ESG has been coming up in conversation frequently, and if you’re unfamiliar with the ESG acronym, it’s understandable to wonder what it is and what it means for you and your business.
ESG stands for Environmental, Social, and Governance, and is rapidly becoming a key consideration for investors in determining where to invest. Environmental typically involves reviewing a company’s carbon footprint, waste and water management, energy efficiency, and other related matters. Social covers community involvement, workforce diversity, building safety, workplace health and safety, and other impacts on communities. Finally, governance refers to board diversity, ethical and business standards, and executive pay, among other factors.
Factors driving the ESG movement
What has brought ESG matters to the front burner? There are many reasons. EBI Consulting, which has a dedicated ESG practice area, notes that there’s a new generation of investors who now often make decisions about where to invest. They tend to be more environmentally and socially conscious and are more apt to take a stand on ESG through allocating investments.
Sustainability frameworks and standards
According to the Sustainability Accounting Standards Board, “It is important to distinguish between sustainability frameworks and sustainability standards. Frameworks provide principle-based guidance on how information is structured, how it is prepared, and what broad topics are covered. Meanwhile, standards provide specific, detailed, and replicable requirements for what should be reported for each topic, including metrics. Standards make frameworks actionable, ensuring comparable, consistent, and reliable disclosure. Frameworks and standards are complementary and are designed to be used together.”
The Global Real Estate Sustainability Benchmark (GRESB) is another organization that plays an important role in the ESG arena. GRESB has earned the partnership of several of the world’s leading real estate companies, in keeping with its mission to provide actionable and transparent ESG data to financial markets. The organization collects, validates, scores and benchmarks ESG data to provide business intelligence, engagement tools and regulatory reporting solutions for investors, asset managers and the wider industry. EBI is one of many industry-leading companies that supports GRESB.
Key areas covered by ESG
There are many aspects of ESG to consider. Examples include:
- Building efficiency (e.g., energy auditing & modeling, carbon footprint analysis, and water and waste management)
- Building certification (e.g., LEED, Energy Star, WELL)
- Tenant health & well-being (e.g., indoor air quality assessments, indoor environmental quality assessments, hazardous material testing & abatement)
- ESG policy & strategy (e.g., a net-zero carbon strategy)
When asked how EBI implements an ESG plan with clients, Associate Director of ESG Business Development and Client Success, Joe DiTizio states:
”The process begins with benchmarking, to establish a baseline for current company performance. We then move into planning, identifying efficient, cost-effective strategies for improvement based on each client’s timeline and goals. Then we are able to help clients execute the plan, creating paths for improvement and driving actual progress. Finally, we report on the client’s ESG performance, along with setting goals they want to meet year-over-year. The process is circular and is designed to facilitate continuous improvement over time."
ESG scoring shows how you measure up
Measuring your company’s progress in adhering to ESG standards is accomplished through an ESG score. This is determined through a checklist of sorts and finding out your ESG score allows you to understand how you compare to others in the industry and meet new investor standards.
As interest in sustainable investing grows, ESG scoring is increasingly important to property owners. A high ESG score demonstrates to investors that you’re aware of the industry’s trajectory towards sustainability and carbon neutrality, you’re getting ahead of regulations we’re likely to see in the future, and you care about your company’s societal impact. Additionally, improving a low score is also attractive to investors.
Transparency is key for ESG. EBI is already seeing investors shifting to greener portfolios, and prioritizing ESG is becoming increasingly important to people.
How to get started with ESG
Getting started on the ESG path can seem overwhelming, and that’s where advisory firms such as EBI come in. EBI’s experienced energy services team can help you to establish a customized plan that fits your needs and goals while providing expert resources to help you achieve them.