APRIL 2022
Issue #02 | Article 03 / 04
The role of technology in ESG
And what this means for commercial real estate.
Technology is fueling a new era of higher efficiency and understanding in the use, application and human dynamics of commercial space. This decade will witness a huge transition in the way buildings are developed – particularly where technology and ESG (Environmental, Social & Governance) are involved, as technology will be a significant contributor to efficiencies that are cost effective and sustainable. We talked to Avison Young experts to find out more about their views on technology in ESG.
The changing landscape of real estate with ESG
Current global ESG policy is focused on real estate as buildings are responsible for more than a third of all emissions and global energy consumption. Initiatives such as decarbonization commitments are being driven for both new and existing buildings. For Avison Young, ESG informs and is embedded into all of our decisions, leveraging our pilot technology to help guide our clients.
Taking a broad step back from specifics around technology, what is ESG’s overall role in commercial real estate?
Brandy: Given that buildings are responsible for 38% of all emissions and 35% of global energy consumption, it is inevitable that a substantial focus falls on real estate. Limiting global warming in line with the Paris agreement will require the built environment to slash emissions, placing real estate at the heart of the private and public sector as they ambitiously move toward net zero carbon.
Decarbonisation commitments should mean that net zero carbon for new and existing buildings will be commonplace by 2030 - and long before then in some markets. This is being driven by a growing variety of factors: occupier and investor demand, building codes, government regulation, taxation and subsidies, planning requirements, advances in building materials, increased use of technology and grid decarbonisation.
How important is ESG to Avison Young – from the perspective of technology?
Brandy: ESG and wellness are more important than ever to us and our clients. We are moving the needle from simply measuring our ESG performance to ensuring ESG metrics inform the best practices embedded in how we prioritize and deliver our services and how we guide our clients. Adopting a global, unified ESG approach, we are implementing and piloting a range of complementary property technologies that support our customers and our own teams in reaching our ambitious ESG goals and carbon reduction targets.
Some solutions include leveraging small smart IoT sensors with powerful AI, in some cases exploring indoor air quality sensors and smart utility meters to collect data, support our analysis, inform improvements and communicate project and portfolio performance in a range of areas such as Energy, Water, Waste, Health & Wellness.
10 trends for a zero carbon world
Across the world we are seeing ESG issues exercising a great influence throughout our economy, society and built environment. As countries start implementing climate change commitments made at COP26, our team looks at what the journey to net zero carbon means for real estate.
Both property owners and users benefit from ESG data
Technological advancements are providing occupant data that allows owners to better understand how the space is being used, and thus how long-term operating costs and carbonization can be reduced. As a result, users benefit from a more responsive and supportive environment, leading to increased health and wellness.
Do you have any examples of technology improving a property’s ESG offerings?
Liam: The field of building controls, advanced occupancy sensing, automation and data dashboarding are the greatest technological advancements in their potential to improve the environmental and social experience of a property. These technologies are providing more intuitive, healthy and comfortable space for users, while providing the data for building managers to decarbonize and reduce long-term operating costs of their assets.
If a client could start doing one thing today, from a technology perspective to improve upon ESG, what would that be?
Liam: I strongly encourage clients to collect occupant data for their properties. This will help them better understand how the space is being used, so it can be set up to be most responsive and supportive for users and ultimately be most efficient from an operational perspective.
ESG from a valuation perspective
ESG technologies provide an abundance of valuable, accurate data that is essential for the valuation process. For building management, knowledge of how it works and continuous improvement are needed to maximize performance.
What factor does ESG play in your role in valuation?
Jessica: In the realm of valuation, it’s everything. The industry started on typewriters, and relied upon thorough site inspections and visits to municipal planning offices. Technology clearly changed all of that now that we have geographic information systems mapping, online access to municipal documents and access to comparable databases.
Anything new to watch out for when it comes to technology and ESG?
Jessica: Various new technologies are driving efficiency and helping reduce consumption. With the rush for data collection, we’re discovering the value behind securing the most accurate, timely and efficient meters, metrics, sensors, and software for buildings. Smart building automation systems have come a long way to enable streamlined data collection, analysis and action rooted in automation and optimization for better performance. Many buildings, particularly those that are LEED-certified, are outfitted with sub-meters and sensors to measure indoor air quality. But you can’t just install this technology and walk away. An operations team must know how to utilize this data to measure performance and motivate action and continuous improvement to ensure reductions are made.
The future is now
Current exploration in using AI for automatic HVAC systems has proven successful - reducing electrical consumption in one of our properties by almost 10%. More than half of millennials factor ESG policy and performance into their investment decisions.
Anything new to watch out for when it comes to technology and ESG?
Tarek: We are currently exploring AI bots that can be integrated into Building Management Systems that, when combined with occupancy sensors, can automatically adjust the occupancy schedules of building HVAC systems. A dynamically operated system that can adjust to match actual occupancy schedules is a proven model to reduce utility consumption.
In our test scenarios on one of our retail/office properties, we reduced electrical consumption data over 19 days by 9.2%, which is the equivalent of reducing 4.7 metric tons of CO2 of emissions, equivalent to not driving 18,880 km (based on figures from the Environmental Protection Agency). While there remains much work to refine with such offerings, the preliminary results of test scenarios are very encouraging.
Do you have any interesting facts about technology and ESG working hand in hand in CRE?
Tarek: Fifty-five percent of millennials factor ESG policies and performance into their investment decisions, compared to 25 percent of Gen Xers and 11 percent of baby boomers, according to the ULI's 2020 Emerging Trends Report. This generational skew suggests the potential of ESG to influence capital deployment decisions will be rising over time. The Role of ESG Indicators in CRE Investment Decisions Is Only Expected to Grow Further - Sebastian Obando | Jan 27, 2020
The future and beyond
Some land development decisions are irreversible, but our new ability to visualize large amounts of data aids us in making critical decisions that are better for our environment and collective well-being moving forward.
Anything new to watch out for when it comes to technology and ESG?
Marie-France: ESG factors have highlighted the long-term consequences of real estate decisions, many of which, like land development, are irreversible. Indeed, every piece of land developed for one purpose is no longer available for another use that could have been better for the environment and our collective social well-being.
This is not a new issue but the tools we have access to today help look at real estate decisions from several angles. New spatial visualization technologies and geographic information
systems such as AVANT by Avison Young are a game changer for me. These tools help the brain assimilate a phenomenal amount of market evidence that would not be possible in Excel, for example, and they offer new insights into the multifactorial issues surrounding development and investment in the built world. As they say, “a picture is worth a thousand words” and helps us reach critical decisions for our clients and other stakeholders.
With decades of experience, Avison Young’s team of professionals is uniquely positioned to work closely with clients on property conversions, supporting all life stages of a project from start to completion.
Visit avisonyoung.ca to learn more about the services provided in this article.
Our experts who contributed to this article
Explore Viewpoints #02 by Avison Young
Explore Viewpoints #02 by Avison Young
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