What it is ESG and its impact on the real estate market

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What it is ESG and its impact on the real estate market
What it is ESG and its impact on the real estate market

The real estate market is constantly evolving and not only in relation to technology, but also in terms of socio-environmental issues. In this scenario, the ESG concept is spreading and increasingly inserted in the activities of this segment.

Therefore, ESG consists of practices that aim to make economic activities conscious, reducing social and environmental impacts — an important concept that contributes to generating responsible businesses, which do not focus only on making profits.

In this post, you will understand everything about ESG, what it is, what each pillar means, and other relevant information on the subject. Keep reading and understand how ESG practices are impacting the real estate market and its activities!

After all, what is the ESG concept?

ESG is the acronym for the terms Environmental, Social, and Governmental, an expression that, in free translation, means Environmental, Social, and Governance — pillars considered the major drivers of strategy in a business.

In this sense, the ESG concept emerged in 2005 in Who Cares Wins, a report obtained by an initiative of the UN – United Nations. It is a meeting that brought together 20 financial institutions from around the world to establish guidelines and include social and environmental issues in the market.

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In view of this, ESG is a concept that promotes the implementation of practices that reduce social, environmental, and governance impacts. A factor that is on the agenda, including in the real estate market, and contributes to improving the relationship with stakeholders and enhancing results.

What is the meaning of each pillar?

As we saw in the previous topic, it is made up of 3 principles, which are environmental, social, and corporate governance issues. Therefore, each pillar, as they are also called, directs the methodologies and practices for the implementation of the strategy.

The first step in understanding how it works is to know in detail what the guidelines of each pillar are. In this way, it is possible to identify opportunities and commit to continuous improvement in each aspect addressed in the pillars.

See below what each ESG principle means!

Environmental – Ambiental

The environmental pillar consists of practices aimed at preserving the environment and natural resources. These are actions that aim to promote sustainability and responsible action, which does not cause significant environmental impacts.

It is a set of good practices that demonstrate the environmental responsibility of the business, for example:

  • legal regularity;
  • efficient solid waste management;
  • correct effluent management;
  • use of renewable energies;
  • reduction of atmospheric emissions;
  • use of rainwater collection and reuse systems;
  • conscious use of natural resources;
  • sustainability practices in construction.

In view of this, good practices for the environmental pillar are applied according to the business activities. However, they must be inserted consistently and with a commitment to environmental results, which really eliminate severe impacts.

Social – Social

Social issues are also relevant, so the social pillar comprises all actions developed to promote social well-being. Basically, it is the form and practices adopted by the business in relation to employees, customers, and society in general.

In the social pillar, important actions are addressed, for example:

  • guarantee of human rights;
  • team diversity;
  • social inclusion;
  • good labor policies;
  • protection of confidential data;
  • relationship with society;
  • humanized relationship with employees;
  • satisfaction of all customers.

In this context, the social agenda has a significant weight in the performance and results of the business, as it is about human relations. For this reason, it is a subject constantly evaluated by customers and negotiations, including investors.

Governance – Governança

In turn, the governance pillar is directly related to the quality of business management and administration. Therefore, they are a set of actions adopted to ensure a good organizational climate, clear objectives, and efficient management.

In view of this, some of the practices of the governance pillar are:

  • periodic performance of tax audits.
  • presence of a whistleblowing channel;
  • diversity on the board;
  • Financial independence;
  • relationship with public agencies;
  • executive compensation;
  • transparency and ethics.

Governance is an agenda that involves administrative and managerial issues, mainly related to senior management. In other words, it is corporate conduct, internal policies, and culture, criteria considered essential for success.

How does ESG work in practice?

The goal of a business that focuses on ESG is to improve all activities and improve internal, environmental, and societal relations. In this sense, it is a systematic process and applied through well-planned methodologies and actions.

Therefore, ESG works through a set of good practices implemented in a company with a focus on the 3 major pillars – which are environmental, social, and governance principles, generating responsibility and corporate awareness.

In this way, ESG is implemented through the consistent adoption of the good practices included in each pillar. Therefore, it is a process that happens individually, that is, according to the segment, activities, objectives and particularity of each business.

Although ESG is a concept developed in the financial and investment market, it is increasingly widespread in all sectors. Especially for the benefits it provides, improving performance, business and personal relationships.

How does ESG impact the real estate market?

ESG has become a trend in Brazil and has been influencing business performance, providing great benefits. In the real estate sector it is no different, and the understanding and applicability of ESG principles is a reality in many construction companies.

This scenario is motivated by the growing pressure from the market, government and society, to promote sustainable development. Therefore, construction companies and developers have prioritized initiatives to reduce social and environmental impacts and maintain good relationships.

In addition to affecting the construction sector, ESG will also have a direct impact on the activities of real estate companies. Especially in aspects related to social relations and commercialization of properties built without environmental impacts and with a focus on sustainability.

The change in consumer habits and level of customer demand make ESG a necessary requirement in the real estate market. With this, it will be necessary to go beyond selling or renting real estate, but to change the culture and mentality to act with socio-environmental awareness and responsibility.

In this sense, real estate businesses that adopt ESG principles will have greater opportunities to close partnerships, whether for investments or sales. After all, social relations, legal regularity, well-established corporate governance, and sustainability are the basis for success.

What are the strategies to apply ESG?

The evolution of the market happens quickly and requires attention from real estate managers, to promote adaptations and avoid losing space in the market. In this context, ESG principles are real trends and considering them is essential for every real estate company that wants to grow.

In other words, ESG is something that promises to take over the market in the short term, so preparing for it is essential — above all, to get ahead of competitors and apply innovations capable of improving social and environmental relations and maintaining good results.

However, the process to apply ESG must happen with a lot of planning and definitive methodologies. After all, even leading to some result, isolated actions do not make a real estate company suitable for ESG precepts, it is necessary to detail all the pillars.

To start planning and applying ESG, it is important to consider the following factors:

  • study ESG well and seek inspiration;
  • know your activities – negative and positive points;
  • involve all management and teams;
  • create policies and disseminate them to everyone;
  • develop sustainability practices in business;
  • create a committee to implement the ESG pillars;
  • Define and monitor indicators.

ESG is a change in a company’s culture, for this reason, it must happen continuously and effectively. Especially in management factors, relationships with society and focus on solutions that contribute to avoiding environmental impacts.

As you have noticed, knowing about ESG what it is and how it affects your activities is essential to keep up with the evolution of the market. Above all, act responsibly, offer services and properties that meet the expectations of customers, especially generation Z, who are attuned to social issues. Did you like the post? Now that you understand everything about ESG, what it is, how it works and affects your segment, what do you think about reading other relevant content? Don’t waste time and see right now what are the main trends in the real estate market and how to prepare for them!

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