REITs of all types own more than $3.5 trillion gross asset value of real estate assets across the U.S.
U.S. listed REITs have an equity market capitalization of nearly $1.2 trillion, and own and operate between 10% and 20% of U.S. commercial real estate. The U.S. REIT industry plays a meaningful role and looks to play an even greater role in moving the needle forward for ESG best practices. Nareit’s REIT ESG Dashboard helps quantify that impact and showcases the progress over the years.
Nareit’s REIT ESG Dashboard reflects publicly reported data from 2016 through 2019 as reported in 2017 through 2020, respectively, for the 100 largest U.S. equity REITs by equity market cap each year. In 2020, these 100 REITs represented approximately 94% of the listed equity REIT equity market cap as of December 31, 2019. These REITs owned 534,179 assets including 46,338 buildings totaling around 4.7 billion square feet of real estate in the U.S., as of year-end 2019.
Charts within the Dashboard either reflect REITs by number or the percentage of the REIT industry by equity market cap.
Almost all REITs are now reporting their sustainability efforts publicly, with the percentage growing year-over-year. In 2020, 98 of the largest 100 REITs reported publicly on their ESG efforts, including on their company websites, annual reports, proxy statements, and/or stand-alone sustainability reports.
A consistently increasing number of REITs are producing stand-alone sustainability reports, with 66 of the top 100 REITs issuing these reports in 2020.
ESG reporting, which was more common for larger REITs in prior years, is now a priority for almost all REITs, regardless of their size. Showing the most progress over the past year, REITs with an equity market cap under $5 billion jumped from 71% reporting to 97%, catching up with mid-size and larger REITs and more than doubling their share since 2018. Nareit supports member companies of all sizes looking to advance their ESG initiatives through its JumpStart Program and REITWorks Conference.
There are several reporting frameworks, guidelines and standards with which REITs can report their ESG data, including GRESB, CDP, and GRI. In 2020, CDP had the highest participation rate by number of companies and by equity market cap, with 40 of the top 100 REITs participating or, 73% by equity market cap. GRESB and GRI both had 39 of the top 100 REITs utilize these tools in 2020, representing 50% and 49% by equity market cap, respectively. REITs may utilize more than one ESG reporting framework. For example, 21 of the top 100 REITs, by equity market cap, reported to all three frameworks (GRESB, CDP, and GRI).
The 2019 Nareit Guide to ESG Reporting Frameworks provides an overview of the most relevant ESG frameworks in the marketplace and their most commonly used metrics in a single, user-friendly document.
In addition to reporting sustainability performance, an increasing number of REITs publicly disclose carbon targets and sustainability goals. In 2020, 29 REITs, representing 46% by equity market cap, disclosed carbon targets, and 37 REITs publicly disclosed sustainability goals, representing 55% by equity market cap. Twenty-nine REITs reported both a carbon target and a sustainability goal, representing 46% of the equity market cap of the top 100 REITs.
As REITs expand their ESG initiatives, more companies are hiring staff dedicated to ESG. Between 2017 and 2020, 19 of the top 100 REITs added a full-time dedicated ESG staff position for the first time. The 41 REITs with dedicated ESG staff account for over 60% of the equity market cap of the top 100 REITs. In addition, many of those without dedicated ESG staff implement ESG initiatives through sustainability committees as well as guidance from outside consultants.
From retrofitting existing buildings to implementing new sustainability and energy conservation standards, the REIT industry is moving to reduce resource consumption.
Consistent with 2019, more than three quarters of the top 100 REITs own certified green buildings. Over 2,100 REIT-owned buildings have a green certification, which covers approximately 627 million square feet. In fact, REIT-owned properties are often at the forefront of sustainable building innovations.
REITs are reducing carbon emissions, generating energy savings, reducing water consumption and waste, and increasingly reporting on those efforts. The two most commonly reported metrics relate to carbon emissions and energy usage. The top 100 REITs, by equity market cap, reporting on tracked environmental metrics increased from 2019 to 2020 for each metric. In 2020, 49 REITs, representing 66% of the equity market cap of the top 100 REITs, reported on carbon emissions and energy usage, up from 31 in 2019. REITs disclosing water usage increased from 29 in 2019 to 44 in 2020, representing 58% of the top 100 REITs by equity market cap. Reporting of waste management has increased from 27 REITs reporting in 2019 to 32 REITs reporting in 2020, representing 43% of the top 100 REITs by equity market cap.
