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Navigating the Evolving ESG Data Landscape: Challenges, Trends, and Solutions



Authors: Carli Schoenleber, Kelsey Ceccarelli, Denita Toneva

Contributors: Lauren Rodriguez, Chika Acholonu, Jackie Royds 

March 20, 2024


This article was featured in GRESB Insights — see publication here.


As environmental, social, and governance (ESG) data grows increasingly important for regulatory compliance, financing requirements, and competitiveness, simply following in the footsteps of industry peers is no longer sufficient. The complexities of sustainability and the imperative for prompt action demand that real estate companies construct their own data-driven strategies, tailored to their unique business model. This transition fundamentally transforms ESG data from a compliance necessity into a strategic asset, essential for uncovering risks and opportunities, and forging a resilient trajectory for long-term success. The critical role of data is highlighted in investor-facing frameworks like GRESB®, where nearly 20% of the environmental performance score hinges on data coverage, emphasizing that even data reflecting subpar performance is valuable.  


 

Barriers to Optimizing ESG Data Integrity  

However, to fully harness the potential of data, owners must address prevalent challenges in acquiring high-quality data at both the portfolio and building level. This is especially true in the key environmental domains for real estate — energy, water, and waste management.  For utility data, owners may face challenges in three areas: 


Data availability centers on how easily data can be sourced from entities like utilities or tenants. As investors increasingly prefer quarterly over annual reporting, property owners require consistent access to data year-round.  


Data coverage measures the extent of data available for a property or entire portfolio, aiming for the industry benchmark of “whole-building data” that includes both landlord- and tenant-controlled areas. This becomes challenging in triple-net lease situations, where tenants manage their utility expenses. 


Data quality assesses the precision, depth, and reliability of the data. Quality data accurately reflect business operations, are meticulously gathered and verified, and balance manual and automated processes for efficiency and accuracy. Frameworks like GRESB and CDP® award higher points for third-party data assurance, and some benchmarking ordinances are starting to require this as well (e.g., Boston, Washington D.C.). Despite the upfront costs, sustainability assurance has been shown to pay for itself by reducing costs of capital.[1]  

 

Technological Innovations and Trends 

In the past decade, the real estate sector has witnessed a surge in innovative technologies aimed at enhancing data availability, coverage, and quality, while simultaneously streamlining the data collection and management process. Some of the key innovations involve application programming interfaces (APIs), data management platforms, and shadow meters. 

The Role of APIs: APIs facilitate secure data transfer between systems, replacing the cumbersome process of manually entering information from utility bills. Catalyzed by benchmarking laws that require utilities to share energy data with property owners, APIs now enable easy data sharing from utilities to platforms like ENERGY STAR Portfolio Manager®. This approach has expanded to include water and even waste data, a metric traditionally harder to track. Innovations like Waste Management's integration with ENERGY STAR Portfolio Manager exemplify this progress.  


Utility Automation and ESG Data Management Platforms: Utility automation (e.g., WatchWire®, Conservice®, Schneider Electric®) and ESG data management platforms (e.g., Measurabl®, Scaler Global, Deepki™) have significantly improved the collection, management, analysis, and reporting of environmental data. These platforms are key in identifying data coverage gaps and opportunities for cost savings and operational improvements. They provide advanced analytical tools, including visual data trend representations and performance metrics, enhancing decision-making processes. Additionally, these systems are vital for ensuring regulatory compliance and aligning reporting with frameworks like GRESB and CDP.  


Shadow Metering: When tenant utility data is hard to obtain, shadow metering for electric, gas, and water can be a solution to improve coverage and get whole-building data. It involves installing meters to capture whole-building data and can be arranged with all types of leases. Although it does not provide historical data, it ensures complete data from the point of installation, benefiting future reporting cycles. 

