NAREIM Sustainability meeting: Key takeaways

April 27, 2022

NAREIM has produced a directory of ESG consultants utilized by member firms and their lead ESG professionals.

Comprising more than 50 firms globally and covering generalist and specialist ESG advisory work, the list is intended to be a living document available to all NAREIM members and help as they build out ESG and asset management strategies.

The list is thanks to the work of the NAREIM Sustainability Committee and was conducted during NAREIM’s 2022 Sustainability meeting, held in New York on April 27. This will be a living document available on the NAREIM website, which will be developed further to include consultant contacts and emails.

The list covers generalist as well as specialist providers, such as data, risk assessment, renewable energy, offsets and procurement, multifamily, SFDR analysis, diagnostics, physical risk, strategy, GRESB reporting, construction, engineering and implementation among many other areas.

Download the directory and the meeting presentations here.

Other key highlights from the meeting, included:

Social: Case studies with members also covered the Social, the S of ESG and how to define, investing in and understand the value of social impact to the business and investor returns.

• Ideas discussed included: Digital amenities, pairing senior housing residents with students to combat loneliness, helping students with depression (to help lower suicide rates).

• The key advice was to not wait for LPs to ask for you to invest in the Social aspect of ESG. “Don’t wait for your investor to start asking for Social to go out and do it…It’s a differentiator and it ties back to the overall value of the building.”

Exit and returns: It’s all about thinking two buyers down the road. In investing in ESG staffing, data and strategies, the payback was in the exit – and it might be the exit for whoever buys it from you.

• One member said all assets would need to be ESG-performers within 10-15 years, and if you wanted to maximize the best return in your exit, you needed to also think about the exit of your buyer as they would not want the cap-ex of greening a building themselves.

Climate Risk: Has a deal been killed owing to Climate Risk assessments? Members asked this question during our group discussion, what’s on your mind? Some members said yes.

• Those deals killed were largely in Europe, in the last 6 to 12 months, and for some it was because of other issues related to the asset, not just climate risk.

• Members asked one another though whether climate risk data was informing decisions about investing in certain sub-markets – and for one closed-ended fund, that had happened. The manager added, a separate account client had instead opted to invest in the sub-market deal

Net Zero: To will be impossible to achieve net zero without decarbonization of the electricity grid, the NAREIM meeting heard, however members achieve property without the electrification of the grid. But there were solutions at hand. Solutions included:

• Set a goal and understand what your baseline is. The industry is typically using CREEM as a net zero framework

• Have a process of technology in place to aggregate data, such as master metering, tenant authorization forms to transfer data, even manual meter readings as a cost effective way of reporting tenant data

• Use mechanical equipment’s end of life as an opportunity to upgrade to low carbon technology and identify simple fixes, such as LED lights, reflective roofs.

• Look to energy modelling to predict future energy consumption

• Test the performance of the building operations and machines, look for calibration, linkages, refrigerant charges, maintain equipment

• Switch fuels where you can

• Look to renewables, RECs and carbon offsets

Embodied carbon: Embodied carbon, monitoring and mitigating the emissions created by your tenants, is exceptionally “challenging”, the NAREIM meeting heard. But members were warned they only had 11 years to start doing something about it.

• Under current regulations, embodied carbon – the carbon it takes to build, operate, run and dispose of a building also known as the life cycle of a property – will need to be measured by 2035.

• One member described their journey measuring embodied carbon, following an LP request. Results were still pending, and they didn’t know what decisions would be made from the data, but they added: “[As an industry] we have 11 years to get this done. Everything we are building now we will have to live with for the next 80 years. We have to start doing this now.”

• Key reporting frameworks to consider, included: TCFD, the taskforce on climate-related financial disclosures; Advancing Net Zero; GRESB; CDSB, the Climate Disclosure Standards Board; GRI and CDP.

• Technology to mitigate embodied carbon is early. And there isn’t always a solution to your challenge. Members urged one another to share ideas and specialist consultants with one another.

Download the directory and the meeting presentations here.