From ESG 1.0 to 3.0

You’re the Head of Operations for a large and diverse portfolio consisting of over 15,000 multifamily units, 8 million square feet of office space and 3 million square feet of retail.

Recently, you’ve been “volunforced” to head up the ESG committee. Even more difficult than the vague mandate to “do ESG,” there’s an explicit understanding that any new investments are to have a quantifiable ROI.

The other frustrating aspect is that the company already does good work. Social considerations have been woven into the company’s DNA and community development is incorporated into every ground up project.

Likewise on the environmental front, the company has implemented numerous initiatives in the past couple of years, though the tracking and reporting of these have not necessarily been standardized.

In internal meetings, a similar vein of conversation keeps coming up: “The entire industry is facing the exact same situation, why does it feel like we’re reinventing the wheel?”

The clock is ticking and there’s immense pressure to get it right so that the portfolio can continue to scale. What’s needed is a roadmap, a clear progression from the first step to the ultimate goal.

So, let’s break ESG into three broad categories, each of which builds on the last.

ESG 1.0

ESG 1.0 is simply benchmarking at the portfolio scale.

Some cities, like New York, Boston and Los Angeles, have required utility benchmarking submissions for years. While there are industry leaders, many organizations are doing what’s required in each locality, but not at the portfolio level.

The value of ESG 1.0 is two-fold:

• Checking the box for investors that will not provide capital to firms that do not have reporting in place

• Allowing non-technical stakeholders to leverage a benchmark to inform allocation of resources

That’s where reporting frameworks come in. While there are dozens of different standards, when starting out, the first step should be to get whole-building utility data into Energy Star Portfolio Manager. 

While an arduous process to do manually, this is very straightforward with technology. In most cases, technology providers can integrate directly with utilities to pull this data into a central platform and then push it on a regular basis to Energy Star Portfolio Manager.