Are Real Estate Folks Serious About ESG?

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We have all seen plastic carry bags in shopping malls as well as tissue paper in pubs claiming to be made out of 100% recycled paper. Most of the time these are, in fact, examples of harmless 'greenwashing'. 

However, when ESG claims are not what they seem in the commercial real estate world, the impact on the environment is much more profound, and the stakes are much higher. 

Following The Green

Environmental, social, and governance (ESG) investing principles are more in vogue today than ever before, and it’s becoming increasingly easier to spot large commercial real estate firms that have incorporated ESG practices into their business.

And who not? Real estate developments simply follow the money and per Bloomberg, global ESG assets are on track to exceed USD53 trillion by 2025 - more than a third of total assets under management.

But Seriously. . .

While the real estate sector's increased emphasis on ESG is a result of intensifying scrutiny, the air around ESG compliance is still as opaque as the NCR smog the day after Diwali. 

And that's because the problem lies with the ESG ratings itself, and possibly even green building certifications, which are a mish-mash of subjective measurements. The jargon laced goop of sustainability metrics relies on providers using their own data and definitions that are often arbitrary, biased and ambiguous.

Is That True?

Pretty much. A recent Bloomberg investigation revealed that MSCI, the world’s leading ESG rating company, doesn’t actually measure a company’s impact on the planet. Instead, its upside-down ratings “gauge the opposite: the potential impact of the world on the company and its shareholders.”

Still On Top Though. . .

While it's easy to be cynical and assume that green funds are all about er, greenwashing, if you look at all green claims, the ones made by the real estate sector are the most measurable. 

And, the sector is doing some of the very best and most objective work on this, feel experts.