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Report: REITs Embrace ESG Strategies

The consequences of climate change and tenant safety in the face of the COVID-19 pandemic has led the commercial real estate industry to increase its environmental, social and governance efforts. According to the National Association of REITs, real estate investment trusts also “continue to take significant and tangible steps to address and advance their ESG strategies and practices.”

The organization’s recently released “2022 REIT Industry ESG Report” noted that REITs across the board are both strengthening board oversight of ESG while boosting data and disclosures to stakeholders. Also in the mix are programs focused on health and wellness and strategies to reduce carbon emissions. Additionally, More than half of Nareit corporate members said they linked compensation packages to ESG performance during 2021, versus one-third of those that did so in 2020.

The report also indicated that:

  • 82% of REITs surveyed had integrated ESG risks and opportunities into their strategy and financial planning in 2021—up from 77% in 2020.
  • 87% offer mental health support as part of their health insurance
  • 81% offer programs that improve work-life balance, such as childcare, flexible work arrangements and parental leave
  • In the area of diversity, 50% of new REIT directors were women and 31% were people of color—up from 48% and 13% in 2019, respectively

One reason for a higher focus on ESG is because of investor demand. “The growing interest in sustainability reflects an emerging generation of values-driven investors who are questioning the impact that business is having on society,” the report said. Furthermore, since the pandemic, investors are placing a “greater emphasis on corporations’ ESG performance in their investment strategy and decision-making.”

To that end, the report indicated that REITs continue focusing on pursuing net-zero goals, championing diversity, improving transparency and strengthening ties to the communities in which they operate.

“The REIT and publicly traded real estate industry are committed to implementing innovative and impactful ESG practices,” said Nareit President and CEO Steven A. Wechsler. “This report demonstrates the progress our industry has made in owning and operating real estate responsibly, planning and practicing for resilience, and placing a premium on the people who are key to the success of these efforts.”

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