Real estate’s ESG push needs resilience as a fourth pillar

THE last two-and-a-half years have been a stark reminder that stability is not to be taken for granted. The world has grappled with a global pandemic, waves of political tension with international consequences, and extreme weather conditions – including the second-hottest and coldest temperatures on record in Singapore alone. As a result, how we live, work and connect with one another and how we interact with the places and spaces around us have shifted, perhaps irrevocably.

As a protagonist in these unfolding crises, the commercial real estate industry has its own role to play. The industry is one of the largest contributors to global carbon emissions. While this is the reality, it’s not all bad news. Yes, it is a challenge to limit this contribution to carbon emissions – but looking at it positively, there is a real opportunity here for the industry to rally together to ensure that emissions are reduced to achieve national and global targets, as well as create spaces that are resilient for the future.

To help limit this increase, owners and operators are using ESG (environmental, social, and governance) as a framework to prioritise initiatives and measure progress. Recently, however, it has become apparent that ESG alone is not sufficient if we are to prepare our sector for potential future shocks and therefore the flexibility that these may demand of us. Enter resilience.

Why resilience?

Although a tricky pill to swallow, it’s become increasingly clear that we are not able to prevent climate change completely. Here in Singapore, the National Environment Agency has cautioned that extreme weather events could become more serious and frequent due to climate change. As such, it becomes a priority to create spaces that are resilient to these changes, as well as trying to reduce the scale and rate of change.

In the context of real estate, resilience applies in three main areas. It involves being able to adapt to change, whether environmental or societal, and having the flexibility to stay current against constantly evolving technology.

First is the resilience of a building itself: how its physical infrastructure can adapt to global challenges such as power grid failures and weather-related impacts. This could include flood prevention measures or back-up power for critical systems.

Second is the resilience of the technology within a building: how future-ready such technology is. For example, there is the risk of obsolescence if technology cannot be upgraded or is no longer operable. This might be the case if an in-building mobile solution cannot be upgraded to 5G, say.

Third is how technology can support the building in being resilient: how much of a long-term impact technology has on a building’s ability to adapt to change. A good example is the shift to flexible working brought about by the Covid-19 pandemic. This resulted in the implementation of cloud-based technologies across all IT infrastructure to allow for remote working.

When ESG and resilience-related goals are in place, owners and operators are under immense pressure to demonstrate how they are tracking and improving against these objectives. The consequences of misreporting data, and not using the data to optimise outcomes, are significant. If we are to ensure real estate has a positive lasting impact and delivers good outcomes for users, the technology implemented needs to gather information that will enable better decisions to be made.

Modern buildings are now so complex that it is impossible for a human to monitor the millions of available parameters, let alone optimise the many interrelated systems in real-time. The technology in an intelligent building can monitor every data point and over time learn how to balance and optimise every system to make the whole building as efficient and effective as possible.

It is clear that technology has a foundational role in delivering ESG and resilience in commercial real estate. However, it is equally important that this strategy is undertaken proactively rather than reactively. We need to deliver real estate that both minimises emissions and is resilient to the impact of these emissions. Without using technology to underpin this, there will come a point at which we will be left with stranded assets that are unleasable, therefore unsellable, and ultimately unusable.

The writer is global director of Asia-Pacific at WiredScore.