The CRE sector has a huge role to play in helping combat climate change. According to Architecture 2030i , a non-profit environmental advocacy group, buildings are responsible for nearly 40% of annual global carbon dioxide emissions. Of these, 28% are caused by building operations, and the remaining 11% by building materials and construction (embodied carbon). As the world transitions into a lower-carbon economy, Real Estate leaders can make an impact: first by collecting and assessing data on the environmental impacts of building operations, then by investigating and implementing resource efficiencies, and finally by partnering with developers who use sustainable practices and materials.

By ”green leasing” we mean that tenants either commit to or benefit from embracing sustainable practices, such as waste reduction. More and more organizations are focusing on green leasing. Half of respondents of the 2021 RICS Sustainability report claimed that green leases command premium rents, and 30% state that brown buildings (those without sustainability features) offer reduced rents to compensate tenants.

In our 2022 Deloitte Center for Financial Services Outlook Survey, ESG is a key topic. Turning to the “S” in ESG, only 50% of respondents believe their organization is making strategic investments to improve affordability and quality-of-life issues in communities in which they operate. Less than half of them say their institution is taking steps to increase diversity in the tenant-mix to reflect community demographics. Industry leaders should recognize that stakeholders increasingly expect improvements in these areas. Developer DL3 Realty is now on a mission to revive communities by redeveloping properties in disadvantaged neighborhoods. They have converted a vacated Target store into a Blue Cross Blue Shield customer care center, creating access to health care for neighborhood residents. Another property was repurposed into a call center for Discover Financial Services. This provides employment opportunities for local workers.

As regulators step up ESG reporting demands, firms will soon have to prioritize these efforts. In September, the US Securities and Exchange Commission released a sample letter that requests additional information from companies concerning their efforts to address climate change. Recent disclosure rules in the European Union’s Corporate Sustainability Reporting Directive and the China Securities Regulatory Commission will also require companies to identify, track, and report on key performance indicators, such as carbon emissions and human capital metrics.Our survey showed that for smaller firms, quantifying climate risks in their business and portfolio, as well as quantifying DE&I initiatives and social equity across different geographies, was particularly challenging.