By Mark Halloran, SVP
The Commercial Real Estate (CRE) industry seems optimistic about ESG (Environmental, Social, and Governance). ESG is defined as a company’s commitment to lessening its environmental footprint, focusing on addressing social inequalities in the workplace, and improving internal controls and transparency. A recent online post by NAREIT estimates that the entire green economy could generate about 24 million jobs worldwide by 2030. Beyond job growth, rebalancing human impact on the planet and addressing social inequities seems like the right course, considering the built environment accounts for about 37% of greenhouse gas emissions.
Do ESG initiatives in the CRE industry address global environmental concerns? The answer is: they can, but buyer beware.
There is, of course, a set of ESG-specific jargon:
- Carbon Neutral – any CO2released into the atmosphere from a company’s activities is balanced by an equivalent amount being removed.
- Climate Positive – activity goes beyond achieving net-zero carbon emissions to create an environmental benefit by removing additional carbon dioxide from the atmosphere.
- Net-Zero Carbon Emissions– an activity releases net-zero carbon emissions into the atmosphere, while Net-Zero emissions balance all greenhouse gas (GHG) released and the amount removed from the atmosphere.
- Green Washing – exaggerated environmental, social, and governance credentials in investment products. Eco-friendly, low carbon, sustainable and similar terms are often used in marketing and are not well defined.
Bloomberg News’ recent online dispatch reported Goldman Sachs’ offering 5-year sustainability bonds at a notable $700 million to be attached to funding for environmental and social efforts. That sounds to be, at least, carbon neutral. The piece concluded that Goldman (and all financial entities) continues to invest enormous sums in businesses and industries known to be most harmful to the environment.
There are companies making strides. An online post from Progressive Grocer noted that Whole Foods achieved its energy savings goal two years ahead of the projected schedule by improving energy performance by 21% from a 2010 baseline, implementing a wide range of retrofit projects, and an energy awareness program for store operations. Your next thought might be, “What about parent-company Amazon’s global environmental footprint?” You would be right; that’s the rub.
ESG is now part of the lexicon of investors and the CRE community. That is a positive and somewhat-recent development. The results of ESG initiatives can be hard to measure, and hard to monetize to the point where we have enterprise-wide “Climate Positive” programs. Savvy CRE leaders and technicians have crafted ways to monetize almost every cash-flowing innovation; ESG initiatives will be no exception. The ESA agenda needs to be continually pushed to get there.
Visit our website to learn more about NV5’s ESG initiatives: https://staging.nv5.com/esg/.