AccountAbility CEO Sunny Misser discusses his firm’s analysis of REITs’ ESG programs.

07/29/2016 | by

AccountAbility, a global consulting firm that specializes in corporate responsibility and sustainability, has worked with NAREIT for the past year to develop a better understanding of the array of sustainability-related guidelines, key performance indicators and metrics in use or under consideration for real estate businesses and real estate investment in the U.S. and around the world. As part of this initiative, NAREIT also explored whether best practice-type sustainability guidelines are achievable and desirable for U.S. REITs in the public marketplace. Sunny Misser, the firm’s CEO, talked with about the results of AccountAbility’s analysis, key takeaways from the exercise and broader trends in corporate responsibility. Can you give us an overview of AccountAbility’s work with NAREIT?

Sunny Misser: Sustainability is an issue of increasing importance and relevance for the entire real estate industry, as well as, specifically, among REITs and publicly traded real estate companies. NAREIT asked AccountAbility to help it better understand leading sustainability practices among its membership, as well as within the global real estate community. The objective was to help NAREIT’s members embed good practices in these activities, enhance their sustainability efforts and improve their overall performance.

We developed a “practical toolkit” of leading sustainability practices for the member REITs through an engaged consultative process. We conducted a detailed survey; we spoke to over 80 REITs; we interviewed 20 to 21 REITs in depth; we developed 12 case studies; we reviewed 15 standards, ratings and frameworks; we did independent research; we had two interactive worshops – one in New York and one in Miami. And based on the messaging we heard, we applied our thinking to leading practices and developed the practical guidance. What were some of the takeaways for you from this exercise?

Misser: There were a few valuable takeaways for us:

  • There’s strong and consistent support from NAREIT’s member base;
  • REITs are looking to NAREIT to assume leadership in this process; and
  • REITs are looking for practical guidance that is simple, clear and easy to implement.

Specifically, REITs are looking for standardized sustainability metrics, collective sustainability goals, streamlining of the disclosure process and sector-specific environmental, social and governance (ESG) guidance. In your experience, what are some of the bigger trends that you are seeing in the area of sustainability?

Misser: I believe the first trend that we’re observing concerns reporting and disclosure. The statistics are very telling: Over 93 percent of the global Fortune 250 companies report on sustainability matters. That is a significant number. You’re looking at a material jump in the last two decades.

Over 51 percent of the same set of companies on a larger scale, say the Fortune 1000, report in their annual report on sustainability issues.

So, when you look at the trend lines across every industry sector, over half the sector is reporting on industry issues as they pertain to sustainability. We believe that one clear trend, as it concerns the real estate industry, is that sustainability reporting is a standard global practice at this time.

The second trend that we see is around standards. There is a proliferation of multiple standards across several industry sectors as well as general sustainability standards that are flooding the market. It has never been more apparent than in the last five to six years. Most of our clients are struggling to make sense of it or navigate around it.

We strongly believe—based on the work we do, the clients we advise and our research—that one key outcome is going to be one of consolidation. We are going to see a large majority of these standards consolidate and settle into two to three or three to four big, broad-based platforms of standards.

The other sub trend that we’re going to observe is that there is going to be a significant emphasis on industry sectors. Within industry sectors, it’s going to be very focused on subject-matter-based guidance. There are going to be two tiers, one of consolidation and another of drilling down, and we see that happening in the next three to five years.

The third trend that we can broadly highlight is that there is a certain mainstreaming that is occurring. What I mean by mainstreaming is that broad-based sustainability metrics, measures and goals are becoming more integrated into business operations, processes and systems. It is becoming less of something that you have to do, but more of a routine occurrence, a part of day-to-day business.

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