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ESG 1.0 vs. ESG 2.0 By Connell McGill
Connell McGill co-founder and CEO of Enertiv
A
s the real estate industry re-
everything from the way their products are
companies, private property funds, devel-
sponds to pressure from inside
made to how they are packaged and deliv-
opers and investors — is increasing rapidly.
and out to take environmental,
ered. Even major oil and gas companies are
Ten years ago, this level of commitment to
social and governance issues
investing heavily in renewable energies. But
sustainability, social responsibility and gov-
what about the real estate industry?
ernance were only for a few. Now, it’s for the
(ESG) seriously, property firms are setting
many, as investors are judged for their ethics,
increasingly ambitious ESG goals. But the data used to set these goals is insufficient to
Encouragingly (and while there is still plenty
as well as financial results.
drive meaningful action. How do firms move
of work to be done), there is lots of evidence
from simple measurement and disclosure to
to suggest that the real estate industry is fully
What’s abundantly clear is that whether
actually improving outcomes?
aware of the importance of ESG factors on
or not individual real estate companies
the way it builds, invests and operates. Many
and leaders are as passionate as Gen Z,
Over the last 10 years, the growing realization
major real estate companies and brands are
ESG is now a fundamental part of strategic
of humanity’s obligation to protect the world
leading the way in applying ESG standards,
decision-making within the industry. What’s
we live in has started to shape the outlook of
setting the tone for the rest of the industry.
also true is that progress differs from com-
almost every developed economy. Spurred
Whether it’s developing greener buildings
pany to company. Commitment to ESG is
by a growing understanding of how global
(the “e” bit), tackling social imbalances
very much on a broad spectrum. While the
warming is impacting the world around us
through greater provision of affordable hous-
vast majority of real estate players recognize
and championed by a passionate Gen Z,
ing or care centers (the “s” bit), it’s rare to
its importance, many are still trying to work
more and more people see climate change
find a company that hasn’t committed to ESG
out exactly what it means to implement a
as the biggest existential threat facing
standards in its long-term strategy.
meaningful commitment to ESG as part of their day-to-day operations. As owners and
humanity today. Importantly, investors are also bringing their
operators are increasingly held accountable
Lawmakers, businesses and citizens are all
weight to bear by ensuring they invest re-
for their environmental and social impact,
responding accordingly, making significant
sponsibly and not purely for financial gain.
how can they evolve from measurement and
changes in a bid to be more sustainable
The fact is, what money says matters a lot.
disclosure to a clearly defined plan of action?
and environmentally conscious. Across the
The ESG stance taken by BlackRock, for ex-
We believe that the simple answer is for most
United States, cities like New York, Boston
ample, has seemingly shifted the investment
companies to move from ESG 1.0 to ESG 2.0.
and Los Angeles are taking matters into their
community overnight. Participation in the
own hands and passing laws designed to
Global Real Estate Sustainability Benchmark
ESG 1.0 is the first step most real estate own-
reduce carbon emissions at both a corporate
(GRESB) real estate assessment — the
ers and operators have taken to demonstrate
and individual level. When it comes to busi-
investor-driven global ESG benchmark
commitment to sustainability. What does this
ness, industries like retail are thinking about
and reporting framework for listed property
look like in practice? Broadly speaking, ESG Headshot courtesy of Enertiv
78 MANN REPORT | JUNE & JULY 2022
