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Right strategy, right technology are key to ESG success

Right strategy, right technology are key to ESG success

The last couple of years have been a turning point in many ways, particularly when it comes to climate and social inequality, and many organizations are using Environmental, Social and Governance (ESG) to help guide their future.

If your organization is currently working on an ESG strategy, you are definitely ahead of the curve. If you are part of a company that has yet to invest in ESG, it is important to realize that it is here to stay.

The changing societal views have resulted in governments worldwide beginning to install regulations that make an ESG strategy necessary. Increasingly, earnings calls for an organization cannot focus solely on financial statements and require a look at ESG performance as well.

ESG success can only be obtained if a company has the right strategy and technology in place. These are just a few of the issues I covered in a recent discussion with Multi-Housing News.

An organization first must look at its portfolio and then decide what type of ESG company it wants to be, such as an ESG-first organization. It will then need to develop a strategy that brings it to that goal.

ESG has financial impacts on properties

When seeking financing for multifamily housing projects, ESG plays a vital role in the terms a builder can obtain from lenders, and it opens the door to a pool of investors who might otherwise not consider the project. Organizations with projects that are more environmentally friendly have an opportunity for lending earmarked strictly for sustainability or ESG purposes.

ESG Certification also affects the value of a property. LEED certification, which is a framework for highly efficient, green buildings, can lead to a higher market value. You spend more upfront, on both certifications and building costs, but you get a higher ROI based solely on the certification. ESG certifications show that the company is making efforts to reduce operating costs via efficiency, resulting in a higher value for that property.

Potential investors or buyers of a property will want an organization or property to prove they have ESG in place and it is working. A part of due diligence now is to collect data on actual energy usage, such as water and gas consumption, to show an organization is adhering to ESG strategy. Certifications alone will not be enough.

ESG success requires technology, choose wisely

Many properties only have the capability of showing overall energy performance by building or unit. Smart technology, however, now makes it possible for an organization to obtain granular data on energy usage in almost every aspect of the property.

This granular data allows them to make the necessary adjustments to the property’s energy consumption and create a more climate-friendly community. More data leads to a better ESG strategy. To achieve this, they need to have hardware and software that turns all this data into meaningful results.

After developing an ESG strategy, an organization must align itself with a supplier that can provide the data necessary to make those decisions and present it in a way that works. Hardware is only half the battle, so it’s wise to avoid a supplier that only works with a single system or a limited one. A good supplier is one that can also offer cloud and software that extracts all the data in a meaningful way. This data should easily transition for anyone constructing an ESG report for an organization.

Owners/operators should ask potential suppliers these questions to ensure they are compatible with the organization's ESG strategy:

  • Are they a supplier of only components or are they ESG-focused?
  • How do they go to market with ESG products?
  • Are they building the right functionality into their products?
  • Are they focused on the future of ESG and its technology?

Current and future ESG technology

Companies that have implemented the right components and software into their ESG strategy have seen annual savings of up to 20%. The current most popular components are HVAC controls, lighting systems and leak detection.

HVAC components have greatly expanded the control of energy usage, going from just the common areas to better control in units. When a unit is empty, energy usage can be programmed to eliminate unnecessary consumption. When occupied, residents will have better control over their own usage and can even be added to demand-response programs.

Lighting systems allow for smarter control over common areas and exterior LED lighting, which can result in greater savings and environmental impact.

Leak detection and waterflow systems save money in numerous ways. Leak detection devices alert to a leak before it goes from a nuisance to a catastrophe. Not only does this prevent major repair costs but also reduces insurance premiums. Water flow systems make it possible to collect data on all areas of water usage right down to a unit’s shower or dishwasher.

There are other ESG components that are experiencing increased interest lately. Smart waste programs use sensors that alert a community on how full their trash is in each dumpster or can. These sensors can be fitted with cameras that alert maintenance or waste management companies if a trash or recycling receptacle was contaminated.

Indoor air quality and building health components examine such items as ventilation and circadian lighting. The heightened awareness around health these days has made this a more necessary component for communities.

Regardless of which strategy a company takes, ESG is a growing part of the multifamily industry. To be successful financially, organizations will need to make sure they have the right technology.

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