Over the past decade ESG has moved from the fringe of attention (outside of corporate circles) to the center spotlight for not just corporations, but the nations in which they operate and the global public that makes their business possible. Those who Design, Build and Operate buildings today dedicate more headspace than ever before to human health/wellness and environmental sustainability. If I were to ‘bet’ on any trend at the intersection of the Internet of Things and Real Estate, it would be tech-enabled building operations tools that enable companies to have their best people, managing their buildings at maximum efficiency, all-the-time, from wherever those experts may be. PropTech that lets world-class engineers avoid battling through traffic to multiple buildings to meet vendors bidding on ECM’s or addressing technical issues, will offer the irresistible one-two punch of ‘Quality of Life’ in the battle for that talent, alongside ‘Sustainable Efficiency’ in the way that time, fuel and energy must be deployed.
If I were to ‘bet’ on any trend at the intersection of the Internet of Things and Real Estate, it would be tech-enabled building operations tools that enable companies to have their best people, managing their buildings at maximum efficiency, all-the-time, from wherever those experts may be.
Charlie Cichetti, CEO & Co-Founder of the Sustainable Investment Group
These tools are going to be the substance of the ‘metaverse’, whatever that term comes to mean: the 1’s and 0’s that are the virtual doppelgangers of the molecules in which we live, work and play. As a Green Building professional, when I’m doing a commissioning walkthrough, I want to hand my client more than just a PDF report no one will ever read. I want to hand them a Digital Twin that lets their team see not only where something needs to be fixed today, but where even the management team of the next owners can look for opportunities or issues five years down the road that help them succeed in decarbonizing, in making a healthier, more equitable space. That Digital Twin and the property technology inside it becomes a real asset, one that is appreciating in value along with the physical building; a digital asset yes, but it’s no less real. That’s where we are going to see PropTech become inextricably intertwined with success in ESG.
The companies that can productise their purposeful activity and compete on an emotional level will win out in the long term.
Jimmy Cockerton, UK Business Strategy Manager at Microsoft
Looking forward to how companies will approach ESG in the future, I think we will see two major changes that create the impact we need to see for people and the planet. The first is making ESG measurement quantitative rather than qualitative as they mostly are today. The second is companies using this measurement to differentiate. The companies that can productise their purposeful activity and compete on an emotional level will win out in the long term.
ESG will continue to evolve rapidly, with new standards, understanding and acronyms entering the vernacular at pace. As science deepens our insights and technology offers optionality, the field will become increasingly complex in the short-term, before enhanced legislation brings focus and motivation in the mid-term.
I’m also expecting to see greater refining and reporting of more indicators across the ESG spectrum. Often it’s more straightforward to report improvements in the environmental aspect, for example in our Head Office at One Fitzroy we measure air quality every 3 months to ensure standards remain high, but I expect PropTech will evolve to increase accountability of social and governance measures to deliver material differences in all three spheres.
ESG will continue to evolve rapidly, with new standards, understanding and acronyms entering the vernacular at pace
Hettie Cust, Strategic Projects Manager at Gerald Eve LLP
I think over the next couple of years there will be big changes in regulation and legislation – this might be at state level, local government level, or country level.
Michael Grant, COO at Metrikus
I think over the next couple of years there will be big changes in regulation and legislation – this might be at state level, local government level, or country level. Companies will have no choice but to comply – until this point, some companies may still drag their heels with ESG, which is already something we’ve seen in our market.
I also think new joiners or tenants will have bigger expectations for companies to have clear ESG strategies in place. People want to see and understand how exactly this is being rolled out and what goals are being hit, and it will be a bigger part of the decision-making process for prospective employees. Any businesses that lack transparency might notice it impacts their recruitment efforts.
The drive to price a wider set of ESG risks together with rising pressure for more accountability and greater regulatory scrutiny will increase the demand for more credible disclosure. Climate risks are currently being assessed based on global or regional models making it tricky for the market to price that risk at the asset-level. In the next two to three years, I think we’ll see a massive shift towards better resolution in climate risk tools, more specific to assets.
Good quality data will continue to play a key role in ESG, particularly as we now have commonly adopted tools like the Carbon Risk Real Estate Monitor (CRREM), which gives context to the metrics that have been reported, allowing investors and portfolio managers to interpret them in a more meaningful way.
When it comes to regulation, I think that the implementation of the EU Taxonomy and the Sustainable Finance Disclosure Regulation (SFDR) will have a big impact, as they will effectively force asset owners and managers to apply the concept of double materiality. This will increase transparency and help the sector understand the real impact that real estate funds are having.
ESG rating platforms will also start to align more with natural boundaries. We are already starting to see this shift, with collaborations between companies like GRESB and CRREM. In the coming years, other ratings and standards will follow suit, broadening the scope to include aspects like materials and water usage.
Finally, I think we will see an increased focus on measuring and reducing Scope 3 emissions. Currently, there is a great deal of estimation being used, but we have the tools we need to progress towards measuring and reporting across all emission scopes in a more accurate way.
Andres Guzman, Senior Director | Head of ESG – Europe at Tishman Speyer.
I hope that each stakeholder will be able to see for themselves how taking action to save money can also have a positive impact on reducing carbon emissions, and vice-versa.
Sophia Kesteven, General Manager at Tech Zero
I think the current energy crisis in the UK could be a catalyst for businesses to really hone in on their energy use; refining their energy management and taking action to become much more energy efficient.
I think many companies will look to become more self-sufficient, such as by installing solar panels on office buildings or warehouses, alongside energy storage technology. This will take strong partnerships and collaboration, especially within shared workspaces, but I hope that each stakeholder will be able to see for themselves how taking action to save money can also have a positive impact on reducing carbon emissions, and vice-versa.
