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How Property Technology supports ESG in the Real Estate industry

01 June 2023

The UK real estate industry has seen significant growth in the intersection of Property Technology (PropTech) and Environmental, Social, and Governance (ESG) considerations in recent years. Cities like London have committed to reducing building emissions and property owners and managers must prioritise sustainability to meet these demands. PropTech solutions can improve the tenant experience while capturing, monitoring, and improving ESG metrics.

Smart building systems are a key PropTech innovation that can optimise energy consumption, air quality, lighting, temperature, and other sustainability factors. Monitoring these metrics with sensors and IoT devices, as well as machine learning algorithms and real-time adjustments can improve sustainability and reduce operating costs. Improved sustainability can lead to increased tenant satisfaction and enhanced long-term financial performance.  

“As the real estate industry faces increasing pressure to prioritize sustainability, PropTech solutions are becoming essential tools for property owners and managers. By leveraging smart building systems and other innovative technologies, real-time adjustments can be made to improve sustainability, reduce operating costs, and enhance the tenant experience. At Retransform, we're proud to be at the forefront of this intersection between PropTech and ESG, providing cutting-edge solutions to help our clients meet their sustainability goals." says Pinkesh Shroff, Vice President at Retransform. 

A positive ESG profile is increasingly a critical requirement for attracting socially responsible investors and tenants. By focusing on ESG factors, property owners and managers can enhance their brand reputation and appeal to such investors and tenants.  PropTech solutions capture, monitor, and improve ESG metrics, such as energy usage, carbon emissions, water consumption, and waste management. This data can inform decision-making to reduce energy consumption and waste while also improving sustainability and meeting the growing demand for sustainable properties.  

"We have seen strong momentum from investors, fund, and asset managers focused on the real estate sector in relation to their net zero commitments. Subsequent to targets being set, often the immediate challenge is around effective measurement and reporting. Innovative PropTech solutions are in demand as a vital component to the net zero journey. Smart building systems can now leverage advanced sensor technology and machine learning algorithms to enhance energy consumption, air quality, and other sustainability factors. By providing real-time data and actionable insights, our solutions can empower property owners and managers to make informed decisions that improve their ESG performance, while also enhancing the tenant experience." says Simon Vardon, Head of Product - Real Assets at Apex Group 

PropTech solutions can also improve tenant engagement with ESG initiatives. Mobile apps and online platforms provide tenants with real-time feedback on their energy consumption, waste management, and other ESG metrics. By increasing tenant awareness and engagement with sustainability initiatives, property owners and managers benefit from increased tenant satisfaction and retention rates. 

So, just how does this work in practice?  

Pinkesh Shroff walks us through a case study; “Retransform is engaged by a prominent real estate investment management firm to support their objectives of understanding and reducing their carbon footprint, enhancing consumption data, automating submissions to GRESB and Energy STAR, and improving asset operational efficiency and performance. 

Our process began with a comprehensive assessment of their assets, evaluating their level of smartness, digital capabilities, hardware, and design specifications. Using the findings, we prepared a gap analysis report that outlined the necessary digital levers for installation and led to the implementation phase. Currently, we're equipping buildings with sensors and smart meters to enable intelligent retrofitting. Subsequently, we will collect and examine data on costs, consumption, operational efficiency, performance, and CO2 emissions to provide a holistic overview. Additionally, we will offer recommendations to improve these metrics and automate rules chains, maximizing asset potential. 

Our platform streamlines work orders and benchmarking submissions, reducing labour costs and saving time. By measuring and reducing CO2 emissions, it empowers the client to improve their ESG score while enhancing building performance to lower consumption and costs.” 

The UK government has recently introduced initiatives and regulations aimed at promoting ESG factors in the real estate industry. The Minimum Energy Efficiency Standards (MEES) require all rented commercial and residential properties to achieve an EPC rating of at least E, while the Green Homes Grant scheme provides financial support for property owners to make energy-efficient improvements to their homes. The UK Green Finance Strategy aims to accelerate the growth of green finance and encourage investment in sustainable infrastructure projects. 

The integration of PropTech and ESG considerations is a critical factor in the UK real estate market. By leveraging technology to improve sustainability, capture ESG metrics, and enhance tenant engagement, property owners and managers can meet the growing demand for sustainable and socially responsible properties, while also achieving long-term financial success. With the UK government introducing new regulations to promote sustainability in the real estate industry, property owners and managers who prioritise ESG factors are likely to benefit from improved brand reputation, increased tenant satisfaction, and reduced operating costs. 

This article was written by Simon Vardon, Global Head of Product - Real Assets at Apex Group and Pinkesh Shroff, Vice President Retransform.

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