It’s about sustainability – and financial performance 

For those newer to the concept, ESG originated as an investment term, specifically referring to investments with a priority on optimal environmental, social, and governance factors or outcomes. When ESG is a priority, investments are made with consideration of both environmental and human wellbeing. OECD Paris reports numerous drivers of ESG investing, including the growing societal attention to the risks from climate change, the benefits of responsible business conduct, and the need for diversity in all ranks of the workplace.

Simply stated, ESG investing is based upon the growing belief that the financial performance of organizations is increasingly affected by both environmental and social factors. It’s about both mitigating risk and creating value.

  

Stepping up to meet shifting resident priorities 

Prospective and current residents alike have begun to demand a greater focus on social impact of the companies with which they do business, including their landlords. “Over the last 5 to 10 years, there has been increasing focus on being good corporate citizens,” Rachel Woolf, SVP, Investor Relations & Operations with Blue Vista Capital Management told the National Apartment Association’s UNITS magazine in 2021. Consider these data points from the recently published NielsenIQ Global Health & Wellness Report:  

• 67% of global consumers say that environmental health and how their choices impact the planet is important to them

• 68% of surveyed global consumers are willing to pay more for produces that support communities and vulnerable groups

• 34% of surveyed global consumers are more likely to buy products with sustainable credentials than 2 years ago

• Customers may be more likely to lease, or continue to lease, from multifamily owners and operators with a demonstrated commitment to sustainability and responsible business practices.

 

Environmental gaps multifamily owners, operators and managers can fill

From the U.S. Department of Energy, the building sector is said to account for 40% of energy usage and Co2 emissions in the U.S. How can multifamily communities be advocates for higher environmental regard? There are countless ways to do so, including:

• Investing in programs and solutions that are leveling up energy data and reporting and helping raise the bar by creating greater awareness and transparency around consumption

• Transitioning to net-zero paperless workplaces and embracing digital rent collection, maintenance requests, and resident communication

• Employing energy and water conservation practices; utilizing energy efficient appliances

• Thoughtful waste management practices including recycling

• Using energy efficient lighting throughout the community including the use of LED bulbs in residents’ homes

• Making it easy for residents to behave in environmentally friendly ways by providing electric vehicle charging stations and recycling

• Reducing resident turnover can result in a reduced use of natural resources require for maintenance and repairs as a byproduct of resident retention

 

Welcoming inclusion, diversity, and deconstructing barriers to entry

The social considerations of ESG encompass both customer-facing practices and employee relations. Some ways that communities can promote social considerations for both residents and onsite teams include:  

• Creating and maintaining employee-friendly work practices, such as generous benefits and paid sick leave

• Supporting diversity, equity, inclusion, and justice by dismantling barriers to resources and opportunities in the workplace

• Upholding fair business standards and treating all suppliers and business partners honorably

• Actively engaging with the neighboring communities in which rental communities are located to support and uplift small businesses and local charities, and important causes

• Supporting the physical and mental health and wellness of employees and residents

Governance considerations that come into play for Multifamily

Multifamily communities and their owners and operators can mitigate risks at all levels by adhering to all federal and legal requirements. For example:

• Abiding by fair housing laws and ensuring all customers are treated fairly

• Prioritizing customer and employee privacy in all aspects of community operations

• Ensuring secure transactional payments across all applications

• Upholding an ethical code of conduct across every facet of business operations, from hiring and employment practices to client and partner relationships

• Adhering to all local, state, and federal laws and legal requirements

 

Long-term rewards for investing in ESG today

 According to Colliers’ 3rd annual Global Investor Outlook report, many multifamily investors have already jumped onboard the ESG bandwagon and are including 5-10% of their portfolio allocations to commitments within the next 5 years. A commitment to ESG can help multifamily firms meet the increasing pressure from their customers, investors, and business partners. It can also help to mitigate risk, lower expenses, and safeguard return on investment—all contributors to the business’ bottom line. Because regulatory measures are expected to continue to tighten over time with regard to every aspect of environmental, social, and governance concerns, multifamily property operators who incorporate ESG efficiencies can not only stay ahead of the curve but may also boost long-term asset value.

 

 

Sources:

· ESG Settles Into the Multifamily Industry, Multi-Housing News, https://www.multihousingnews.com/esg-settles-into-the-multifamily-industry/

· ESG Investing: Practices, Progress and Challenges, OECD Paris, www.oecd.org/finance/ESGInvestingPracticesProgressandChallenges.pdf

· ESG: What It Is and Why You Should Care, UNITS magazine, https://www.naahq.org/esg-what-it-and-why-you-should-care

· Global Health & Wellness Report, NielsenIQ, https://nielseniq.com/global/en/insights/analysis/2021/how-health-conscious-consumers-want-to-live-in-a-healthy-world/

· Global Investor Outlook: Will 2023 Bring Stablization?, Globest

https://www.globest.com/sbm-gbst/2022/12/21/global-investor-outlook-will-2023-bring-stabilization/

· Rental owners turn to tech as pressure for ESG reporting grows, Multifamily Dive

https://www.multifamilydive.com/news/rental-owners-turn-to-tech-as-pressure-for-esg-reporting-grows/631499/