ESG to fruition: The role of the property manager in carrying out owners’ ESG goals

Our industry is engaged in an important dialogue to improve sustainability through ESG transparency and industry collaboration. This article is a contribution to this larger conversation and does not necessarily reflect GRESB’s position.

Just ten years ago ESG was considered optional, even partisan, in the real estate industry. Now, in the 2020s, that is no longer the case. Success in the real estate industry is correlated to companies holding ESG policies in their foundational beliefs. This has become so for several reasons. ESG increases operational efficiency, allowing for previously unattainable financial success. Similarly, in a market where potential tenants and buyers value these principles, ESG acts as a competitive differentiator against similar properties that do not share ESG goals. By identifying ESG risks, real estate companies can mitigate risk and ensure resiliency against all types of legal, economic, and environmental threats. This also includes limiting turnover rate and attracting the best potential employees to your firm. On top of nurturing a highly sought after workplace, all types of governments, from the local to federal level, have their own ESG regulations, meaning companies that previously embodied ESG in their mission will not have to make sudden changes that their non-abiding counterparts will have to.

The question for property owners is no longer “Should we incorporate ESG into our properties?” but rather “How should we incorporate ESG into our properties?” Afterall, as an owner, it is difficult to oversee ESG being carried out within your property on a day-to-day basis. This is where the role of property managers cannot be undervalued. Property managers are the ones who ultimately ensure that ESG policies come to full fruition in the daily operation of the property. This article will look at a few important ways in which property managers can ensure that ESG goals are implemented and carried out to their full potential.

One of the key challenges for property managers and third-party property managers is balancing their own integrated ESG platform with their owners’ platforms. To be successful, property managers must work collaboratively with owners to identify and achieve the most materially relevant ESG goals. This requires a clear understanding of each owner’s priorities and objectives by both parties, as well as regular communication and progress reporting. Including ESG progress in owner reporting is an essential component of this collaboration and ensures ongoing alignment between the goals of the property manager and their owners.

While all properties’ ESG initiatives start and end with their owner, it is ultimately up to property managers to see how far these initiatives will go within the day-to-day of a property’s operation. When new ESG policies are put in place by the owner, the first and arguably most important step the property manager will take is ensuring “company buy-in.” Company buy-in can be achieved through several actions. The property manager should ensure that the entire staff is educated in modern ESG practices and principles. This educational aspect of ESG is often outsourced to nonprofits, government recourses and associations, such as LEEDS, Energy Star, GRESB, and the Institute of Real Estate Management (IREM). These organizations pride themselves on offering high-quality ESG education at little to no cost. It will be up to the property manager to find which source works best for their specific property and the management team that supports them. Subsequently, it is wise to include an ESG training component in your employee onboarding process to emphasize the importance of ESG to your company and educate new employees on your platform. It is also a good idea to establish channels to gather ideas and information from employees who want to contribute to ESG. Employees are going to value upper-level ESG goals to a larger extent if they can freely voice their own concerns or share their own ideas about how to meet those goals.

Establishing a baseline with a sustainability assessment is a necessary step for evaluating the current sustainability practices of a property and identifying areas for improvement. The initial sustainability assessment involves a comprehensive evaluation of the property’s environmental, social, and governance factors. The assessment process typically involves gathering data on the property’s environmental performance as well as evaluating social and governance factors. This data is analyzed by the property manager to identify areas of strength and opportunities for improvement in the property’s sustainability practices. Based on this analysis, property managers can set specific goals for improving sustainability performance, which are then translated into action plans that detail specific steps and timelines to achieve these ESG goals.

Continuous monitoring is central to the success and long-term viability of your ESG program. Maintaining improvements, as well as support for the program, requires gathering data, assessing impact, and learning from setbacks and challenges. Only with continuous monitoring can property managers track your KPIs and adjust your ESG strategy as needed to meet your goals. Once again, ESG program management and data analysis platforms can assist with your efforts in continuous monitoring, allowing you to assess firm and portfolio performance.

The steady progress of technological advancements has been one of the primary drivers for ESG growth within the real estate industry. Leveraging technology is a critical component of any successful ESG platform, particularly when it comes to selecting the right technological upgrades to install at your property. Smart building technology—or “proptech”—solutions can significantly improve the efficiency of property operations and enhance ESG performance.

For example, consider the usage of proptech in water management. One of the easiest factors to understand regarding a building’s environmental impacts is its water usage. As utility rates continue to rise and global climate change adds pressure to regions of the world already grappling with water scarcity, leveraging new technology can play a crucial role in improving your property’s water management.

Here are a few examples of what proptech water automatization looks like:

• Automatic faucets and drinking fountains
• Remote monitoring and leak detection
• Automated (smart) water shut off valves
• Automated alerts to management team via email, text, etc.
• Automated optimization and efficiency through analysis of water usage data
• Smart irrigation systems that utilize sensors and controllers to adjust watering based on
  real-time data from soil moisture measurements and atmospheric conditions

Proptech is not just limited to water usage but can be utilized to satisfy multiple systems that relate to ESG goals. The most successful property managers utilize proptech in lighting systems, HVAC (Heating, Ventilation, and Air Conditioning) units, IAQ (Indoor Air Quality) oversight, tenant engagement, emergency planning, parking or electronic vehicle stations, and more.

Compelling messages on ESG successes such as property certifications, energy and water reductions, and impactful volunteering programs can help a company achieve the greatest value from its initiatives. Leasing platforms are one way to promote a property’s ESG success—and an important one for reaching tenants and residents. Listing services such as CoStar and Multiple Listing Services (MLSs) allow for information on a property’s sustainable features and certifications.

Another way to share ESG successes is through partnerships and collaborations with others advancing ESG goals and programs. This effort can reach potential clients, employees, and business partners with information on the company’s organizational culture and the quality of operations. Similarly, one of the easiest ways to share ESG success is through property certifications. A reputable, third-party certification quickly and succinctly conveys that a property is performing at a threshold that is acceptable for earning the certification. This message can have a broader appeal than other marketing and promotional efforts, as most stakeholders can deduce that the property has received a “seal of approval” that verifies its sustainable features, programs, and management practices. Examples of renowned sources of certification include Energy Star certification, LEEDS certifications, and IREM’s CSP (Certified Sustainable Property program).

This article was written by Jesse Anderson, Director of Sustainability at Blanton Turner.