Page 30 - RC21 EDGE Summer Issue

SPOTLIGHT: Environmental, Social and Governance
THE NEW CRE-REQUISITE:
AFTER COVID-19, ESG AND SUSTAINABILITY BECOME A MUST HAVE
MICHAEL MORAN
Chief Markets Officer and Director of Risk & Sustainability Microshare
EVEN BEFORE THE COVID-19 PANDEMIC took the world in its grips, the writing was on the wall, with pressure on Commercial Real Estate (CRE) to take sustainability seriously emanating from above and from below. ESG funds–giant financial vehicles that prioritize Environment, Social and Governance metrics in their investment decisions–were claiming an increasing share of global Assets Under Management (AUM). By some measures, funds sensitive to ESG activism own 69 percent of commercial real estate globally.
For much of the last decade, the ESG movement, with
its demands for transparency on topics like carbon footprint, water usage, staff diversity and CEO pay, was driven mostly by market sentiment, backed by a genera- tional transfer of wealth from values-neutral Boomers to more activist Millennial and Gen X investors. What began as fringe activism has exploded into the mainstream, accelerated by the tragic lessons of COVID-19, with the world’s banks, pension managers, Sovereign Wealth Funds (SWFs) scrambling to “green” their portfolios, promising to downgrade or even divest from assets that failed to fall in line.
Enter COVID-19
If once “sustainability metrics” were associated mostly with climate issues, the pandemic has supercharged the “Social” component, leading to a huge new demand for data on the “wellness” of staff and tenants inside buildings, a serious application of data to functions like cleaning and maintenance, and new concern for density, temperature, humidity, C02 buildup, and a host of other concerns many landlords and facilities managers once shrugged off as “nice to haves.”
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