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Companies around the world are stepping up on their efforts to decarbonise their business, and countries are setting national targets to reach net zero under the Paris Agreement. As APAC’s largest real asset manager powered by the New Economy and the third largest listed real estate investment manager globally, ESR Group Limited (“ESR” or “Group”) places top priority on its transition to become a net zero organisation.
Climate Emergency and the Era of Global Boiling
Recent climate events – extreme heatwaves and devastating floods – are occurring globally and this highlights the urgent need for concerted climate action. Instead of focusing on this urgency, some countries are shifting their focus to address energy security as a result of external headwinds such as
economic recession, supply chain disruptions, and geopolitical tensions. The disparity between the current climate crisis and inadequate actions has resulted in global greenhouse gas (“GHG”) emissions reaching an all-time high this year. This prompted the United Nations to warn that the era of global warming has ended, and the era of global boiling has arrived. To address the catastrophic impacts of climate change, ESR believes that immediate decarbonisation actions must be taken to transit to a net zero future.
Net Zero in the Real Estate Sector
The built environment is responsible for almost 40% of global energy related GHG emissions and the real estate sector could contribute to a positive impact. Achieving net zero depends on a myriad of factors such as the type of asset class, location, and condition of buildings, with a fit for purpose strategy. In developing a decarbonisation strategy, real estate owners and managers should consider their building portfolios, regulatory requirements, and the market availability of low-carbon technologies and solutions.
At a basic level, real estate companies should reduce their Scope 1 and 2 operational GHG emissions, which are normally associated with energy use from direct and indirect sources (e.g., on-site fuels and grid electricity). Specifically for developers and owners, GHG emissions across their value chain such as embodied carbon should also be considered. This includes tackling other forms of Scope 3 GHG emissions throughout the life cycle of a building (i.e., from design, construction, operation to demolition) and addressing tenants’ energy consumption within the portfolio.
After establishing the boundaries and sources of GHG emissions, companies should set realistic targets which are aligned to global standards such as SBTi , WorldGBC or RE100. However, companies must avoid setting underpromise or ambiguous net zero targets with misleading climate claims. Companies’ targets should be supported by robust performance data which are collected through the data management system to facilitate monitoring and reporting.
ESR’s Decarbonisation Approach
As part of its ESG 2030 Roadmap, ESR is on track to develop and announce its net zero commitment and strategy this year. This encompasses a carbon mitigation hierarchy approach which prioritises GHG emissions avoidance through low-carbon design and construction (i.e., minimise embodied carbon) and achieves energy efficiency through the asset enhancement initiatives and optimisation of operations (i.e., reduce operational carbon). These efforts will be complemented with the adoption of on-site renewable energy from sources such as solar or hydrogen to further reduce emissions. As of first half of 2023, close to 100 MW of rooftop solar power capacity has been installed across the Group’s global portfolio with approximately 39% of its assets being awarded with sustainability building certifications and ratings. Additional highlights include ESR leveraging on the rooftop space of its assets to provide renewable energy certificates for its customers. For more information, please refer to ESR’s ESG Report 2022.
Climate change has no boundaries and affects the current and future generations. The real estate sector could play a significant role in combating the climate change. However, fighting this uphill battle is a collective effort that requires everyone’s commitment, collaboration, and concerted actions. In accelerating a positive impact in the real estate sector, ESR will lead the way forward to a climate resilient future.
Group Head
Governance & Sustainability ESR Group
Cushman & Wakefield’s ESG Report covers our global impact during 2022, select highlights from 2023 and targets for the years to come as we work toward shaping a more sustainable, inclusive future for commercial real estate.
Read the Report Read MoreIn this month's ESG Buzz, we explore how DEI drives corporate performance and highlight necessary steps to achieve success in this area.
Diversity, Equity, and Inclusion (DEI) initiatives are showing some progress in the Asia-Pacific region, but they still have a considerable way to go. At SS&C Intralinks, we recognise that DEI is no longer just a buzz term for corporate reporting. Instead, these initiatives are critical in driving long-term success across every industry.
The Power of Diversity in Corporate Performance
Diversity encompasses a wide range of dimensions beyond gender and ethnicity, such as age, sexual orientation, disability, and more. Embracing diversity across these dimensions brings fresh perspectives, enhances creativity, and fosters innovation.
It should also be noted that diversity drives marked improvements across every corporate reporting metric. The Gender Diversity & Dealmaking 2022 report by SS&C Intralinks revealed that:
Additionally, McKinsey research has found that companies with high levels of executive- level diversity were 62% more likely to outperform their competitors in profitability. Another study found that when women match men’s participation in the workforce, significantly more opportunities arise that could improve Asia-Pacific’s GDP by 12.5% - the equivalent of USD $4.5 trillion.
