From January through May 2021, S&P 500 companies put out 610 news releases mentioning principles around environmental, social and corporate governance, according to Sentieo.
JLL says investors and recruiting are driving much of this ESG movement. But there is more to ESG than just putting out a press release.
Only 71 of the 647 occupiers and investors in JLL’s Responsible Real Estate report have integrated reducing carbon emissions into a sustainability strategy, adopted carbon reduction targets, set a clear roadmap for delivering on environmental ambitions and have adequate data and technology to track all the above.
Ninety-sex percent of top global companies have publicly stated ESG goals. However, JLL says that only 19% of top global companies have a clear sustainability action plan with committed spend to achieve those goals.
JLL found that the companies far along in their environmental ambitions had allocated significant resources to carbon-reduction efforts. Seventy-four percent of ESG leaders had a dedicated, centralized budget for implanting carbon reduction initiatives.
In addition, ESG leaders carefully tracked their progress, according to JLL. They enhanced their data capabilities to allow for continuous improvement based on real-time analytics and automated decision-making.
On the other hand, underinvestment in technology held back real estate owners and tenants from making ESG progress. Seventy-four percent see insufficient technology infrastructure as a barrier to reaching environmental goals, according to JLL.
As companies hone in on meeting ESG commitments, they will undoubtedly focus on the built environment, accounting for about 40 percent of global carbon emissions.
Real estate owners see the importance of green strategies. Seventy-three percent of those surveyed by JLL said green strategies drive higher occupancy, rents, tenant retention and overall higher values.
Since new construction has carbon implications, Lori Mabardi, senior director, ESG Research, JLL, says, “many owners are considering retrofitting properties to make them less carbon intensive.” As part of this effort, they may install solar panels on rooftops or electric vehicle charging stations.
ESG-Friendly Financial Products
Fortunately, for building owners, there is financing to help out. For instance, C-PACE, a long-term financing product secured by a property tax assessment, provides developers with an affordable alternative to mezzanine debt and equity. The funding can be used for energy efficiency, renewable energy and water conservation improvements to commercial properties as retrofits or during new construction.
Recently, Petros PACE Finance’s $89 million loan for the 111 Wall Street building became the first-ever C-PACE deal completed as part of New York City’s recently launched program.
In addition to being the city’s first deal, it is also the largest single C-PACE transaction ever closed in the US since the financing structure debuted more than 10 years ago.
The PACE funding is part of a $500 million acquisition and reposition financing closed by 111 Wall Street’s joint venture partners, Wafra Capital Partners and Nightingale Properties.
The planned PACE-eligible renovations should significantly reduce 111 Wall Street’s carbon footprint and help it achieve LEED Silver certification. Those renovations at the 1.2 million-square-foot, 25-story high-rise office building include a full upgrade to the building’s façade, a complete infrastructure overhaul with new HVAC air conditioning and mechanical-electrical-plumping systems.