The trend towards Environmental, Social, and Governance (ESG) considerations in investment decision-making is accelerating. Nowhere is this more apparent than in real estate. And there are good reasons for this.
We know that that the built environment accounts for 39% of global carbon emissions. We also know that our buildings and public spaces can have a dramatic impact on our health, wellbeing and productivity. And we’re starting to see climate change impacting on our communities, towns and cities. Sustainability and resilience are the two key factors at play.
Embedding ESG considerations into investment decisions is one mechanism through which we can affect real change. But challenges remain with a lack of common reporting standards and metrics. There is also a lack of reliable, comparable, and realtime data, and this is where PropTech comes in.
PropTech and ESG
PropTech can be thought of as the application of digital technology to property.
Used well, it has the potential to unlock data that can be used to improve the performance of our buildings and the public realm. Opportunities include building and energy optimisation, predictive maintenance, and the improved utilisation of physical environments. Ultimately, PropTech if used effectively can support more sustainable and resilient built environments.
Data is critical for understanding both how our assets are performing and to drive improvement.
Over the next few years, data that is in realtime, reliable and comparable will become critical in the built environment. A real driver for this will be ESG related requirements underpinned by consistent reporting metrics. These requirements, once developed, will largely shape investment, loan, and indeed even insurance, decisions. We will also see a further increase in pressures from buyers and tenants, for homes, buildings and public spaces that have a positive social impact. We’re starting to see this with the proposed sets of metrics outlined in, for instance, The Sustainability Reporting Standard for Social Housing.
Ethics and Proptech
While these moves towards a data led built environment are on the whole positive, it would be remiss to not mention ethics. Emerging tech raises complex questions about the ethics of data and the potential for unintended consequences; depending on the type of data we look to collect, these questions will proliferate.
And there have been controversies over the use of AI driven automatic facial recognition technologies being deployed in public/commercial spaces, concerns about privacy in the context of the Internet of Things (IoT), and concerns about cybersecurity and the potential for our homes and buildings to be hacked.
We’re right to be concerned. Efforts need to be made to engage the public in a meaningful way, and to build in robust cybersecurity and privacy considerations from the outset.
Final thoughts
PropTech has a bright future in providing real benefits for asset owners and managers, for tenants, and for individuals and communities. And as part of this, ESG relevant data will play an increasingly important role in determining investment decisions. Ultimately we need data, systems, and tech, that can support in maximising efficiencies in our built environment and support sustainable and resilient built environments.
***
Keyah Consulting works with companies on their approach to ESG in real estate, and across health and the built environment. If you’re ready to explore what ESG might mean for your business, get in touch.