Adding ESG Transparency to Real Estate
More and more investors are integrating ESG risks into their investment process. Given the large size and specialized nature of real estate assets, the investment community has demanded sophisticated tools to more accurately identify real estate companies that own more sustainable properties and integrate this information seamlessly into their investment process.
S&P Dow Jones Indices has collaborated with GRESB, a leader in evaluating ESG characteristics of real estate companies, to create the Dow Jones Green Real Estate Indices. The indices, which utilize data from GRESB, are designed to be representative of the investment characteristics of conventional real estate benchmarks, but with an improved sustainability profile.
- Dow Jones Global Green RESI
- Dow Jones U.S. Green REIT Index
- Dow Jones Global Ex-U.S. Green RESI
- Dow Jones Japan Green RESI
1. Why do real estate companies require a specialized approach to quantifying sustainability?
Sander: While sustainability considerations affect all industries, they are particularly relevant for the real estate sector. With an estimated 40% of all global carbon emissions being driven by the construction and operation of buildings, real estate is a particular industry of focus among ESG investors. Buildings are long-lived and typically cannot be moved to another place, which leaves them exposed to the direct localized consequences posed by sustainability risks: more stringent regulatory requirements; changing societal preferences for places to work, live, and play; and exposure to climate-related events such as flooding, water scarcity, and extreme weather conditions.
There’s a growing recognition by companies and investors that ESG matters are fundamental to business performance and should be disclosed in financial reports. Businesses are also coming to realize that integrating ESG concerns into core business and financial decisions will generate new streams of data that can be used to enhance growth and sustainability.
Real estate is a complex business with varying degrees of control on construction quality and operational excellence. The GRESB framework is specifically tailored to real estate companies that seek to embrace industry best practices on the full range of ESG issues that can be material to shareholders.