ESG strategies are an imperative

A new Barclays report draws on insights from some of the industry’s early movers to outline the value of sustainability and how to create a winning strategy.

According to the UK Green Building Council (UKGBC), the built environment contributes around 40% of the UK’s carbon footprint, making buildings the second-largest source of emissions in the country. And although new buildings are more energy-efficient, 80% of the buildings that will be in use by 2050 have already been constructed.

To meet the UK’s 2050 net zero target, there is growing recognition that the real estate industry needs to eliminate the majority of domestic and commercial building emissions within the next 30 years.

At the same time, stakeholders – from investors to occupiers – are increasingly signalling their interest in green buildings that can manage energy efficiently and produce positive impacts in local communities, as well as improving bottom lines. JLL data show that sustainability is having a measurable and significant impact on value, with even A-/B-rated buildings showing a 10% rent increase.

Sustainability is no longer primarily about brand purpose, corporate social responsibility and intangible value to stakeholders. It is now a business imperative that helps avert future risks, manage the changing regulatory landscape and add recognisable value to real estate assets, projects and firms.

A number of our clients who are early adopters of sustainability initiatives – such as LGIM Real Assets, Tritax Management, Derwent London and JLL – are showing that they can create and preserve commercial value, as well as brand value, and deliver results for all stakeholders.

However, although many real estate companies recognise the need to embed sustainability into strategies and day-to-day business, developing a strategy or formalising existing sustainability initiatives can seem a daunting challenge.

In our report, some of the industry’s first movers on sustainability give invaluable advice on how to identify the value of sustainability and suggest how companies should create sustainability strategies.

While each company’s approach will be different, our report highlights the importance of getting the basics right. That includes ensuring compliance with industry and wider sustainability regulations, but also preparing for future regulatory change. The report also sets out key pointers for carrying out materiality assessments and identifying what sustainability means for all stakeholders to help establish a business’s priorities.

It is important to focus initially on areas where action will have the biggest impact and offer the highest level of control. It is also important for businesses to have access to data to measure their environmental impact before embarking on, for example, energy-efficiency initiatives and to ensure that sustainability goals support each other.

Barclays is dedicated to helping real estate businesses address the environmental and sustainability challenges our planet faces. Contact us to find out more about our green finance solutions and how we can support your sustainability agenda.

Jess Tomlinson is head of real estate London at Barclays