The Business Case for ESG

Introduction

It’s getting easier to join the green dots to a bigger and better bottom line.

There are numerous western studies – 200 and counting – that examine the link between sustainability performance and financial results, and there’s now plenty of research to demonstrate a tangible sustainability dividend for businesses.

However, the data for AsiaPac is patchy. To bridge this information, APREA and GRESB are working with the Japanese Ministry of Land, Infrastructure, Transport and Toursim and the Real Estate Transaction Improvement Organisation

A copy of the research brief in linked here

In the interim, here are some of the findings uncovered by research in other regions:

A March 2015 study of studies by the University of Oxford and Arabesque Partners revealed that a commitment to ESG – environmental, social and governance – practices will generally:

  • lower a firm’s cost of capital (90% of studies);

  • improve operational performance (88% of studies); and,

  • enhance relative stock prices (80% of studies).

The Property Council/IPD Green Index in Australia points to a consistent 70+ basis point total return premium for high environmental performance buildings.

In New Zealand, the current total return premium is a 66 basis point advantage over non-green buildings. A similar story exists in Canada according to REALpac/IPD’s green property benchmark.

A very recent NAREIT/Real Foundations analysis showed a 29% to 40% ROI on capital invested in sustainability-oriented projects.

A joint Singapore Government-NUS study into recently retrofitted buildings, pointed to an uptick in capital values of 2.7% for office assets and 2.3% for retail premises.

A study performed by Xymax Real Estate Institute Corporation in November 2015 showed that green building certificates increase new contract rent of Tokyo office buildings by 4.4%.

And, a June 2015 CBRE research report revealed a 7.4% rental premium for green buildings in Beijing, rising to a 13.5% premium in Shanghai and a 26% rent boost for Shenzhen.

Clearly, green buildings represent a smart approach to doing business.

APREA’s ESG & Sustainability Roundtable is working with GRESB and international partners to bring these benefits within easy reach of all members.

Peter Verwer
Chief Executive
Asia Pacific Real Estate Association