Investors, tenants, and regulators are increasingly demanding that buildings meet high sustainability standards 1. In many cases, ESG disclosure has gone from voluntary to mandatory, and it's often linked to a company's financial health 2. Companies are responding by incorporating environmental, social, and governance (ESG) principles into their operations. This report analyzes case studies of successful ESG implementation in commercial real estate (CRE) to identify best practices and lessons learned.
EY's Commitment to Sustainability
EY has made a public commitment to reduce its greenhouse gas emissions and reach net zero by 2025 3. This commitment is reflected in two key initiatives: a comparative analysis of hypothetical office buildings in Chicago and a sustainable travel program.
Comparative Analysis of Hypothetical Office Buildings in Chicago 4
EY conducted a case study to demonstrate the financial benefits of ESG investment in commercial real estate. The study compared two hypothetical office buildings in Chicago, one with a strong ESG focus and one without. The analysis revealed that the ESG-focused building had a 10% to 21% higher market value than the non-green building 4. This increase in value was attributed to several factors, including:
- Higher rental rates: Tenants were willing to pay more for space in the ESG-focused building due to lower operating expenses and intangible benefits such as improved employee well-being4.
- Lower vacancy rates: The ESG-focused building had a 1% to 2% lower vacancy rate, likely because tenants sought spaces that aligned with their corporate values4.
- Reduced operating expenses: Energy-efficient building systems in the ESG-focused building resulted in a 2.5% to 5.0% reduction in common area maintenance (CAM) expenses4.
Sustainable Travel Program 3
As part of its net-zero commitment, EY's travel, meetings, and events team implemented a sustainable travel program. Key actions included:
- Policy changes: Eliminating one-day trips, encouraging rail travel over air travel, and planning meetings at venues with vegetarian meals.
- Technology: Developing the EY Sustainable Travel Approval Tool with IBM to automate travel approvals and promote sustainable travel options.
- Communication: Implementing automated messaging to remind employees of sustainable travel options and recommend rail travel over air travel.
Case Study: Invesco Real Estate's ESG+R Principles 5
Invesco Real Estate has committed to ESG+R (environmental, social, governance, and resilience) principles, focusing on enhancing building performance and promoting best practices to adapt to market changes. The company's initiatives include:
- Energy efficiency: Implementing energy-efficient technologies and renewable energy sources to reduce carbon emissions.
- Water conservation: Implementing water-saving fixtures and technologies to reduce water consumption.
- Waste management: Implementing waste reduction and recycling programs to minimize waste generation.
- Social equity: Promoting diversity and inclusion in the workplace and supporting community initiatives.
Case Study: 321 Exhibition Street in Melbourne 5
The 321 Exhibition Street building in Melbourne is an example of how retrofitting can achieve net-zero status. The building underwent a comprehensive renovation that included:
- Energy-efficient upgrades: Installing high-performance windows, insulation, and lighting systems.
- Renewable energy: Installing solar panels to generate renewable energy on-site.
- Water conservation: Implementing water-efficient fixtures and rainwater harvesting systems.
The building achieved top ratings for energy, water, and indoor environment performance, demonstrating the potential for sustainable development through retrofitting.
| Case Study | Key Takeaways |
Works cited
- ESG In Commercial Real Estate - Smarter Technologies, accessed December 15, 2024, https://smartertechnologies.com/blog/esg-in-commercial-real-estate/
- The Financial Case for ESG in Commercial Real Estate - Measurabl, accessed December 15, 2024, https://www.measurabl.com/the-financial-case-for-esg-in-commercial-real-estate/
- Case study: EY | Business Travel News Europe, accessed December 15, 2024, https://www.businesstravelnewseurope.com/ESG-in-Business-Travel/EY-case-study
- Looking at ESG's positive impact on property values | EY - US, accessed December 15, 2024, https://www.ey.com/en_us/insights/real-estate-hospitality-construction/looking-at-esg-s-positive-impact-on-property-values
- Top Trends in ESG Reporting for the Real Estate Industry - Plan Be Eco, accessed December 15, 2024, https://planbe.eco/en/blog/top-trends-in-esg-reporting-for-the-real-estate-industry/