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Introducing ESG Investing in the Real Estate Industry

Sustainability is the path to a more eco-friendly and efficiently-run society. It’s become a leading concern among business stakeholders since sustainability is about reducing waste and maximizing productivity. Investors have a growing awareness of how ecology plays a major role in the economy, which is why ESG investing is on the rise, particularly in the real estate industry.

ESG Criteria and Importance of ESG Investing

A growing number of investors are turning to ESG ratings of businesses in deciding their investments. ESG relates to environmental, social, and governance concerns that affect a company. Companies that engage in sustainable practices get high ESG ratings. While those that pollute or are inefficient receive low ESG ratings.

The ESG scores are not only shaped by environmental considerations, there are other ESG criteria that also involve how well the management governs. Risk management is one of the pillars of modern corporate governance. Other important aspects include maintaining government compliance, following industry standards, and maintaining a positive company reputation.

Embracing Social Responsibility

The social aspect of ESG criteria pushes the company to think beyond commercial concerns by embracing issues that directly affect the community. Employment diversity and human rights are core social issues businesses must consider. The growing awareness of climate change and its effects on supply chains is largely driving the growth of ESG investing.

In the future, the population will be larger while natural resources will be less plentiful. More and more, business survival will depend on planning and integrating sustainability into the company vision. The real estate industry has clearly steered toward ESG metrics. It was evident with the increased participation in 2020 GRESB real estate assessments.

What Is PropTech?

In the real estate industry, they use this term to refer to property technology. It involves IT tools used to buy, sell and manage real estate properties. The three top market segments for PropTech are smart homes, equity sharing, and real estate finance platforms.

Some of the major ESG factors watched by the real estate industry are risk management, energy efficiency, and water waste reduction.

How PropTech and IoT Help ESG

IoT tools are at the core of digital transformation in industries such as real estate, utility management, and manufacturing. These tools are playing a major role in establishing meaningful sustainable solutions for business operations. The combination of collecting a wealth of big data and applying AI technology provides real estate decision-makers with real-time data. That is useful for making adjustments to improve sustainability.

Proptech encompasses IoT tools that monitor consumption, temperature, security … of buildings to better understand and manage them. When these tools are integrated with machine learning software and automation, the system can improve the property’s efficiency, making it more valuable.

CSR vs ESG: What’s the Difference?

Smart technology is increasingly associated with corporate social responsibility (CSR), as it helps solve many problems linked to sustainability. The difference between CSR and ESG is the former reflects qualitative assessments of a company’s sustainability, while the latter deals with quantitative values of sustainable practices.

The growth of ESG data over the last few years suggests that ESG investing trends are gaining prominence in the broader investment community. The more a company places value in ESG concerns, the more attractive the firm may potentially be for future investors.

Growth of ESG investing in the real estate industry

Investors should consider the growth of ESG investing as a signal that broader markets are changing to embrace the ecological and economic virtues of sustainability. Meanwhile, business leaders should know the difference between CSR and ESG and be ready to answer questions investors have about a company’s commitment to sustainability.

Shayp is a PropTech company that helps the real estate sector measure the ESG performance of buildings. Contact us and we will be happy to answer your questions about technology to help you manage your properties.