HomeBlogRealtors should adopt ESG code faster

Realtors should adopt ESG code faster

Environment, social and governance, though basic issues, often have been overlooked by all of us including the government and corporates. However, ESG is becoming an increasingly a hot topic with increased investor activism and greater emphasis being given to environment world over. Investors find imbibing ESG metrics in their strategies beneficial, driven not only by a need to comply with regulatory requirements and environmental protection regulations, but also to preserve future asset value and enhance brand image. Further, a number of NGOs globally are encouraging asset owners, asset managers and corporates to voluntarily adopt ESG standards.

Thus, ESG is becoming an important issue for real estate industry as the focus is now to deliver net-zero targets and contribute to the larger cause of climate change. As commitments to decarbonize rise, demand for sustainable buildings is expected to follow suit. Developers with a proactive approach and a continuous focus on sustainability and climate risk mitigation strategies will be frontrunners as investment destinations.

Buildings account for nearly 35-40% of global greenhouse gas emissions and 40% of raw material use. Therefore, assessing and imbibing ESG into real estate and construction is paramount for countries to be able to achieve their sustainability goals.

While factors such as location, quality of asset and backing of a strong developer or investor, etc. could always lead to a higher rental premium, but today with ESG coming into major play, green certification has also become an important metric for tenant decision making.

To promote higher adoption of green certified projects, the state and the central government could incentivize developers and asset owners in the form of monetary and non-monetary benefits such as higher FSI, lower statutory fee and lower incidental taxes, etc. In addition, common platforms such as regular industry events could be organized to promote awareness about the importance of sustainable buildings in the long-term.

Ultimately, it is the occupiers who are the main drivers for the development of a green real estate ecosystem. The demand intensity for sustainable projects will define how quickly we see a transformation in the sector. At least one-fifth of the world’s 2,000 largest public companies, with sales of USD 14 trillion, have committed to meeting net zero emission targets. Such commitments by the leaders will force others too follow the Green path. Realtors should do well to take a clue from such pledges about the things to come and be ready for the inevitable.

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