Last year saw a surge in commercial real estate transactions, witha record $809 billion in commercial property sales,according to Real Capital Analytics. For many companies in the sector, including the commercial real estate services and investment firm CBRE Group, Inc., there has been a boom in business. But CBRE also saw a return on its investments in, and focus on, ESG (environmental, social and governance).
From the start of 2021 through to now, CBRE has repeatedly been recognized for the company’s diversity and inclusion efforts. Bloomberg also named CBRE to its Gender-Equality Index for the third consecutive year in February. In 2021, CBRE featured on the Human Rights Campaign’s “Best Place to Work for LBGTQ Equality,” the Disability Equality Index’s list of Best Places to Work for Disability Inclusion and on Ethisphere’s directory of the “World’s Most Ethical Companies” –for the eighth consecutive year.
“As a professional services firm, we are all about our people, whose integrity and commitment to ethical conduct served us well as we rallied to support colleagues and communities in need, while continuing to deliver world-class solutions for our clients,” said Elizabeth Atlee, CBRE’s senior vice president and chief ethics and compliance officer, said in a public statement.
Internally, CBRE was simultaneously building out its Diversity, Equity and Inclusion (DEI) team, promoting Tim Dismond from chief diversity officer to chief responsibility officer, uniting all of CBRE’s ESG efforts under his leadership. Ryan Mitchell and LaTonya Wilson were both hired to lead DEI efforts for CBRE; Mitchell for advisory services and real estate investments businesses and Woodson for global workplace solutions business.
The move to incorporate more ESG practices into the business is not unusual for the commercial real estate industry.A GlobeSt.com articlepublished last June found that “over the last decade, commercial real estate players have increasingly considered the environment and sustainability when underwriting investments and operating properties.”
Quite simply, business leaders have recognized that the economist Milton Friedman’s 1970s doctrine, “the social responsibility of business is the increase profits,” is effectively dead. Neal Hartman, senior lecturer in managerial communication at MIT Sloan argued in his January 2021 article published by the school, that Friedman was suggesting “greed was good.” Hartmann points out that modern companies’ “focus on the environment and renewable energy have bolstered the brand images of these companies.”
Today’s consumers and shareholders would argue that “green” is good, and in fact, a focus on ESG can have a positive impact on revenues. Yet, more can be done. For example, CBRE contends listed infrastructure is neglected in ESG and sustainable strategies inthe October 2021 investment insights report,Why Listed Infrastructure is Essential for ESG and Sustainability, published in conjunction with New York Life Investments. The report states “infrastructure may drive 50 percent of all decarbonization investment.”
So, as the world’s largest manager of commercial properties, CBRE has said that it is committed to improving the efficiency and sustainability of its own building operations as well as that of its clients. According to its 2020 corporate responsibility report, CBRE seeks a greenhouse gas reduction target of cutting its operational emissions by more than two-thirds by 2035.
Further, CBRE its announced commitment to net-zero carbon emissions by 2040 and as part of that strategy. The company has also signed The Climate Pledge, joining a group of companies committed to achieving the Paris Agreement’s net-zero carbon goal 10 years ahead of schedule. Efforts like these helped CBRE earn a spot on the Dow Jones World Sustainability Index for three consecutive years.
However, with approximately 500 offices worldwide and more than 100,000 employees, it stands to reason that CBRE puts so much emphasis on talent diversity. 2020 saw the launch of a partnership between the real estate shop and social impact platform Project Destined, which now includes the Historically Black Colleges and Universities (HBCU) Bridge Program, connecting students with CBRE leaders to expose them to industry career paths.
As CBRE President and CEO Robert Sulentic said in the 2020 Corporate Responsibility Report, “We are particularly focused on onboarding and advancing more people of color and women….”
Beyond internal DEI initiatives, CBRE also pledged $1 billion in purchasing from minority- and women-owned suppliers in 2021, tripling that spend by 2025.
Image credit: Robert Stump via Unsplash
FAQs
ESG (environmental, social, governance) is used as a framework to assess how a commercial real estate portfolio manages risks and opportunities that shifting market and non-market conditions create.
What is the ESG score in commercial real estate? ›
ESG ratings are now key in setting the value of commercial real estate. They highlight a property's green, social, and governance qualities and affect its price on the market. Real estate experts can gain many benefits by applying ESG principles.
