In it for the long run

The IREM Certified Sustainable Property (CSP) program, a green building certification for existing office buildings, multifamily communities, industrial properties, shopping centers, medical office buildings, and senior housing facilities, had its best year ever in 2021. More than 300 new properties were certified, and many applicants are participating in the program for the first time.

The exceptional year was partly due to a soaring number of commitments to environmental, social, and governance (ESG) principles, especially among institutional owners and fund managers. Many more property managers are being called upon to contribute in ways large and small to our own companies’ or owners’ ESG initiatives. In many cases, we’re encountering terminology and concepts for the first time. We’re all still learning how ESG applies to us specifically and how best to integrate it into our day-to-day jobs of managing properties.

IREM’s Sustainability Advisory Board helps guide the Institute’s programs around ESG, including the CSP program, so that property managers have the tools and resources they need to tackle this emerging priority.

CSP for industrial properties

As ESG continues to grow in importance, the CSP remains IREM’s primary program that helps property managers operate their properties more efficiently and engage with owners, residents and tenants, vendors, and other stakeholders on these critical issues. IREM has worked to make the CSP an accessible framework, applicable to different property types, company sizes, experience levels, and approaches to ESG.

In 2021, IREM launched the CSP for industrial properties program based on recommendations from the Sustainability Advisory Board. In just the first year of the program, IREM was able to certify 26 industrial properties.

Clarion Partners was among the first companies to use the CSP for industrial properties program as part of its ESG strategy. “Clarion Partners is proud to have certified 17 industrial properties under the IREM CSP program in 2021,” says Karen Mahrous, Clarion’s senior vice president and head of ESG. “We see the value in the IREM CSP program for our industrial portfolio for its educational component and standardization of minimum sustainability best practices.”

Bohdy Hedgcock, managing director and head of capital markets for Clarion’s industrial portfolio, adds, “We believe that an increased focus on sustainability is leading to heightened attention to ESG criteria for industrial properties from our tenants and other property owners that may ultimately translate to higher values.”

The CSP program provides owners and managers with key tasks for capitalizing on the opportunities at these properties, which the tenants often largely or entirely control. Areas that can be addressed include site maintenance, wildlife protection, exterior lighting, renewable energy, cool roofs, health and safety, green pest management, and more.

For many multi-tenant properties, these items provide discrete actions that management can take to improve the property’s sustainability and ultimately reduce the greenhouse gas emissions of their portfolios.

Mahrous provides some specific results of applying sustainability best practices within Clarion Partner’s 17 CSP properties: four new ENERGY STAR®-labeled buildings, 75% or more high-efficiency water fixtures at five properties, and composting programs at eight properties. Also, all 17 properties offer wellness features or amenities to tenants.

“And, in addition to demonstrating the sustainability features of a property,” Mahrous continues, “the IREM CSP program also focuses on education and establishing a baseline. The program promotes the use of sustainability policies, tenant engagement, and other industry tools, such as the ENERGY STAR Treasure Hunt, to create long-term best practices at the property.”

ESG survey

While it’s still in question how deeply the trend will reach into property management, ESG is a top priority for many owners and fund managers. The investment community is partially driving attention to ESG as a proactive risk mitigation approach to address the impacts of climate change, rising utility and insurance costs, natural disasters, and increasing government regulations.

A total of 60% of respondents to CBRE, Inc., AMO’s 2021 Global Investor Intentions Survey said they had already adopted ESG considerations as part of their investment criteria.

We’ve also heard increased demand from our tenants and residents, who want assurances that the indoor environment is safe in the COVID-19 pandemic. A formal ESG program or a building certification can go a long way toward making those assurances.

The board has discussed how ESG applies to different asset classes, types of ownership, and other variables. Managers have become comfortable with property sustainability—how our properties use energy, water, and materials, along with the right strategies to gain more efficiency in those areas. However, ESG goes beyond the resource efficiency of the property. It delves into other areas of corporate responsibility, such as health and wellness; diversity, equity, and inclusion initiatives; and ethical business practices. This broader application requires new ways of thinking, new language, and new skills.

With assistance from the board, IREM has been developing tools and resources to support property managers in their ESG efforts. Part of this effort was the IREM ESG Survey sent to property managers in the U.S. and Canada in April for Earth Day and sponsored by Yardi Systems, which has graciously awarded IREM the Yardi Energy Efficiency Grant since 2014.

IREM will use the results to further assess the property manager’s role in ESG and target the development of ESG resources to complement those already available, such as the CSP. The survey will also inform the next iteration of the CSP. Stay tuned for the full survey results.

ESG training and education

The board advises on IREM’s educational offerings on ESG and sustainability. Several IREM skills on-demand courses, available on the IREM website, provide an overview of ESG. Other courses cover LED retrofits, sustainable capital improvements, energy performance, and other relevant topics for a full suite of options to get up to speed on ESG and sustainable operations.

ESG as a priority isn’t going away. The Sustainability Advisory Board will continue to help property managers grapple with this evolving territory in our businesses by supporting research, furthering the CSP program, and creating educational resources.