In recent years, the acronym ESG (Environmental, Social and Corporate Governance) has become a topic for all business sectors. These three factors, which encompass environmental, social and corporate governance, dictate a company’s social and sustainable impact. These are criteria that influence not only profit, but also determine the potential and performance of companies in all sectors. But how can this impact the real estate market?
In the environmental area, according to the United Nations Environment Program, the real estate sector is responsible for almost 40% of energy-related carbon emissions in the world? To solve this problem, the construction of green buildings has been an effective strategy for reducing climate impacts. In addition, the real estate market can still increase its revenues and incentives in the market. Socially speaking, construction companies must have a solid policy regarding the health and safety of their employees and nearby communities. And the change in customer expectations, which aim for well-being and health, has also been influencing the operational strategy and attitudes of companies towards projects.
Another essential issue is governance. Historically susceptible to corruption, the sector has been implementing several mechanisms for monitoring, auditing, employee training and whistleblower protection, aiming to minimize these already notorious risks. We also see room for improvement in independence and diversity on companies’ Boards of Directors. “Therefore, I have no doubt that the practice of ESG actions will increasingly be an integral part of the decision-making of large buyers of real estate assets. For companies that have not yet adopted this practice, it is essential that they understand how to do so, otherwise they will be left out of the game in the new real estate market”, says Claudio Hermolin, CEO of Primaz.
