Commercial real estate companies will benefit financially and otherwise from sustainable building concepts like rechargeable battery power, data to protect against extreme weather events, steps toward Net Zero energy use, and benchmarking performance using various third-party sustainability measures, according to panelists on the “Sustainability: The Next Generation” session at CRE.Converge 2017.
The global real estate sustainability benchmark developed by investor accountability organization GRESB is one that developers should consider, said Maryellen Dolan, director of portfolio and asset management and director of sustainability at National Real Estate Advisors, LLC. The annual survey incorporates environmental, social and governance issues to measure your company against a peer set, she said.
“It’s an annual process, it’s tedious, it takes time,” Dolan said. “But you see where you rank, it’s confidential, it’s free for developers to participate, and it’s an excellent way of getting your bearings in this sustainability platform.” GRESB also provides a forum for communicating these achievements with investors, she said. “It’s rare that you can respond to an investor or a consultant without responding to these questions.”
Once you’ve mastered GRESB, the next step would be the Sustainability Accounting Standards Board, said Sara Neff, senior vice president, sustainability with Kilroy Realty Corporation. That provides a method to show how you’re addressing important issues like water and energy conservation, as well as sustainability generally, embedded in your company’s 10-K report. “Investors keep telling us, ‘We want info in the 10-K,’” she said.
To measure health and wellness in the built environment, another important issue to investors, commercial builders should consider the WELL rating system, said Jeannie Renne-Malone, vice president, sustainability, for Prologis, Inc. “The challenge and opportunity for us in the real estate world is to look at what we’re doing to impact sustainability. There’s a need for a standardized approach to measuring health and well being.”
The panelists provided a few ideas for how to score higher on those measures. Neff brought up how using batteries to power a building makes financial, environmental and risk management sense. “Anybody developing a property needs to put [energy] storage in it,” she said. “It’s hard to retrofit in an urban core environment.” Batteries mitigate against higher energy prices, can be charged at night, and provide a fail-safe against overloading the power grid, she added.
Dolan talked about how to protect your real estate portfolio from climate risk related to extreme weather events and rising sea levels. She suggested working closely with your insurance consultant to gain access to historical data about claims that will prove instructive. “You have to begin to look at your asset, [ask] what could potentially happen over time, and come up with a quantification of the average annual loss,” she said. “By looking at the asset value, you can make long-term strategic decisions.”
Renne-Malone shared some thoughts on how to get buildings to Net Zero energy use, which the Paris climate agreement signed by 196 countries in 2015 requires for new buildings by 2030 and existing buildings by 2050. Although the Trump administration is withdrawing the United States from that agreement, many companies remain committed, she said.
“As we’re future-proofing our business and portfolio, we’re looking at distant technologies that will keep us progressive and ahead of the curve,” she said. “There’s a huge resilience benefit to this, in terms of both economic cycles and extreme weather events.”
Ed Finkel is a freelance writer based in Evanston, Illinois, who covers real estate and a variety of other business-related topics.