From wind to solar, REITs are increasingly integrating onsite renewable energy generation into their operations. In 2020, 37% of the top 100 REITs by equity market cap reported utilization of onsite renewable energy sources.
REITs have a history of incorporating social initiatives into their business models, resulting in positive impact on their employees, communities, tenants, and other stakeholders. Social initiatives may include providing employee development opportunities, revitalizing neighborhoods within their communities, and supporting tenant needs.
2020 built on the trend of increased reporting on social initiatives and programs. Tenant engagement and community development are some of the social initiatives REITs most frequently report on. In 2020, 66 of the top 100 REITs by equity market cap publicly disclosed data on tenant engagement, representing 80% by equity market cap. The same year, 88 out of the top 100 REITs by equity market cap publicly disclosed data on their community development programs, representing 92% by equity market cap.
An increasing number of REITs are reporting on a variety of workforce metrics. In 2020, disclosure on workforce development programs had the highest increase among the tracked workforce metrics, jumping from 68% to 85% by equity market cap. More REITs also reported having health and wellness programs in 2020, increasing from 69% to 74% by equity market cap. Examples of health and wellness programs include employee discounts to gym facilities, group weight-loss challenges, flex scheduling work hours, and mental health and stress management programs.
Social policies related to supplier/vendor screening, diversity, inclusion, and equal opportunity initiatives, and health and safety practices are increasingly disclosed by REITs. In 2020, 78 of the top 100 REITs by equity market cap publicly disclosed their diversity, equity and inclusion initiatives, representing 89% by equity market cap. Disclosure of health and safety policies also increased, with 73% by equity market cap reporting on their policies, which may address compliance with local and federal regulations, employee and tenant safety oversight, incident reporting, and emergency preparedness, among other safety-related topics.
Governance policies reflect an organization’s processes, policies, practices, and impact regarding its formalized governing infrastructure, transparency, roles and responsibilities, and accountability.
Diversity and inclusion are important objectives for all public companies. REITs are showing progress in reporting in this area, particularly as it relates to gender diversity on boards of directors. The number of REITs with at least one female board member increased from 97 of the top 100 largest REITs by equity market cap in 2019, to 99 in 2020. Twenty-two of top 100 REITs by equity market cap reported publicly on pay equity.
Public disclosure of governance-related items is a strength for REITs:
- 97 of the top 100 REITs by equity market cap publicly disclosed their general governance and risk assessment policies
- 96 of the top 100 REITs by equity market cap publicly disclosed their compensation policy
- 94 of the top 100 REITs by equity market cap publicly disclosed their anti-corruption policy
These disclosures are primarily reported in proxy statements, rather than stand-alone reports.
To Learn More
REITs and Publicly Traded Real Estate Companies
If you’re looking to start a sustainability program or advance an existing one, check out Nareit’s JumpStart Program and annual REITWorks Conference. Contact Fulya Kocak, Nareit Senior Vice President, ESG Issues to learn more about these programs.
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This data collection and analysis for the ESG Dashboard was performed by GeoPhy, a tech company in the real estate domain, building a global platform for independent real estate data and information, using publicly available information from listed U.S. equity REITs including websites, annual reports, sustainability reports, 10-Ks, direct feeds, and certification schemes. This public information is subject to continuous change and therefore is not warranted as to its merchantability, completeness, accuracy or fitness for a particular purpose. The data and analysis are provided “as is” and reflect GeoPhy’s opinion at the date of publication only. Any reference to third party names, or third party data, is for appropriate acknowledgement of its ownership and does not constitute a sponsorship, or endorsement, by such owner. When the ESG Dashboard refers to 2018, 2019 or 2020 results, it reflects data reported by REITs in 2018, 2019 or 2020, reflecting the prior fiscal year operations.