Net-zero carbon goals, employee experience drive increased focus on ESG

CBRE recently surveyed more than 500 commercial real estate professionals globally about the relative importance of Environmental, Social and Governance (ESG) criteria in their real estate strategies. The survey reveals the coverage and scope of ESG goals for real estate, the challenges in achieving those goals and the value real estate professionals place on environmental and social features in buildings.

Following are the top ESG trends revealed by our survey. The full report will be released early next year.

Key Takeaways:

An Increased Focus on ESG

Two-thirds of survey respondents said that their focus on ESG priorities and strategies intensified in 2022. While most companies first established ESG goals to meet certain self-imposed ethical standards and the demands of shareholders, various external factors are now making such goals mandatory. These factors include increased government disclosure requirements to achieve net-zero carbon emissions and the need to offset rising energy prices, which the World Bank estimates will remain 75% above the five-year average in 2023.

ENVIRONMENT: Green is worth it

Three-quarters or more of respondents agreed on the top five environmental building features they deem to have the most impact when valuing a real estate transaction. Building features that the most respondents are willing to pay a premium for (positive impact) include on-site renewable energy generation and smart technology that adjusts building operations to reduce environmental impact. Features that reduce energy consumption seem to be the environmental building feature that is under consideration the most when reviewing a deal. Almost half of respondents would seek a discount or walk away from a deal altogether (negative impact) if a building lacked features that reduce energy consumption. Green building certification and buildings that have superior resilience to the effects of climate change also made the top five list.

Figure 1: Top Five Environmental Building Features that Impact a Real Estate Transaction

Note: Total indicates the sum of responses that would have the most impact on a transaction (positive or negative). Remaining responses were neutral.
Source: CBRE Research Global ESG Survey, November 2022.

SOCIAL: Feeling good and doing good

Nearly 60% or more of respondents agreed on the top five social building features they deem to have the most impact when valuing a real estate transaction. Nearly half of respondents are willing to pay a premium for building features that improve the physical and mental health of employees and for buildings that have health and well-being certifications. Buildings that are conveniently near public transportation systems seem to be the social feature that is under consideration the most when reviewing a deal. Nearly two-fifths of respondents would seek a discount or walk away from a deal altogether (negative impact) if a building wasn’t near public transport. Facilities that support cycling and walking and buildings with “inclusive design” also made the top five list.

Figure 2: Top Five Social Building Features that Impact a Real Estate Transaction

Note: Total indicates the sum of responses that would have the most impact on a transaction (positive or negative). Remaining responses were neutral.
Source: CBRE Research Global ESG Survey, November 2022.

GOVERNANCE: The clock is ticking

With 65% of respondents indicating their company has made a public net-zero pledge, reducing greenhouse gas (GHG) emissions is at the top of corporate social responsibility (CSR) agendas. This is closely tied to the reason why both occupiers and investors heavily weigh features that reduce energy consumption when buying or leasing property. Occupiers are leading the charge on net-zero targets, with most targeting 2030 as their deadline. More than half of respondents report poor quality or availability of data as a barrier to implementing ESG goals.

Figure 3: If you have a public net-zero pledge, which year have you set for achieving that pledge?

Source: CBRE Research Global ESG Survey, November 2022.

Real Estate’s Growing Role in ESG Efforts

The real estate industry is uniquely positioned to positively impact our properties, communities and overall environment with ESG initiatives. This survey highlights that real estate professionals and companies are taking note of this and increasing their efforts across the ESG spectrum.

We look forward to sharing the full results and analysis in early 2023.