REITs are making gains across the board in adopting practices that enable investors to make informed decisions taking into account environmental and social strategy and performance, says Jessica Long, Nareit senior vice president for environmental stewardship and sustainability.
Speaking on the REIT Report, Long noted that Nareit’s latest REIT ESG Dashboard shows that 100% of the top 100 REITs are reporting publicly on ESG in some manner. “REITs really are demonstrating that as an industry, real estate is taking seriously the requests from investors and regulators and other key stakeholders that are saying that ‘these environmental and social issues are important to us and we want to understand how you're managing those things.’”
One data point in the latest dashboard shows that 89% of REITs are reporting on their climate risk policy. Long noted that these percentages show that REITs “are out ahead on this….and putting in place policies and procedures and looking at the metrics to help better manage this risk and understand what's happening within a REIT’s real estate portfolios.”
Long added that one of the most exciting aspects of the dashboard is the increase in coverage for smaller REITs. “The greatest increase is really in those REITs that are under $5 billion in market cap, where as recently as 2018, less than half of those entities had any ESG reporting.”
According to Long, “this really demonstrates that as an industry, we're moving forward with consistency in how we're talking to investors and really giving them that information to be able to make investment decisions based on comparable data, which is really important.”
Looking ahead, Long said she expects to see REITs further their understanding of the financial impacts of physical climate risk exposure, as well as the transition to a low carbon economy. “There's going to be more detailed information provided to investors. This is going to include investments to make buildings more resilient, emergency planning, and engagement with the local community,” she said. “I think it's going to give investors a much clearer and fuller picture of what some of these metrics mean.”
Long also noted that the dashboard shows the number of REITs reporting on renewable energy has doubled since 2020. “REITs continue to work with tenants, solar developers, and utilities to execute renewable transactions and bring that as an important part of their sustainability strategies,” she said.