An ESG benchmark provides comparable and reliable data on the ESG performance of investments in real estate. Environmental, social and governance (ESG) metrics enable enterprises and undertakings to reach their long-term business goals, improve relations with stakeholders and local communities, and boost their brand recognition and value.
Besides sustainability, an ESG benchmark is used to improve the investment performance of properties. ESG-compliant investments generally perform better than real estate assets that do not respect ESG sustainability principles.
The ESG investment policy of asset managers considers the risks and opportunities associated with environmental, social and governance issues across the investment cycle. This reduces business and financial risk while improving the return on the investments.
Sustainable, responsible and impact investing actively selects or eliminates investments according to specific ethical guidelines and ESG investment criteria. There is a wide range of voluntary SRI codes of conduct for the finance industry, often in partnership with public agencies and other stakeholders.
A variety of sustainable building certification systems assess, verify and certify the sustainability of buildings for developers, investors and operators. LEED, EDGE and BREEAM are leading international sustainable building certifications that provide operational and brand-value incentives to property owners.
The United Nations Principles for Responsible Investment (UNPRI) promotes SRI investing. It recommends a variety of "voluntary and aspirational" actions for incorporating ESG issues into investment practices across asset classes.
The European Green Deal Investment Plan (EGDIP) was established by the European Commission to mobilize EU funding and stimulate public and private investments to promote and facilitate the transition to a climate-neutral, green, competitive and inclusive economy. It outlines the framework of regulations and legislation aimed at achieving the EU's sustainability targets and transformative agenda.
There are several tools for identifying hotel companies and property owners that are committed to improving the sustainability of their portfolio. Two of the best known are the GRESB Portfolio Analysis Tool and MSCI ESG Ratings.