Not even the precarious economic climate is dissuading the commercial real estate industry from maintaining a commitment to ESG. Leading commercial real estate services firms like JLL, CBRE, Cushman & Wakefield, and Colliers are making a big push to address worldwide ESG objectives, including the 45 percent reduction in global greenhouse gas emissions by 2030, by enhancing client services and setting their own goals internally. With the clock ticking, these firms must constantly reevaluate whether they’re doing enough to support the real estate industry’s role in meeting ESG standards.
Services firms find that the building owners, managers, and tenants relying on their services are thirsty for guidance in the ESG arena. “What we are seeing is that many of our clients have super ambitious ESG targets,” Christian Ulbrich, CEO of JLL, said during the company’s fourth quarter 2022 earnings call on February 28, 2023. “That whole notion around the E of the ESG is driving a lot of activity from our clients.”
JLL, CBRE, Cushman & Wakefield, and Colliers are enhancing their ESG platforms in many ways, but one common method they have been actively pursuing is enhancing ESG leadership. JLL recently tapped a 10-year veteran in the energy infrastructure sector to take on the role of Vice President of Energy Resilience for the firm’s Clean Energy and Infrastructure Advisory team. The new team member, who will help guide clients on energy and sustainability endeavors, is tasked with developing an energy resilience business that will serve as a platform for implementing distributed energy and microgrid solutions. CBRE bolstered its sustainability services by adding an expert environmental strategist as Chief Sustainability Officer and Senior Vice President of Client Sustainability Solutions. The new hire has a broad assignment, acting across CBRE’s divisions to fortify the firm’s various sustainability services.
The leading services firms aren’t limiting the growth of their ESG teams to the U.S., and it is a global effort. Cushman & Wakefield has brought on an expert in bolstering sustainability advisory groups for the role of Head of Sustainability & ESG for the Asia Pacific region. From Sydney, Australia, the new head will lead a team of more than 60 ESG professionals and act as chair of the Asia Pacific Sustainability & ESG Operations Committee. Additionally, Cushman & Wakefield promoted from within its London offices to fill the position of the firm’s first Global Head of Sustainability Thought Leadership, a role that calls for the steering of the firm’s ESG and sustainability research as well as its thought leadership. In the United Kingdom, Colliers just took a step to shine a brighter light on the social element of ESG by hiring a veteran in the socio-economic aspect of commercial real estate. As part of the firm’s dedicated ESG team, the experienced sustainability consultant will collaborate with Colliers’ clients on shaping comprehensive ESG programs that emphasize social value as they do on environmental friendliness.
Programs behind the people
In addition to augmenting manpower to better assist clients in meeting their ESG goals, the leading real estate services firms are implementing new service lines and developing innovative paradigms. In early March, CBRE introduced a global electric vehicles service designed to guide clients through the process of instituting EV charging infrastructure. The new service line relies on the expertise of leaders from CBRE’s Global Workplace Solutions and Advisory & Transaction Services. It offers start-to-finish accommodations from determining charging site locations to providing ongoing maintenance. In partnership with facility maintenance and repair company Akima Intra-Data, CBRE has already secured the Indefinite Delivery Indefinite Quantity design-build and construction contract (an agreement to provide an indefinite quantity of services for a fixed period of time) with the federal government’s General Services Administration to craft a centralized, turn-key solutions program for electric vehicle charging infrastructure across the agency’s entire portfolio.
March was a fruitful month in new ESG offerings for JLL as well. The firm released a research report introducing its new Green Leasing 2.0 model, which provides a playbook for building owners and occupiers for decarbonization through the entire life of a lease. As JLL notes, existing lease agreements of the green and non-green sort do not allow for collaboration on energy-efficient solutions between owner and occupier at the asset level. Green Leasing 2.0 provides a model for data sharing and greater transparency between owners and tenants. The model incorporates education, engagement, and shared equity as a guide to meeting and monitoring sustainability targets to boost operational efficiency and reduce costs.
Building investors and tenants are motivated to step up their ESG activities. From legislation imposing emissions-reduction mandates to catering to the sustainability preferences of the workforce talent, those operating and occupying properties will continue to rely on the guidance of real estate services firms as the ESG space evolves.
Walking the walk
There’s nothing like taking your own advice to encourage others to follow suit, and commercial real estate services firms are walking the walk when it comes to ESG pursuits. JLL (which notes that it is the world’s first real estate company with a net-zero target that has been validated by the Science Based Targets initiative) laid out its climate action goals and achievements with the mid-2022 release of its global sustainability report and has been making strides in meeting its targets ever since. The company has set a goal of achieving net-zero emissions by 2040 and plans to do so by eradicating carbon emissions throughout its operations. If successful, the company will have fully abated 95 percent of its global carbon footprint by the designated date. The company also plans for 100 percent of buildings occupied and managed by JLL to have a sustainable building certificate by 2030, a goal that is already nearly halfway to realization.
CBRE has outlined a set of goals for itself as well. The company plans to reduce emissions from its operations by 68 percent come 2035, and it has just a few years left to achieve 100 percent renewable electricity by the end of 2025. At last count, more than 50 percent of the firm’s offices, accounting for approximately 3.3 million square feet globally, boast at least one official sustainability certification. Furthermore, by 2035, CBRE expects to transition its entire service fleet to electric vehicles by 2035.
Like JLL and CBRE, Cushman & Wakefield has instituted corporate objectives for decreasing its carbon footprint. Using 2019 as a baseline, Cushman & Wakefield is moving to orchestrate a 50 percent reduction in greenhouse gas emissions across its corporate offices and operations by 2030. The company is also working with clients at its managed properties to institute science-based sustainability targets to be achieved by 2025, as Cushman & Wakefield’s managed portfolio accounts for roughly 99 percent of the company’s emissions. Colliers has also committed to reducing emissions and achieving net zero for its operations by 2030.
While the leading services firms continue to pinpoint ESG in their internal agendas and their service offerings, the global commercial real estate industry may not be doing enough to achieve the worldwide goal of positioning buildings to operate at net zero by 2050 or even self-imposed short-term goals set for 2030. While real estate properties account for nearly 40 percent of global greenhouse gas emissions, according to Amsterdam-based wealth manager Van Lanschot Kempen, a mere 10 percent of the world’s listed real estate companies have established net-zero targets spanning all three scopes: direct building emissions, including heating; indirect emissions, such as the generation of electricity; and indirect emissions, including carbon. Should the economy worsen ahead, real estate companies may be forced to reevaluate budget allocations for ESG initiatives. While progress is being made in the environmental element of ESG, the commercial real estate industry will have to double down on its efforts to realize global sustainability goals. Large brokerages are leading the way in the journey to carbon zero, but there is still a long way to go.