ESG – rate this
ESG is a long-term strategy thus it requires responsible implementation, says Łukasz Jachna, Chief Capital Markets Officer and Board Member at 7R.
Powered by global players, corporate social responsibility (CSR) has emerged as a positive trend. The spread, however, calls for clearly defined standards for ethical strategies making it possible for corporates to abandon business models based solely on generating profits in the social isolation.
This is why the sustainability-conscious companies today have to meet the ESG (Environment, Social Responsibility and Corporate Governance) criteria. In order to attract long-term investors they need to report on their actions, contributions and impact towards sustainable development.
Investing in the future
- In our opinion ESG has always been out there but it hasn’t been well defined,” says Łukasz Jachna. - ESG standards are guidelines for the companies who look to improve their operational efficiency,” he adds. Compared to indicators like revenues, profits, or turnover – which are determining the profitability of the company – ESG is seen more like soft data at the moment. But Łukasz Jachna predicts that ESG may become a more precise indicator over time, making the companies with the powerful social and environmental impact a top target for investors.
ESG is a long-term strategy which means that within the next five years a property that does not meet the ESG requirements might not be able to attract a tenant, as more and more companies will expect specified leased space requirements which are in line with their internal sustainable policy. Same thing can happen when it comes to potential buyers. Real estate developer who fails to act on ESG issues is taking a risk of not finding a buyer for its product in the future. Especially when it comes to institutional investors,
says Łukasz Jachna
Chief Capital Markets Officer and Board Member
Gaining advantages today
But in fact, the ESG strategies are already providing market advantages, such as reducing warehouse costs. This is why 7R is focusing on eco-solutions that actually pay off, such as reducing warehouse energy and water consumption.
- Reducing warehouse operational costs requires additional investments, for example in water filtration, or rainwater collection. However, these investments provide an actual savings to our tenants, which then can be used to implement other ESG solutions within their own organization - points out Jachna.
In an effort to improve market value, as well as to provide additional advantages to tenants, 7R is implementing the sustainable solutions both in the design and the development stage.
- From the investment side it means higher construction costs and more time spent on the pre-development stage. But in order to succeed in the real estate market you need to think long-term, as well designed projects will not require additional investments in the future - adds 7R's expert.
This is why 7R is now focusing on efficient energy use. As a part of its pilot program, the developer is introducing a system to provide tenants energy self-sufficiency. At the same time, in one of its Krakow’s projects it is implementing the so-called trigeneration, or combined cooling, which is recovering gas energy for cooling system.
- Shifting some cooling power to natural gas is an ecological solution and additionally it transitions the warehouse into zero-emmision building. In order to implement these solutions tenants need to understand the need for them. And it is our responsibility as a developer to make them aware of what they need - says Łukasz Jachna.