Savills: Corporate ESG strategy rises in importance for Operational Residential Sector

The international real estate advisor found that ESG strategy has become 'more important' or 'significantly more important' in the last five years for 85% of survey respondents which included 50 investors, developers and operations people from across all residential investment classes.

The survey goes on to show that just 10% of respondents said that their company ESG strategy has stayed the same or become less important over the last 12 months, despite the effects of Covid-19, which had the potential to stall any progress being made. Instead, it appears to have strengthened the majority of companies commitments. This is evident in the results showing that 40% of respondents indicating that their companies have committed to a net-zero strategy.

Sophie Chick, Director, World Research, Savills, commented: 'Our survey findings indicate that sentiment towards ESG strategies has remained incredibly resilient this year and continues on an upward trajectory. This demonstrates how attitudes towards the role real estate has to play in the current climate crisis, are really shifting for the better.'

Rising demand
Demand for sustainable buildings is rising on all fronts and the survey indicates that the largest source of demand for green buildings is coming from investors, followed by demand from their own company. Respondents indicated that this rise in demand comes from a dive for sustainability certifications, a need to reduce resources as well as increased corporate commitments to sustainability.

Marcus Roberts, Head of European Investment and Development, Operational Capital Markets, Savills, commented: 'Savills survey indicates that investors are the largest group clearly driving requirements for greener buildings, with people from within the company and shareholders coming in closer behind. That said, we all have a responsibility and a role to play when it comes to ESG in order to futureproof for generations to come.'

The responses from the survey with regards to this were split; respondents stating they expect to be able to charge a 'green premium' accounted for 44%. However the degree of premium they are expecting is moderate, with 87% of respondents expecting not be able to add any more than 10% on top of existing values.

Marcus Roberts added: 'Whether this premium is something that starts to play out is a trend that is still in its infancy and there may well be a time when we see funds paying a premium for ESG assets in the future, or even achieving discounts for those that do not reach certain thresholds. Nevertheless, with a growing number of funds that focus specifically on sustainable assets or those with a positive ESG impact, we can expect to see investor appetite become more targeted with regards to properties with such credentials.'

Build a better building
Increasingly, buildings are being designed, constructed and refurbished to a certified sustainability standard and 80% of respondents indicated that at least one building in their portfolio met with such a standard. An even higher proportion, nearly 90%, plan to do so in the future.

Better, more sustainable buildings, can offer different features to boost their green and social cohesion credentials which often have the added bonus of boosting user experience and lowering costs in the long term.