 

Beyond Utility Data: Expanding the ESG Data Scope 


Scope 3 Emissions  

The focus on scope 3 emissions data has grown notably in recent years, becoming a new standard for emissions reporting. This shift is especially crucial in the real estate industry, where scope 1 and 2 emissions are often overshadowed by scope 3 emissions.[2] These include sources across the value chain, namely building materials and tenant emissions. Recent regulations, such as California’s SB 253 and the EU’s Corporate Sustainability Reporting Directive, now mandate scope 3 emissions reporting, aligning with the IFRS Sustainability Reporting Standards that regard it as a best practice. Investors are actively pushing for this change, filing resolutions for companies to report on scope 3 emissions and set science-based targets.[3] This shift necessitates more advanced systems for tracking and validating emissions data across supply chains and enhancing collaboration and transparency. Lendlease®, a leader in this space, advocates for an industry-wide supplier reporting platform to securely exchange digitized scope 3 emissions data.[4] 


Green Building Certifications 

The ESG landscape is also witnessing growing investor interest in green building certification data as a proxy for assessing the sustainability of real estate companies. Investors are requesting specific data points, such as the number of green building certifications a company holds, the number of assets with valid certifications, and the percentage of square footage certified by programs like LEED. These data points offer investors a tangible measure of a company's commitment to sustainable practices, making green building certifications a crucial element in the evaluation of a real estate firm's overall ESG performance. 


Social Metrics 

Historically lagging behind environmental data in terms of collection and reporting, social data is now catching up amid rising demands for broader ESG reporting, particularly around diversity, equity, and inclusion (DEI). Companies are identifying financially material social metrics, such as employee sentiment across various demographic groups, to better understand and address issues of workplace satisfaction and engagement that impact recruitment and retention. This includes conducting DEI surveys with optional demographic questions, enabling companies to pinpoint and address specific concerns among different groups. Additionally, human rights considerations are becoming a crucial aspect, with CRE companies beginning to scrutinize their operations and supply chains for potential risks like forced labor or discrimination. Starting with their immediate operations and extending to direct suppliers and beyond, businesses are gradually developing strategies to assess and mitigate these risks, reflecting the growing importance of comprehensive social data tracking in enhancing their overall ESG performance.[5]

 

Conclusion 

Accessible, comprehensive, and precise ESG data is key to advancing corporate sustainability and securing a competitive edge in the real estate industry. Technological advancements such as APIs, ESG data management platforms, and shadow metering are overcoming data integrity challenges, streamlining the process of collection and analysis for strategic decisions and investor reporting.  

 

In real estate, effective ESG management now goes beyond traditional utility data, compelling owners to incorporate a wider range of data types, including scope 3 emissions, green building certifications, and social metrics, which are becoming increasingly important for a full representation of ESG performance and identifying potential risks and opportunities.  

 

As demand for diverse ESG data grows, leveraging innovative technologies to improve connectivity, enhance data accuracy, and foster industry collaboration is key to transforming complex data landscapes into actionable, sustainable solutions. 

 

Author and Contributors



Carli Schoenleber

Carli is a Senior Communications Manager, Content and Engagement Specialist for Verdani Partners, leading thought leadership articles and the Engagement Committee. She has over a decade of experience in the sustainability field, working across diverse roles in environmental communication research, environmental planning, marketing, and wetland science. She holds a B.S. in Environmental Science, Policy, and Management from the University of Minnesota and a M.S. in Forest Ecosystems and Society from Oregon State University.





Kelsey Ceccarelli

Kelsey serves as the co-lead of Verdani Technical Services Department, which completes ASHRAE Energy Audits and other building-level services. Kelsey manages ESG data for four commercial real estate portfolios and acts as a strategic advisor on others. Through tracking buildings’ progress toward sustainability goals, she enjoys seeing the true impact of efficiency in the built environment.








Denita Toneva

Denita is an Engineering Manager at Verdani Partners and co-chairs the QC Committee. She has over seven years of experience in utility data analysis, project management, and sustainability engagement. She holds a B.S. in Environmental Science with a concentration in Conservation Biology from UCLA.





Contributions were also made by Lauren Rodriguez, Associate Engineering Manager; Chika Acholonu, Associate Director of ESG, DEI Committee Lead; and Jackie Royds, Associate Communications Designer.

 

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