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Report: REIT ESG Strategies Include Risk Mitigation and Carbon Reduction
Nareit’s recently released REIT Industry ESG Report 2023 outlined how real estate investment trusts follow environmental, social and governance practices. Regarding climate change, REITs are focused on risk assessment, preparation and mitigation. REITs are also aligning their efforts with leading global frameworks to reduce carbon emissions.
The report also noted that REITs surveyed in 2022 indicated implementing new technologies to improve ESG monitoring performance.
Environment and Climate Issues
- The multiple dashboards throughout the sustainability report included the following:
- 89% of the 100 largest REITs by market capitalization report having a climate policy, up from 20% in 2018
- 83% align their ESG financial frameworks with the Task Force on Climate-Related Financial Disclosures, an increase from 23% in 2020
- 73% publicly report their carbon targets, up from 30% in 2018
- 84% reported having a green/sustainability committee or team that includes various roles
- 100% of companies in Nareit’s ESG Dashboard are reporting publicly on ESG
The Nareit report also indicated an increased focus on climate risk reporting, including the need to understand climate-related financial risks for long-term investment decisions. Many REITs in the U.S. have included climate-related metrics in voluntary supplemental reporting.
Social and Governance Issues
Meanwhile, on the social and governance side, REITs focus on employee growth by addressing worker needs. This includes inclusive recruiting and hiring and boosting employee engagement to aid retention.
REITs also assess tenant demand by collecting feedback in areas including building amenity satisfaction, frequency of contact with building management, and on-site management teams’ effectiveness.
Furthermore, in examining the top 100 REITs:
- 98% report on community development programs
- 96% publicly disclose supplier screening
- 78% have ESG board oversight specified in a charter
- 76% indicated they report ESG performance to their boards of directors at least quarterly
- 63% reported linking executive compensation to ESG performance
- ◦People
- ◦Policy/Gov't
