Increasing sustainability in real estate with ESG
Making sustainability measurable with ESG
Sustainability, social responsibility and responsible corporate governance are important aspects of economic activity today. This also applies to the real estate sector. Sustainability certificates that meet the standards of the ESG (Environmental Social Governance) criteria identify a real estate company as an ecologically responsible and fair provider on the market. The building sector in particular holds enormous potential in terms of climate protection. Such certificates make a valuable contribution and create incentives, as they increase the value of real estate.
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Goals of ecological-social corporate governance
The abbreviation ESG refers to the consideration of aspects of the environment, social affairs and responsible corporate governance. The certificate is awarded to companies that make an economic contribution to environmentally friendly, sustainable and social development that goes beyond the legal requirements. The sustainability factor can include, for example, climate-neutral construction of real estate. After all, the operation of buildings accounts for 35% of Germany's final energy consumption, so this is an important lever for saving energy. Social responsibility in real estate companies includes points such as fair pay and compliance with ethical standards. The corporate governance aspect focuses on relationships with investors, construction project developers or government bodies and transparent communication with these entities. ESG regulation is carried out via the EU.
ESG criteria in the real estate industry
To obtain the certificate, real estate companies must meet certain ESG criteria. ESG sustainability criteria in the real estate sector include climate-neutral buildings, energy-efficient and environmentally friendly building management, and green spaces incorporated into properties. Sustainable wastewater disposal and the general avoidance of negative ecological aspects in the construction and operation of real estate are also part of the ESG sustainability criteria. In the social sector, fair working conditions, but also social housing, accessibility or the development of a good community infrastructure are among the important criteria that a company should fulfill. Corporate governance focuses on the ethical behavior of the company, especially with regard to economic processes and their impact on society. The focus is, for example, on equal opportunities, the independence of supervisory boards or a targeted approach to corruption. Companies can provide evidence of compliance with such criteria by means of a rating carried out by ESG rating agencies. Ranking is done on a point scale from 0 to 100, the higher the score, the better the rating.
Guidelines for CO2 emissions and energy efficiency
The EU taxonomy serves to create incentives for investors to invest in environmentally and climate-friendly sectors. ESG investments promote sustainable companies. To be classified as such, real estate companies must reduce their CO2 emissions and build energy-efficiently. The EU taxonomy determines which guidelines must be fulfilled for this. They must be taken into account, for example, when building new properties or renovating existing ones. Verification of compliance with such guidelines governs the disclosure of construction project information. This is stipulated in the Disclosure Ordinance. Here, the concrete goals and characteristics as well as the methods and results in terms of sustainability, social and corporate governance must be specified precisely. Real estate companies are therefore required to provide documentation in accordance with ESG reporting obligations.
Transparent ESG reporting: A hurdle for companies
The ESG reporting requirement creates some challenges for companies. Since this year, many EU-based companies have been required to disclose and thus accurately document their sustainability, social and corporate governance efforts. In 2023, this obligation will be extended to a large number of other companies. They will have to name internal and external sustainability risks. This creates opportunities, but also some hurdles, because integrating reporting into existing processes requires some preparation. For example, it must be clarified in which business area reporting is to be integrated, technical requirements must be clarified and fulfilled, and personnel resources must be created for this purpose. With good preparation, however, the potential for creating added value is enormous. Targeted ESG investing enables considerable increases in value, especially in the real estate sector.