11/07/2018 | by Diane Rusignola

Panelists from Vornado Realty Trust (NYSE: VNO), Kilroy Realty Corp. (NYSE: KRC), and Host Hotels & Resorts (NYSE: HST) weighed in on what ESG means to their companies today at Nareit’s REITworld: 2018 Annual Conference in San Francisco. The conference’s opening Spotlight Session, REIT Industry ESG Updates, was moderated by Ben Myers, director of sustainability at Boston Properties, Inc. (NYSE: BXP). 

Dan Egan, vice president of sustainability & utilities at Vornado, talked about his company’s mature sustainability program, which started more than 10 years ago primarily in the energy management realm.

“Our leadership saw that energy management and sustainability wasn’t just a hot topic—it was here to stay. Vornado … realized that something like sustainability was part of a suite of offerings that we would have to work into our buildings in order to remain competitive with the new construction that was happening in our markets,” Egan said.

Egan noted that the company began to realize the financial value of energy efficiency, and that the reduction of their operating costs was a meaningful metric. Over time, sustainability for Vornado evolved into the larger topic of ESG. 

Sara Neff, senior vice president of sustainability at Kilroy, echoed Egan’s sentiment that sustainability at Kilroy has grown and evolved over the years.

“Our LEED buildings had higher rents and lower vacancies, so it made sense to get more and more of them,” Neff said, adding that ESG investment has always been a major value driver for the company.

Rick Werber, senior vice president of engineering and sustainability at Host Hotels, said that a decade ago, his company was only performing “random acts of sustainability,” with various departments acting alone, rather than together as a larger team on a cross-company effort.

“[It] was an opportunity to really pull that platform together under unifying principles,” Werber said.

When Myers asked the panel what makes a building healthy, Egan said that Vornado recognizes that its tenants spend most of their waking hours in their buildings. “The environment that surrounds them needs to be one that nurtures their physical, mental, [and] social well-being,” Egan said, adding that maintaining air quality is a key component from an operational standpoint.

Neff said that active design followed by air quality is what makes a healthy building to Kilroy. “There’s water and there’s noise, and light, and all this other stuff, but [we’re really air-focused],” she said.

Werber said tenants are looking for facilities like fitness centers and spas, but as the owners of real estate, Host Hotels is focused on the engineering and the indoor air quality.

“We rely upon our managers to make sure that our building envelopes are tight and buildings are neutrally-pressurized. We have a good, solid chemistry program that ensures that we’re not contaminating the buildings, either through the HVAC system or [through] the water supply,” he added.

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