Por sus características, el sector inmobiliario debe comprometerse desde el punto de vista social. Especialmente en el contexto actual, ya que la sostenibilidad hace tiempo que es un aspecto predominante en la toma de decisiones de las empresas y las actividades relacionadas con la construcción tienen impacto considerable sobre el medioambiente.
In recent years, organizations such as the UN and the European Union have set goals and objectives to transform today’s world and curb threats such as climate change. And one of the starting points is to work in the financial sector, so that companies adopt responsible practices that encourage them to invest in projects that benefit society.
In light of this situation, ESG criteria have emerged to help guide the real estate sector toward a more sustainable, ethical, and profitable future. This roadmap has been embraced by an increasing number of companies in the sector in recent times—and with considerable success.
What are ESG criteria?
Regardless of the sector in which they operate, companies are aware that they need to act responsibly—not only toward their customers, but also toward society as a whole. However, although this premise seems very obvious today, it has not actually influenced their decisions until relatively recently.
Specifically, we have to go back 30 years to see a shift in companies’ primary focus. Back then, around the 1990s, investors began to take an interest in how companies interacted with society and the environment. And they found that efforts aimed at implementing good social and sustainability practices tended to yield positive results, enabling companies to compete successfully both corporately and economically.
As a result of all this, and against a backdrop of climate change becoming an increasingly pressing issue, the first global index to evaluate the sustainability performance of the world’s leading companies was published in 1999: the Dow Jones Sustainability Index. And although its significance was not particularly great at first, in the long run it marked a turning point toward a new way of understanding business activity.
Not surprisingly, it laid the groundwork for the creation of the ESG concept in 2004. Its architect was the then-Secretary-General of the United Nations (UN), Kofi Annan, who challenged some fifty CEOs of major financial institutions from around the world to find solutions for integrating environmental factors ( environmental), social (social), and governance (governance) factors into the financial market by the year 2030. Hence, the term ESG emerged as the acronym resulting from combining these three aspects.
What does each ESG criterion refer to?
Environmental Criteria
The impact that the real estate sector has on the environment—and especially in the field of construction—is undeniable. Building involves altering the land, extracting materials and natural resources, consuming energy, and generating waste; so it is not surprising that, according to 2021 UN data, these activities account for more than 34% of energy demand and nearly 37% of energy-relatedCO2 emissions.
Taking this into account and acting accordingly means that companies must be guided by environmental criteria to change the way they design and construct buildings. Thus, not only must the planning and construction processes be as sustainable as possible, but so must the building itself throughout its life cycle.
Thus, applying ESG environmental criteria also makes it possible to address and advance some of the main Sustainable Development Goals (SDGs), such as those related to clean water and sanitation (SDG 6), affordable and clean energy (SDG 7), and climate action (SDG 13), among others.
Social Criteria
These factors focus on how real estate projects interact with society. Therefore, taking them into account means going beyond pure corporate profit and seeking positive impacts on other stakeholders, such as the employees of the companies involved, consumers and customers, suppliers, and so on.
To this end, the company invests in implementing measures to improve employees’ work lives—such as work-life balance and gender equality initiatives—as well as in training, cultural, and charitable projects. This links them closely to the purely social SDGs, such as ending poverty (SDG 1), promoting good health and well-being (SDG 3), and supporting gender equality (SDG 5).
Governance Criteria
Finally, ESG criteria also call for measures to improve the internal management of real estate companies, with a particular emphasis on transparent and ethical management. Simply put, they focus on doing the right thing to prevent corrupt practices and ensure good corporate governance.
Putting these criteria into practice helps promote decent work and economic growth (SDG 8), establish peace, justice, and strong institutions (SDG 16), and build partnerships to achieve the goals (SDG 17).
What are the current trends in ESG criteria?
It has been nearly two decades since they were first formulated, and ESG criteria have evolved and adapted to the changes that society itself has undergone. Therefore, at a time like the present—marked by the energy crisis and the pressing need to transition to more sustainable energy sources—companies in the real estate sector are realizing that making an effort today to decarbonize their operations is a profitable strategy in the medium and long term.
The result is a modern approach to ESG criteria aimed at achieving outcomes such as:
- A reduction in the industry’s carbon emissions through the construction of a new building that provides more affordable housing and comprehensive services for tenants and owners.
- The use of new materials in construction, while also addressing the issue of the additional costs these materials currently entail compared to traditional materials.
- Make sustainability a cornerstone of most investment projects. As such, it is now practically an indispensable requirement, given that these criteria have been standardized at the legal level in Spain thanks to the establishment of the Technical Building Code (CTE).
- Establish energy-saving, efficiency, and health certifications to demonstrate companies’ commitment to responsible and sustainable practices. The certifications BREEAM or LEED are some of the best examples internationally, while at CULMIA we have also developed our own: CUARZO, a standard that guarantees healthy design and construction, and JADE, a standard that ensures sustainable design and construction.
What are the immediate challenges that ESG criteria pose for the real estate sector?
All of these actions are geared toward an ideal goal: the complete decarbonization of the sector. In other words, toward a new housing model that will enable the industry to achieve the two major objectives it has set for itself within the framework of long-term EU policies: a 40% reduction by 2030 inCO2 emissionsassociated with the production of materials and construction, as well as a 100% reduction in emissions during the useful life of buildings. And a complete reduction of all emissions by 2050, both in production and construction processes and throughout the subsequent service life.
Among other things, this involves making an effort to implement circular models in construction processes to make better use of materials, establishing mechanisms for monitoring and collecting energy efficiency data, and investing in social projects to highlight the benefits of committing to sustainable construction.
Not to mention other challenges related to social responsibility and governance, such as the need to invest in the development of affordable housing as a way to enhance its social and environmental benefits without sacrificing financial returns. Or the adoption by real estate investment trusts (REITs) of corporate social responsibility (CSR) policies .
At CULMIA, we are committed to ESG criteria
Our vision is to work toward creating economic and social value; therefore, our activities respect the environment and aim to contribute to the betterment of both society and its citizens. That is why at CULMIA we have our own Sustainability Policy, which establishes the essential principles of the work we do and the common framework of action that underpins our corporate strategy and values. We invite you to learn more about it here.
We recommend:
- Do you know how to reduce your carbon footprint at home?
- The Rise of Green Building in Spain and Its Impact on the Real Estate Market