The Current State of DEI in APAC
Kantar analysis reveals that DEI initiatives are struggling in APAC, despite growing awareness of their importance among businesses and brands. The annual global study revealed DEI initiatives were struggling in APAC markets. Although Australia showed the second-largest growth in DEI progress, Japan has gone backwards, and India underperformed, showing we still have a long way to go.
Another study by Workday found that the lack of a strategic approach in DEI was most prevalent in APAC, with more than half (52%) of respondents indicating that their organisations did not have an approach - which is concerning when compared to Europe (39%) and North America (34%).
From a reporting perspective, we see that DEI disclosure is slowly becoming a mandatory requirement across many domains. For example, the Hong Kong Stock Exchange and Singapore Stock Exchange have recently updated board diversity disclosure requirements for listed companies.
In Singapore, the voluntary target for the 100 largest companies is for 25% of the board to be female by 2025 and 30% by 2030, while South Korea has also implemented mandatory diversity quotas in 2020, requiring at least one female on the board of public companies.
Leading the way in private markets, AirTree Ventures, Blackbird Ventures, along with other VCs in Australia, have recently pledged greater transparency in revealing investments in women-led businesses to address start-up funding gender imbalance and promote diversity for better outcomes.
Steps to Building DEI Success
Creating an inclusive environment where all employees feel valued and respected is key to unlocking the true potential of diversity. This can be achieved by encouraging open dialogue, establishing mentorship programs, and implementing unconscious bias training to foster inclusivity. Every company should, at the minimum, be pursuing the following:
Addressing Pay Equity: Strive for pay equity within your organisation by regularly conducting pay audits and eliminating any unjust wage gaps. Fair compensation enhances employee morale and bolsters the company's reputation as a socially responsible entity.
Parental Leave Policies: Promote equal parental leave opportunities and support for working parents in company policies. Encourage shared caregiving responsibilities, while fostering a family-friendly and supportive work environment.
Promoting Equal Opportunities: Ensure equal access to growth opportunities and leadership roles for all employees, irrespective of their background. Implement clear career advancement frameworks and mentorship programs to support career progression.
Embedding DEI in Company Policies: Integrate DEI principles into your organisation's governance structure and core values. Establish clear policies against discrimination, harassment, and bias, with stringent consequences for violations.
Measuring and Reporting Progress: Set measurable goals for DEI initiatives and track progress regularly. Transparently report on DEI metrics and outcomes to stakeholders, showcasing your commitment to accountability.
Embracing DEI practices leads to tangible benefits for businesses, employees, and society as a whole. By fostering a culture of inclusivity, we pave the way for innovation, increased productivity, and long-term success. So, take the leap, embrace change, and be at the forefront of the transformative power of inclusion. Let's make a positive impact and shape a brighter, more inclusive future for all.
Sales Director
South APAC, Alternative Investments
SS&C Intralinks
As a specialist real estate investor, Cohen & Steers has long viewed executive compensation and stock ownership as a critical pillar of governance, underpinning longer-term alignment with investors and broader stakeholders of the listed REIT sector across Asia-Pacific.
Managed properly, executive compensation can enhance value creation and growth over the longer run, help retain and develop talent and encourage sustainable business practices. Managed sub-optimally, compensation may encourage short-term behaviour, poor capital allocation and strategy, loss of key talent and risk losing the firm’s social license to operate.
Compensation and equity alignment can be challenging to get right. The pandemic has shown for a number of listed REITs that remuneration structuring and key performance hurdles were not fit for purpose, resulting in a wholesale “shifting of the goal posts” thereafter. Schemes with longer-term performance hurdles focused on securityholder returns and sustainability, with a greater lean into longer-dated stock grants, generally fared better through the cycle. An emphasis on nearer-term performance targets with outsized cash components or short-dated stock grants were ultimately more impacted by cyclical factors that were (at least partly) out of management’s control. Similarly, schemes that lacked a meaningful performance objective and were linked predominantly to the passage of time have generally not fared well.
Read MoreColliers’ latest Impact Report provides an overview of their progress towards their Environment, Social and Governance (ESG) goals and performance in 2022.
The report is structured according to the three pillars of their ESG strategy, Elevate the Built Environment: the environment, inclusiveness, and health and wellbeing, which represent the key areas where they can drive the most impact for our people, clients, and communities.
Their reporting is prepared with reference to the Global Reporting Initiative’s GRI Standards and frameworks set by the Sustainability Accounting Standards Board (SASB) and the Taskforce on Climate-Related Financial Disclosures (TCFD).
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