What is the CBRE sustainability Index? ›
The CBRE U.K. Sustainability Index is an analysis of 1,000 regularly valued property data in the U.K. that CBRE has access to and is used to create an index of investment performance based on their energy efficiency ratings.
What are the ESG factors of real estate? ›
In the context of commercial real estate, investors, regulators, and other stakeholders will use ESG factors to assess how an investment is managing its environmental impact, its treatment of employees, tenants, and communities, and the quality of its governance practices.
Who sets the standards for ESG? ›
The Sustainability Accounting Standards Board (SASB) lays out ESG reporting guidelines through 77 distinct industry-specific metrics. SASB also offers a Materiality Finder, a web-based tool designed to help companies understand what ESG-related issues are relevant to their sector.
What are the criteria for ESG compliance? ›
Common ESG compliance frameworks
This framework focuses on forest health and preservation, water security, and a carbon footprint of an organization. It asks companies for voluntary disclosure of data that isn't related to financials, such as company environmental performance and greenhouse gas emissions.
How is ESG rating determined? ›
The majority of investment companies and financial institutions, as well as specialized ESG research and data companies, calculate ESG scores. These companies gather data on a company's environmental, social, and governance performance, evaluate it, and utilize the results to provide an ESG score.
How is the ESG score calculated? ›
An ESG Scoring Example
If a manufacturing company scores 80 out of 100 on environmental factors, 70 on social factors, and 90 on governance factors, the final ESG score would be calculated as follows: (0.5 * 80) + (0.3 * 70) + (0.2 * 90) = 76.
What are the benefits of ESG in commercial real estate? ›
The Benefits of ESG Strategies
In the nearer term, sustainable practices can help reduce operating costs, attract and retain tenants, and increase property values. Risk reduction is another important benefit of ESG strategies in commercial real estate.
What is the CBRE sustainability policy? ›
Sustainability Commitment and Policy
In 2021, we pledged to reach net zero carbon emissions by 2040 and you can learn more about our decarbonization plan here. Read CBRE's Commitment to Environmental Sustainability outlining our management system to guide sustainability and environmental practices and programs.
As CBRE's Chief Sustainability Officer, Rob Bernard is at the forefront of working to decarbonize the built environment, a sector responsible for approximately 40% of global carbon emissions.
What are the core values of CBRE? ›
Our Guiding Values
- Respect. We treat everyone with dignity, value their contributions, help one another succeed.
- Integrity. We uphold the highest standards in our business practices.
- Service. We dedicate ourselves to making a meaningful impact with our clients and in our communities.
- Excellence.
ESG applied to real estate
For a building or a real estate fund, the environmental component of ESG strategies often focuses on reducing energy consumption and therefore CO2 emissions. This involves carrying out an energy audit to identify high-energy consumption items and areas for improvement.
What are the big 4 of ESG? ›
In this context, the Big 4 accounting firms - Deloitte, PwC, Ernst & Young (EY), and KPMG - play a pivotal role in shaping corporate strategies, reporting practices, and, ultimately, the sustainability divide.
Why does ESG matter in real estate? ›
ESG factors are important considerations in real estate development. They address critical issues like climate change, social justice, and ethical business practices. ESG is now being considered at every stage of the development process, including due diligence, site acquisition, design, and construction.
What are ESG standards regulations? ›
ESG regulations are government standards for ESG-related actions, reporting, or disclosures. ESG stands for environmental, social, and governance, and it is a framework for evaluating the sustainability and ethical impact of a company or investment. Preparing for CSRD: Will your reporting strategy need to change?
What are the ESG disclosure standards? ›
The Global ESG Disclosure Standards for Investment Products are the first global voluntary standards for disclosing how an investment product considers ESG issues in its objectives, investment process, and stewardship activities.
What are the most widely used ESG reporting standards? ›
Global Reporting Initiative Standards (GRI)
The GRI Standards are widely regarded as a pioneering framework for sustainability reporting and are utilized worldwide.
What are the ESG ratings and standards? ›
Ratings on environmental, social and governance (ESG) factors provide information about the sustainability performance of a company or a financial instrument, by assessing its exposure to sustainability risks and/or its impact on people and the environment.
