Environmental, Social and Governance, known in the industry as ESG, are social and environmental standards for companies to operate in a responsible manner. They encompass a broad range of factors. Environmental standards incorporate responsible operation as it pertains to climate change, recycling, pollution, and natural resources. Social standards include the wellbeing of tenants and local community. Governance encompasses factors such as a company’s overall diversity, culture, and reputation. 

Once a distant topic, ESG is now more highlighted, promoted and an essential component to any real estate company’s profile. While ESG has yet to be standardized, green features in purpose-build projects attract more capital partners, achieve higher rents, attract better lending terms and finance options and perform better from a building operational standpoint. 

Much of the push is also driven by Millennial and Gen Z, which together consume a significant portion of the workforce and rental pool. Ignoring environmental, social and governance guidelines would be placing any real estate firm at the helm of reputational and performance risk. Health and wellness remain a strong factor for renters. Amenities that were once nice-to-have shifted to need-to-have as a result of the pandemic. Creating healthy buildings fosters better tenant satisfaction and overall income performance.