The REIT industry committed long ago to the principles of sustainable building and operations. Real estate companies are investing in green technologies. They’re studying and implementing environmentally sound best practices. They’re sharing ideas about strategies for reducing their carbon footprint, as witnessed every year at NAREIT’s annual Leader in the Light Working Forum.
Gauging the effectiveness of going green has proven to be an altogether different challenge. Are we dedicated to sustainable business practices, including improving our energy efficiency? Is this sustainable technology generating a return on investment? How does our performance measure up to our peers?
REITs — and their investors — need answers to these are important questions. How these answers will come to us and how effective they will be remains an open question. In part because we’re seeing a rise in competing, standardized sustainability reporting regimes for the real estate industry.
This edition of REIT magazine includes a feature article on one of these such projects. “Material Interest” details the development of the Sustainable Accounting Standards Board (SASB) and its platform for real estate companies. SASB aims to give all public companies, including public REITs, industry-wide guidelines for reporting key sustainability information to shareholders and the general public.
Also, NAREIT has been involved in a sustainability reporting initiative since 2012, when it partnered with the Global Real Estate Sustainability Benchmark (GRESB). The GRESB Annual Survey covers the environmental performance of real estate portfolios around the world, giving real estate companies a global benchmark against which they can evaluate themselves. Institutional investors representing more than $5.5 trillion in assets under management have supported the GRESB survey. NAREIT promotes its members’ participation in the survey by incorporating its results into judging for the annual Leader in the Light Awards, which honor member companies that have demonstrated superior and sustained sustainability business practices.
Those tracking REIT sustainability will find hard evidence of the benefits flowing through to companies. A recent RealFoundations study of data from the Leader in the Light program found that participating companies increased their total investment in energy efficiency projects in 2014 by roughly 30 percent over their three-year moving average from 2011 to 2013. Furthermore, the value of total savings from such projects almost doubled in ’14 relative to the moving average from the previous three-year period, according to the study. The return on investments from the projects climbed to 40 percent last year, up from the average of 26 percent during the prior three years.
Results like that give REITs all the more reason to continue pursuing a robust sustainability reporting framework.
President & CEO