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Sustainability Improves Bottom Line

05/03/2012 | By Matthew Bechard

There is a growing body of evidence demonstrating that energy efficiency and sustainability directly impact the bottom line in the real estate industry, according to Nils Kok, associate professor at Maastricht University in the Netherlands and founder of the Global Real Estate Sustainability Benchmark (GRESB).

In a video interview at the 2012 NAREIT Leader in the Light Working Forum in Dallas, Kok provided updates on the status of the GRESB project and environmentally conscious initiatives in the commercial real estate industry. Kok has spearheaded the effort to collect data from commercial real estate companies around the globe in an effort to create green performance benchmarks. Major institutional investors are beginning to use that information to help inform their investment decisions, according to Kok, and they're encouraging REITs to participate in programs like GRESB and to be more transparent in their operational performance. Kok said some institutions are incorporating sustainability performance scores into their investment models to better project growth rates and risk levels.

Kok noted, however, that data on energy efficiency and similar topics in the REIT industry remain limited. He pointed out that only 30 percent of respondents to his latest survey had any information whatsoever on their companies' sustainability measures.
"In the commercial real estate sector, we don't know a lot about the energy performance of our properties," Kok said. "Seventy percent of the 350-plus respondents didn't have a clue about the energy consumption or the energy performance of their properties. I think that without measuring, you can't start improving."

Kok discussed the market forces that are affecting how REITs address sustainability issues and questions from investors on their environmental footprints.

"Disclosing helps you to realize what you can disclose," he said. "If somebody asks you what your energy consumption in your portfolio is and you want to disclose that, you soon realize that you want to go back to your assets and measure that information to get that information out. So disclosing is basically a market force for you to go back to your assets to collect information. Once you start collecting, then you can start to optimize properties."