ESG Research: A call to action - enhancing ESG solutions for real estate sustainability

A call on ESG Software solutions

The evolving landscape of ESG solutions for real estate highlights the complexity and critical need to align technology with sustainability objectives. Real estate organisations are increasingly leveraging these solutions to enhance not only their environmental performance but also their social and governance outcomes [1]. Throughout this series, we have gotten a glimpse of the diverse array of ESG solutions available, acknowledging that while we have interacted with some, the market is dynamic—new solutions will emerge, existing ones may be acquired, and many will be consolidated.

Our findings reveal a strong emphasis on optimising the Environmental (E) aspect of real estate, given its direct and measurable impact on asset performance, including reductions in waste and emissions. This focus is understandable as it offers tangible results and the possibility of comparison between current and future scenarios. In contrast, optimising Social (S) and Governance (G) aspects are more challenging, partly because these elements often pertain to broader organisational strategies rather than individual assets.

We identified two main pathways taken by solutions when it comes to asset optimisation on the E aspect: improving consumption efficiency and enhancing structural aspects. While many solutions focus on the first, few on the latter. Additionally, we noticed a gap between how solutions market themselves to real estate parties. There is a tendency to use buzzwords related to ESG and a lack of positioning of the product to how real estate organisations are structured. This gap often leads to confusion in the ESG software market, where buzzwords can obscure the practical benefits and user-specific applications of various solutions.

This is where confusion often arises. Questions around: What does data analysis in this solution entail? Who within my organisation can access the data available in this solution? Will property managers and asset managers have access to the same information? Can a solution designed for property managers also provide insights at a fund level, making it useful for portfolio managers? These ambiguities highlight the need for clearer communication and understanding of how different ESG solutions fit within the various roles and levels in real estate management.

Established solutions, with their deep roots in real estate, often provide clearer marketing and target audience definitions. Even though ESG is not their main business. In contrast, new or specialized ESG solutions, though innovative, might need to better articulate their functionalities and benefits within the real estate context.

To address the gap in understanding how ESG solutions integrate with the real estate organisational structure, we developed a framework that cross-referenced how these solutions handle data, the types of data collected, and the real estate organisational pyramid. Beyond filling this gap, the framework aims to provide a high-level overview of the ESG market tailored to real estate. It enables solutions to map their functionalities within the framework, offering a clearer understanding of their offerings and helping real estate organisations better align their operations with these solutions.

It is important to note that throughout the articles, we have used the term "ESG solutions" to refer both to dedicated ESG tools and to established systems that incorporate ESG features. While there are significant differences between these types of solutions, both aim to address ESG-related challenges or gaps in the market. 

Ultimately, whether you are exploring ESG-specific solutions or established systems with ESG features, it is crucial to start by understanding how technology can be integrated into your processes to drive sustainability. For ESG solution providers, we encourage you to align your functionalities with our framework. For real estate parties, we are here to support you in beginning your ESG journey and navigating the integration of ESG and technology throughout your processes.

Source

1. Choosing real estate ESG Software: Three Key considerations for Buyers. (2024, June 7). Verdantix. https://www.verdantix.com/insights/blogs/choosing-real-estate-esg-software-three-key-considerations-for-buyers

Disclaimer: Please be aware that the information in this article is based on verbal communication with suppliers and has not been independently verified.