Be it for institutional investors, fund providers, asset managers, property owners or project developers—ESG has grown enormously in importance in the real estate industry across all asset classes. EXPO REAL responds to these challenges: this is where you will find contacts and experts on everything important to do with ESG in the real estate industry.
In simple terms, ESG—environment (environmental responsibility), social (social responsibility) and governance (good corporate governance)—is about comprehensive sustainability. And this applies to corporate activities and their impact, for example on the environment, as well as to corporate ethics and social responsibility. While many companies have been committed to corporate social responsibility (CSR) for some time, ESG is intended to make the corresponding results measurable.
Basically, the ESG criteria apply to every form of corporate activity—including players in the real estate industry. ESG in real estate is currently becoming an indispensable part of asset management: Both investors and the funding sector are increasingly focusing on ESG. They expect real estate companies to address ESG requirements, act accordingly and document these actions in a verifiable manner.
In his statement, Prof. Dr. Thomas Beyerle explains how the real estate industry is well advised to take a proactive approach to the issues of ESG and SRI. ESG in the real estate industry brings transparency and reduces economic risks relating to net assets, financial position or results of operations, having a positive impact on a company's reputation and emphasizing the value of real estate and its profitability for investors and financiers.
Buildings account for around 40 percent of all CO2 emissions. That alone underlines why the real estate industry—and the construction industry, for that matter—must face up to its responsibility for the environment. Accordingly, the E in ESG and real estate means: today, managing the own product portfolio inevitably includes aspects such as environmental pollution, protection of species and resources, energy efficiency or greenhouse gas emissions. Even though the real estate industry has already taken some important and correct steps with regard to the E of ESG in recent years by implementing corresponding certification systems for new buildings, a lot of "basic work" is still necessary, especially with regard to older existing buildings, for recording the condition of the properties and, where necessary, improving it.
The ESG criteria also call for players in the real estate industry to demonstrably live up to their corporate social responsibility. This means: social justice, health protection and occupational safety for employees along the entire value chain, the social impact of real estate and real estate projects (construction/proportion of social housing, municipal infrastructure, accessibility ...) or social commitment are among the factors gaining further significance.
ESG in the real estate industry means, not least, that a company's ethical behavior is put to the test. Those taking ESG criteria in real estate seriously have no choice but to ensure transparency in governance in a comprehensible manner. This applies, for example, to supervisory structures and the composition of management, but also to compliance, i. e. adherence to rules, not least in dealing with bribery and corruption. Equal opportunity and the effects of economic activity on society also come under this heading. Good corporate governance plays a crucial role in risk and reputation management.
In the real estate sector, ESG criteria are primarily applied to new buildings, renovation measures and the purchase of properties. A high position in ESG rankings requires not only the optimization of new buildings but also the rehabilitation of existing properties in the respective portfolio. For investors who invest in different markets and companies with the help of capital investments, ESG criteria are of particular importance: the higher the ESG score, the safer the investment. Hence, ESG in real estate requires clear rating standards to capture the ESG status of properties across all asset classes and compare them at selected levels.
The ECORE scoring system is increasingly becoming established as the industry standard for ESG certification of real estate in Germany and Europe. ECORE (ESG Circle of Real Estate) was developed for the real estate market in 2020. It serves as a valuation benchmark that can be used across all asset classes and allows comparisons within individual property groups. In addition to the ESG criteria, the assessment also considers all relevant regulations, laws and ordinances as well as completed certifications. The taxonomy criteria of the EU Action Plan on Sustainable Finance and the goals of the Paris Climate Accords are automatically observed. The score determined is shown on a scale from 0 to 100 points. The ECORE is continuously adapted to new requirements.
So far, ESG compliance can primarily be achieved with new buildings. However, the offer here is limited and will not increase in the foreseeable future, especially in view of the shortage of personnel and materials in the construction industry. New construction projects are correspondingly expensive. On the other hand, existing properties that are not ESG compliant will continually lose value, to some extent also because they are increasingly difficult to market. Consequently, renovation of existing buildings is likely to be worthwhile in the long term, especially if in future the gray emissions—i. e. emissions generated during the production of building materials and during construction, and which account for up to 80 percent of all emissions in the entire life cycle of a building—are included in the assessment of a property in the case of demolition and new construction. Read more about Sustainability: conversion instead of new construction?
The basis is data, data, data—and the ability to merge this data in a structured way. Accordingly, it is essential to develop a standardized data structure and build a corresponding information system that can serve as the basis for both ESG reporting and real estate assessment. The primary challenge associated with ESG for the real estate industry: setting up such a system that combines technical and commercial data, makes individual properties or groups of properties comparable, and highlights any need for action.
You are interested in ESG and real estate in general or you are looking for specific assistance for your company? EXPO REAL is exactly the right place for you! In addition to the latest novelties, you will discover groundbreaking innovations at first hand, for example relating to digitalization in the real estate sector. This is where you can share experiences on implementing ESG in the real estate industry with other players—individually or on the guided ESG Tour: this way, you will literally keep pace with the rapid speed of innovation in the real estate industry! Last but not least, a wide variety of presentations and many top speakers will offer insights on ESG practices and beyond: EXPO REAL features the entire spectrum of the real estate industry, allowing you to establish valuable new contacts as well as gain in-depth insights into all asset areas.
With the EXPO REAL Exhibitor directory, we inform you on a daily basis which exhibitors, brands and products you will find at the international trade fair for property and investment. It's worth taking a look!
You will find the list of exhibitors for this year's EXPO REAL here from June 2023.
A true highlight at EXPO REAL? The ESG Tours. Take the opportunity to peer over the shoulder of leading real estate companies as they implement their sustainability strategies! Also worth a look is our extensive conference program: renowned experts from Germany and abroad shed light on the many aspects of ESG in the real estate industry, among other things.