A SOCAP Global webinar covered the topics of ESG and real estate investing. The panelists discussed the current urgency of impact investing. They also talked about how PGIM Real Estate and RBG Smith are adopting ESG strategies and scaling.
During the SOCAP Global webinar, four panelists came together to discuss real estate and impact investing. The speakers include:
Reuben Teague: Executive Director, Impact Investments, PGIM Real Estate (Moderator)
Shubha Maheshwari: Vice President of Global ESG, Verdani Partners
Kimberly Pexton: Vice President of Sustainability, JBG Smith
Christina Hill: Head of Americas Asset Management & Global Head of ESG, PGIM Real Estate
ESG Investing: Then and Now
About thirty years ago, in the early years of ESG, companies focused on policies and how to comply with them. Today, there’s been a major shift to taking action first and demanding policymakers for action later. Companies went from contemplating whether to follow ESG principles to asking how soon they could achieve them. This is a huge shift that has directly impacted many industries, including real estate.
More companies are switching to ESG because climate risk equals an investment risk. Investors are not going to put their money in questionable investments.
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According to Christina Hill, Head of Americas Asset Management & Global Head of ESG, PGIM Real Estate investing in ESG has demonstrated a proven ROI. Getting involved in ESG is a good thing from an investment perspective. “Through ESG, assets are more durable socially, more durable environmentally, and more durable financially because of strong risk-adjusted cash flow.”
Furthermore, the value proposition of ESG is not strictly limited to sustainability. Kimberly Pexton, Vice President of Sustainability, JBG pointed out that the current issues in climate change and social justice are not separate. They fall together and act as a driving force for ESG.
Integrating ESG Strategies in Real Estate Companies
PGIM Approach
In the real estate sector, ESG principles can be applied to several issues. For the environmental aspect, real estate companies may focus on resource reduction. This means cutting down water and electricity use. On the social level, PGIM puts great effort into tenant engagements and stakeholder relationships.
Furthermore, ESG implementation is measured and managed through data collection. Data collection is huge in PGIM and is key to its success. The company uses in-house tools to manage all its data. Without data, the company wouldn’t be able to see progress or keep track of goals.
JBG Smith Approach
During the webinar, Kimberly Pexton spoke about her firm approach to ESG principles. She emphasized the governance advancements that JBG Smith has made. For example, in 2019, JBG Smith added a Vice President of diversity and inclusion. This has built a great foundation for more inclusion within the company.
Also, Pexton’s company has contributed to its local community. She mentioned how the leasing team in JBG Smith has leased space to minority-owned businesses.
Scaling ESG in Real Estate
When implementing ESG strategies, scaling is the biggest obstacle. As Christina Hill said, people want to see change quickly, but that’s not always possible.
For instance, PGIM’s goal is to reduce carbon emissions from 2,000 of its properties. It may look like this will require only one solution, in reality, there will be a need for many solutions.
Each property can have different problems. Some may have water issues, while others may have electricity problems. Solving individual problems may take time, but progress is indeed underway.
Overview of the webinar
When considering ESG in real estate, scaling at a global level will be difficult, but necessary. As the conversations came to a close, Hill emphasized that there will be societal pressure to comply with ESG principles.
It will be important to focus on continuing building solutions for every sector and business, including for the real estate industry, to make sure ESG principles will be adopted as a normal standard.
Editor’s Note: The opinions expressed here by Impakter.com columnists are their own, not those of Impakter.com
