Environmental, social and governance (ESG) factors are becoming more prevalent in the rental housing industry. While a number of large companies like Nike and Starbucks have been reporting ESG metrics for years, apartment companies have recently started adopting the practice.
However, keeping up with the regulatory landscape can be difficult to say the least. Between vaguely written laws and ever-changing guidelines, many operators are uncertain about how to navigate ESG reporting and why it’s beneficial to the entire community. But as the benefits of ESG reporting continue to become more apparent, operators and investors world-wide are taking note.
According to CBRE’s 2021 Global Investor Intentions Survey, 60% of participants indicated that they have already incorporated ESG criteria as part of their investment strategies. As ESG continues to gain momentum, a greater number of investors are demanding that considerations surrounding ESG be embedded into every phase of a property’s lifecycle.
As a way to assess an apartment community’s operations and its impact on environmental and social factors, ESG reporting is offering tremendous benefits for participating communities. We’ll explore some of the benefits below:
Progressing environmental initiatives
Although each facet of ESG is vital to keeping society on the right path, sustainability in rental housing is becoming increasingly prevalent. Operators and investors are tapping into various products and services that encourage an environmentally-conscience community. Things like climate change have operators searching for ways to mitigate the negative affects communities have on the environment and lessen their carbon footprint.
A recent survey conducted by Workiva and Coleman Parkes found that 43% of respondents said their organization’s ESG budget is allocated to address environmental factors. From utilizing energy-saving appliances and enacting water conservation measures to making the leasing and maintenance processes nearly paperless, almost every component of the multifamily industry is being revamped with ESG in mind.
For example, issues such as excess trash or unscooped pet waste are found at many apartment communities and can wreak havoc on the environment. Many operators are looking to third-party services not just to alleviate problems like these, but to do so in a way that is sustainable and has lasting, positive impacts on the environment.
Regardless of the green initiatives and practices an operator chooses to implement, every community can benefit from ESG reporting.
The financial upsides
For the modern resident, living in an environmentally friendly community is at the top of their list. Residents want to know that they are doing their part in protecting the earth, and that the community where they live is doing the same. Keeping a clean community and implementing sustainable measures that promote eco-friendly lifestyles doesn’t only broaden the potential resident pool, it enhances the living experience and bolsters occupancy rates.
High occupancy rates and increased resident satisfaction are undeniably beneficial to operators, but communities that put an emphasis on ESG reporting see a number of additional financial upsides as well. ESG focused communities generally see higher rents than competitors, receive tax credits and gain an overall higher market value. While a company may have different motives for ESG reporting, like ensuring responsible business conduct, mitigating environmental threats or diversifying its workplace culture, the impact can be great.
In fact, seven out of 10 respondents of the Workiva survey indicated that ESG reporting has added tremendous value to their organizations. When it comes to customer retention, cost savings and associate morale, these companies are seeing increases upwards of 70%.
ESG reporting is another way for apartment communities to add value, and an increasing number of operators are using it as a way to not only create a positive environmental and social impact, but to increase NOI as well.
Whether it’s to boost resident satisfaction and occupancy rates or it’s to seize investment opportunities and increase revenue growth, ESG reporting presents plenty of benefits to residents, operators, investors and the entire community at large.