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Companies’ intensified focus on ESG goals is driving their real estate decisions
08 March 2023
The importance of the construction and real estate sector in delivering the ambitions of the Paris Agreement and the UN Sustainability Development Goals is unparalleled. New regulations, rising operating costs and growing scrutiny from stakeholders are among the factors creating new challenges and opportunities for the sector.
CBRE’s Global ESG survey of more than 500 commercial real estate professionals worldwide illustrates the most common and impactful initiatives currently applied in real estate strategies by both investors and occupiers.
The following trends were revealed among survey participants from Continental Europe (CE):
70% of all respondents increased their focus on ESG in 2022
- The focus on ESG priorities intensified because of external factors such as Government imposition of ESG disclosure requirements (67%), and higher energy prices (55%)
- But also due to internal factors such as company ethics, values or purpose (62%) which remain among the top priorities for all respondents
ESG building features are impacting real estate transactions
- Features that reduce energy consumption had the most impact on investment and occupier transaction decisions (88%)
- More than half of respondents would seek a discount or reject a deal altogether if a building lacks these features
There is an emphasis on the value of social building features
- Proximity to public transport was the social feature most cited by respondents (86%) as having an impact on real estate decisions
- Social controversy is also a top consideration, with 52% of all respondents stating that they would reject a building involved in any controversy
The top three challenges for implementing ESG goals are
- Poor availability or quality of data (53%),
- Costs exceeding benefit, making it difficult to justify action (39%), and
- Benefits being unknown or uncertain (36%)
The survey has offered insights into regional differences in priorities and approaches:
- While companies based in the US and APAC prioritise social aspects of the ESG agenda, CE based respondents are more focused on the use of local suppliers, biodiversity and the reduction of risks related to controversial firms
- CE is leading in terms of net-zero goal setting, with CE and UK based companies pledging to achieve net-zero goals sooner than respondents from other geographies
- The use of scopes* is a mixed trend, with CE investors and occupiers being less concerned about categorising their emissions into scopes compared to respondents from other regions
- CE investors and occupiers have higher expectations in terms of environmental building features than their counterparts in other regions
With increasing attention on ESG issues, commercial real estate (CRE) companies, now more than ever, need to understand, enhance, and leverage their ESG performance to drive value and stay competitive. To achieve this, companies need to understand the stakeholders they interact with and align the mutual drivers and incentives of their corporate ESG strategy with those stakeholders.
CBRE’s survey revealed that occupiers and investors are not always aligned in their priorities, ESG goals and the timeframes for achieving them. Maintaining an open dialogue will prove to be crucial to minimise the risk of buildings becoming obsolete and undesirable to occupants. A significant aspect of this collaboration will be green lease clauses, which include operational procedures that advance efficient and carbon neutral buildings.
Find out more in our Global ESG Survey.
Note: The % figures in brackets mean % of respondents.
*Scopes: Scope 1 - Carbon emitted directly from a company's building systems and vehicle fleets; Scope 2 - Carbon emitted indirectly through electricity or fuel consumption for heating and/or cooling buildings; Scope 3 - Carbon emitted indirectly through the products and services provided by building suppliers