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Real Estate and ESG: Unlocking a New Trend of Sustainability

Real Estate and ESG Unlocking a New Trend of Sustainability (6)

With the rise of global sustainability awareness, the real estate market is also actively adopting digital transformation and energy-saving technologies to create a more livable and environmentally friendly built environment. With the help of online platforms and smart technologies, real estate developers can manage green buildings more effectively and provide tenants with real-time information such as energy usage data and carbon emissions, helping tenants reduce their environmental impact.

Energy-efficient technologies are key to sustainable real estate, with innovative technologies ranging from smart buildings to renewable energy to reducing the carbon footprint of buildings. In addition, having LEED, BREEAM and other green building certificates can not only attract environmentally conscious investors and tenants, but also enhance the value of the building.

The increasing demand for green offices by tenants has prompted real estate developers to actively introduce energy-saving technologies and smart office solutions to meet tenants’ needs, and digital transformation and energy-saving technologies have injected new impetus into sustainable real estate development and created more opportunities for investors and tenants.

How do real estate investors approach ESG?

According to the 2021 Global Survey, commercial real estate investors are highly supportive of ESG (Environmental, Social and Governance) measures, especially in North America and Asia. Globally, 63% of investors said they plan to prioritize investing in green and sustainable solutions, with 70% in North America and 65% in Asia. This trend shows that real estate investors are increasingly focusing on environmental and social responsibility and incorporating them into their investment decisions.

Real Estate and ESG Unlocking a New Trend of Sustainability (1)

Tenants’ perception of green offices: 1 in 5 tenants are willing to pay extra to rent a green space

Green building certification is a rating system that evaluates a building’s environmental performance and is important for offices to achieve climate neutrality, and companies are willing to pay a premium for spaces with better environmental performance. In a 2022 survey of office tenants around the world, more than half of respondents said they had paid or were likely to pay rent for sustainability-qualified offices in the next three years. The same survey found that about one-third of respondents plan to retire from less carbon-efficient offices in the next three years.

Real Estate and ESG Unlocking a New Trend of Sustainability (2)

Green Leasing Advantages: Enhance corporate image and rental returns, with a rental premium of up to 20% for green offices in Asia Pacific

Green leasing has become increasingly popular in recent years, ranging from 2% in Tokyo to 19% in Bangkok; It is estimated that by 2025, the proportion of tenants with green leases is expected to reach 85%. The motivations for signing a green lease can vary: some tenants prioritize energy efficiency, citing a reduced environmental footprint as a selling point. In Singapore, for example, investing in a green office building and obtaining the BCA Green Mark certification can not only increase rental income, but also enhance corporate image and market competitiveness.

Real Estate and ESG Unlocking a New Trend of Sustainability (3)

Embracing Green Buildings: Investing in the Future of Sustainable Technology

Between 2020 and 2023, global PropTech investors’ interest in sustainability and building engineering technology continued to grow, with investment interest in sustainability reaching the highest level in 2023 (40%). Increase investment in sustainable and sustainable technologies: It is recommended to invest in companies that focus on sustainable technologies, such as Canadian company CarbonCure Technologies, which uses technology to sequester carbon dioxide in concrete, reduce the carbon footprint of buildings, improve environmental performance, and meet global investment trends, and also help to enhance corporate social responsibility image and market competitiveness.

Real Estate and ESG Unlocking a New Trend of Sustainability (4)

Green building certificates are a growing market

In 2022, France, Germany and the United Kingdom ranked in the top three in the global building industry’s energy efficiency scores, leading the way in the field of green buildings. Projects with a green building certificate are usually more attractive to investors because of their lower operating costs and higher market value, and at the same time, they can also help companies obtain more government subsidies and incentives to improve their return on investment.

Real Estate and ESG Unlocking a New Trend of Sustainability (5)

Insight: 

As green buildings and sustainability become increasingly important in the global real estate market, investors and developers need to adapt their strategies to meet future market demand. Strategic recommendations include increasing investment in energy-efficient technologies and green certification programs, as well as partnering with innovative technologies to improve the environmental performance and operational efficiency of buildings. In addition, public disclosure of carbon emissions data and decarbonization of supply chains will also be important steps to improve corporate transparency and accountability. Through the implementation of these strategies, we can not only enhance the return on investment, but also be able to take advantage of the fierce market competition.

KSCC is a management consulting company in Taiwan. Our services include corporate in-house training, consulting, and leadership management.For more information about our corporate services, please feel free to visit our website: https://kscthinktank.com.tw/custom-training/ 

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