity to the exercise. Effective ESG reporting requires access to granular data for strategy, implementation, and reporting with the required levels of transparency.
Data analytics and smart buildings hold powerful solutions for real estate in overcoming the challenges around ESG and creating data-driven processes for stakeholders at all levels.
Tenant engagement is essential to this process, but the collection of ESG data has been traditionally problematic. Tenant reluctance around data collection has been one issue. The unreliability and inaccuracy of data collected has been another.
Real-time data insights for ESG
Smart building technologies provide powerful connections between ESG initiatives and value for real estate investors, landlords, and tenants. Through a network of sensors, pressure pads, and gateways, stakeholders are connected to building data anytime, from anywhere. Remotely accessible dashboards create easy-to-analyse data insights and analysis on key ESG metrics – even across multiple locations and in even complicated buildings.
Collecting detailed, accurate data creates simplified, standardised analytics and reporting – for internal strategy and to meet compliance and reporting requirements.
Environmental, social, governance data
The built environment is notoriously carbon-intensive. The first step to reducing consumption and waste and conserving resources is understanding. By identifying trends and normal behaviours, stakeholders are empowered to identify areas of unnecessary consumption, waste, and potential optimisation.
The data collected around electricity, gas, and water for example is a starting point for strategic decision-making and management strategies. The data can be used to set realistic benchmarks and targets with minimal disruption to tenants and operations. Over time, it can be used to measure performance versus targets and report on these without greenwashing.
Pre-programmable alerts notify landlords and managers of undesirable changes for expedited interventions and, in some cases, automated interventions. The benefits of this are extensive, ranging from boosted efficiencies, improved maintenance processes, reduced costs, and improved tenant experiences.
Additionally, analysing how a building is used allows the future building design and use to be optimised around real-world occupancy needs. This, too, has a bearing on efficiency – but also ensures the best use of space for productivity, health, and wellbeing.
Smart buildings – and their roles within smart cities – provide benefits for measuring social impact. Transparency through building data allows for reporting on factors influencing building occupants and the surrounding communities. This could incorporate everything from air quality and traffic control to health infrastructure and cybersecurity.
When it comes to governance, IoT data insights afford stakeholders with transparent benchmarking and reporting tools. Smart building technologies utilise data for evidence-based good governance spanning values, management policies and implementation, and ESG processes. Data insights are also the building blocks for meaningful risk mitigation.
Tenant buy-in and engagement
Tenant engagement is critical to the success of ESG data processes in the real estate sector. If tenants can see the benefits of different processes, they are more likely to engage. Additionally, if data insights provide evidence of real value for tenants, this supports positive tenant engagement for ESG and reduced cost and resistance around green leases and other ESG protocols.
Using IoT smart technology solutions, landlords can remove issues of reliability on tenant data and security concerns and also engage with tenants on what their data looks like and why it’s important.
Matthew Margetts is a Director at Smarter Technologies. His background includes working for blue-chip companies such as AppNexus, AOL/ Verizon, and Microsoft in the UK, Far East and Australia.