With multiple market dynamics today influencing customer requirements we predict that we will see an increase in demand for smart building solutions to help reduce energy usage and costs as well as support company ESG initiatives. In particular, we see that Building Energy Management solutions combined with occupancy monitoring and lighting controls are enabling customers to better monitor, predict and manage energy usage. By doing so, customers are realizing the benefits of reducing their energy usage by up to 25% today; this has the added benefit of also reducing energy costs. We expect to see the convergence of company strategies and budgets here – with Building Energy Management deployments linking directly to reducing operational emissions, which is a core sustainability strategy for most customers.
In particular we see that Building Energy Management solutions combined with occupancy monitoring and lighting controls are enabling customers to better monitor, predict and manage energy usage.
James Lockyer, IoT Sales and Marketing Leader at Microsoft
Shareholders, investors and consumers are closely watching what steps companies are taking to meet ESG goals and support the transition to net zero, with many organizations linking their smart building projects to their sustainability annual reports and meeting disclosure requirements, such as the Task Force for Climate Related Financial Disclosures (TCFD) – which has been mandatory for UK listed companies with more than 500 employees since April 2022. Having the ability to record and report all emissions across Scope 1, 2 & 3 categories centrally using a common data model, and being able to demonstrably take steps to reduce emissions, will also accelerate.
According to CIBSE figures, one faulty sensor on an item of plant increases the running cost of that device by a minimum of 10%.
James Palmer, Head of Pre Sales and BMS at Metrikus
I predict that FM departments will get increased budgets to maintain building management systems and HVAC plants. According to CIBSE figures, one faulty sensor on an item of plant increases the running cost of that device by a minimum of 10%. Years of underinvestment in these areas from all sorts of businesses is now being realized as people begin to feel the real cost of inaction.
I think estate managers will be held to greater account by ESG departments as these teams grow within larger businesses. They’ll have to prove the efficiency of their estate and adopt software to demonstrate that they’re actually making a difference.
We can also expect to see more discussions about building efficiency at C-suite level. Heads of businesses will want to understand space utilization, energy efficiency and comfort levels for staff, in order to promote their company to a more discerning, better educated and far more demanding customer base. The same is true for HR departments trying to attract and retain top talent. They will need to prove their business is sustainable and safe to work in.
Organizations will aggregate data across traditional enterprise silos surfacing correlations between building measures and workplace efficiencies. For instance, the combination of occupancy and air quality metrics can provide insights for the optimization of power consumption. As organizations normalize data and buildings become more connected across the portfolio, gamification will be used to drive positive employee behavior in recycling, power savings, etc.
We will see the rise of friendly competitions between teams, facilities, and geographies that encourage not only meeting, but exceeding sustainability targets with positive reinforcement. This will create persistent momentum in organizations as employees and leaders witness the cumulative impact of their individual actions on ESG goals.
As organizations normalize data and buildings become more connected across the portfolio, gamification will be used to drive positive employee behavior in recycling, power savings…
Michael Przytula, Managing Director – Intelligent & Digital Workplaces at Accenture
In the coming years, we will see ESG regulations continue to accelerate amid significant global challenges.
ESG will evolve into the implementation phase for big corporations, but challenges will remain when it comes to small and medium-sized enterprises (SMEs), which are the backbone of Europe's economy and account for 99% of all businesses in the EU, UK and US.
Technology and climate tech will become key for ESG execution, and we will see an increase in the quality of ESG data. Greenwashing will become a risk too expensive to run and Boards will become more ESG conscious.
Susana Quintás, Senior Advisor for Metrikus Spain and Latam
In the coming years, the real estate industry will further accelerate its work to decarbonize. Already ESG is no longer a check-the-box exercise, it involves a holistic company-wide commitment that runs deep through a portfolio.
And looking ahead, pressure for more transparency and accountability will come from stakeholders across the real estate value chain – investors, governments, occupants, communities – which will only increase the importance and seriousness in which sustainability is addressed.
Already ESG is no longer a check-the-box exercise, it involves a holistic company-wide commitment that runs deep through a portfolio.
Marta Schantz, Co-Executive Director, ULI Randall Lewis Center for Sustainability in Real Estate
The drivers and incentives for ESG reporting have increased rapidly in the last 10 years and that trend is only set to continue, with reports suggesting that ESG assets will tip $30 trillion by 2030.
Businesses of any size, in any sector and in any geography are now being requested to provide their ESG and sustainability credentials by multiple stakeholders. Being able to demonstrate that you can measure, manage and report your sustainability is now an essential part of future-proofing your business.
Investors are becoming savvier and are demanding more valuable insights and greater intelligence on whether companies are not only mitigating any negative impact created by their business operations but also creating positive impact in the communities where they operate, and where they sell and source. Traditionally most ESG measurement models were based on negative screening, where the onus is on proving your business is not doing anything bad. Now the focus is on impact reporting, which is being able to report, preferably in a quantitative way, the good your business creates.
In addition to this, there is a push towards a broader definition of sustainability, beyond just climate and environment. It should also cover social and economic factors, as viewing any single aspect of sustainability in isolation means you are inevitably missing a multitude of interrelated factors. Reporting should reflect this and indicators should cover the interrelationship between Climate, Environment, Social impact, Economic impact, and Diversity and Inclusion.
ESG reporting in 2022 and beyond should be based on measuring both current progress and future ambition, setting timeframes and ensuring accountability for the targets and improvements you have committed to.
It is most important to measure what we value, analyze it, communicate it and have a positive intent to do better.
Now the focus is on impact reporting, which is being able to report, preferably in a quantitative way, the good your business creates.
Alexandra Smith, Co-Founder of The Sustainability Group