REITs Looking Ahead on ESG Matters

During the second day of REITworld: 2019 annual conference in Los Angeles, a panel of experts representing 2019 Nareit Leader in the Light award-winning REITs offered an update on the latest ESG developments within their individual companies and across the industry.

Moderated by Sara Neff, senior vice president, sustainability, at Kilroy Realty Corp. (NYSE: KRC), the panel included: Aaron Binkley, senior director of sustainability at Digital Realty Trust, Inc. (NYSE: DLR); Daniel Egan, senior vice president, energy & sustainability, at Vornado Realty Trust (NYSE: VNO); Kevin Hagen, vice president, ESG strategy, at Iron Mountain Inc. (NYSE: IRM); Ben Myers, director of sustainability at Boston Properties, Inc. (NYSE: BXP); and Will Teichman, vice president of business operations at Kimco Realty Corp. (NYSE: KIM).

Hagen, winner of the 2019 Leader in the Light Leadership Personified award, noted that ESG successes so far make it clear that “you can do the right thing and it’s a great business decision.”

Myers, meanwhile, pointed out that the issue of climate risk has “exploded” this year. In response, Boston Properties has conducted a vulnerability assessment of its portfolio, focusing on flood risk.

Binkley underscored the importance of setting internal ESG targets that reflect where an individual company wants to be, rather than arbitrary targets. “It’s important to be intentional,” he said.

Neff, meanwhile, pointed out that the REIT industry has been “terrible” in telling its story regarding the social component of ESG. That has led to passive investors that are interested in ESG skipping over the industry, she said.

Looking ahead to 2020, the panel discussed areas where they will focus their attention. Hagen pointed to talent, and the importance for REITs to pay attention to their ESG teams. Binkley underscored the importance of data: “Do you have the right data to make good business decisions?”

Teichman highlighted the importance of diversity and inclusion: “As an industry we have a problem with diversity.” Myers, meanwhile, said scale is an issue to watch in 2020. He noted that a lot of smaller and private companies are now getting involved in ESG issues. “We need scale,” he stressed. Egan, meanwhile, said climate-related policy will be a key issue in 2020. “You’ll see city and state-level policy emerging that will have varying implications for real estate,” he said.