Reflections on 2023 and a look ahead to 2024
As we close the chapter on 2023 and look forward to 2024, it is an opportune time to reflect on the progress made in the realm of sustainable real estate. The past year, marked by the GRESB assessment, has seen significant strides in ESG practices within the industry. From the rise in GRESB participation to the increased focus on net zero targets, 2023 has been a pivotal year. As we turn our gaze to 2024, we anticipate advancements and a renewed commitment to sustainability, further shaping the future of the real estate sector. In this article, we will delve into the key takeaways from 2023 and explore what lies ahead in 2024, using GRESB data as a representative sample for the real estate industry.
In 2023, GRESB saw a notable 14 percent increase in participants, reflecting the growing importance of sustainability in the real estate sector. The scores are on an upward trend, with the average score landing in the mid-70s. Australia emerged as the geographic leader in scoring, setting a high standard for sustainability practices in real estate. Interestingly, the average starting score for new participants saw a decrease, indicating room for improvement and growth for newcomers to the assessment. Overall, the standout theme of 2023 was the focus on net zero targets. This underscores the industry’s commitment to reducing carbon emissions and aligning with global climate goals.
The commitment to net zero is gaining momentum in the real estate sector, as evidenced by the increasing number of entities setting net zero targets. In fact, 2023 saw a significant milestone with 50 percent of entities now having net zero targets, demonstrating a clear shift towards carbon neutrality. A key driver behind this trend is the growing implementation of carbon pricing. This economic tool is proving effective in incentivizing the reduction of greenhouse gas emissions, pushing more entities to commit to net zero targets. As we move forward, the role of carbon pricing and net-zero commitments will continue to shape the sustainability landscape in the real estate sector.
As we look ahead to 2024 and beyond, several key changes and emerging issues are set to shape the GRESB assessment and the real estate sector at large. Notably, net zero target setting will now be included in the scoring, reflecting the industry’s growing commitment to carbon neutrality. Climate-related opportunities will also be incorporated into risk management disclosures, highlighting the potential benefits of sustainable practices. Other changes include the consideration of building certification validity period and the separation of operational energy use from non-operational energy use, specifically in relation to electric vehicle charging.
Emerging issues to keep an eye on include social issues such as diversity, equity, and inclusion (DEI), as well as embodied carbon, biodiversity, and cyber risk. These factors are becoming increasingly important to ESG considerations and benchmarking, likely playing a significant role as the GRESB assessment continues to evolve.
The financial outlook for real estate in 2024 will be influenced by these trends and changes, as well as broader economic factors. Challenges may be posed by a potential decrease in capital availability and expected increases in the cost of capital resulting from rising interest rates. The impact of the work-from-home and hybrid trend in the corporate real estate market will continue to be a key consideration, while the multifamily residential, industrial, life science, technology, and data center asset classes are expected to grow. Despite uncertain market conditions, the adoption of ESG legislation and practices will likely continue, further shaping the financial landscape of the real estate sector in 2024.
In conclusion, 2023 was a significant year for sustainable real estate, with a notable increase in GRESB participants and a heightened focus on net zero targets. The industry’s commitment to sustainability is evident and this momentum is expected to continue into 2024. Key changes, such as the inclusion of net zero target setting in scoring and the separation of operational and non-operational energy use, along with emerging issues like DEI, embodied carbon, and cyber risk, will shape the GRESB assessment and the real estate industry at large. Despite potential financial challenges, the industry’s resilience is evident and the continued adoption of ESG practices is anticipated. As we move forward, it is crucial for all stakeholders to stay informed and engaged regarding these developments. Everyone has a part to play on this journey towards a more sustainable real estate sector. Continue to monitor these trends, participate in the GRESB assessment, and take proactive steps to enhance your organization’s sustainability practices. Together, we can shape a more sustainable and resilient real estate sector.
This article was written by Wes Fitch, Sustainability Consultant, at Schneider Electric
This article first appeared in the GRESB newsroom. To view, click here.
References
Global Real Estate Sustainability Benchmark, “Driving Sustainable Value: The GRESB Foundation 2024 Roadmap,” GRESB, 2023.
Schneider Electric, “GRESB unpacked: Exploring real estate sustainability reporting and performance,” Schneider Electric, 2023
Deloitte, “2024 commercial real estate outlook: Finding terra firma,” Deloitte Insights, 2023.
Price Waterhouse Coopers, “Emerging trends in real estate 2024: Real estate’s next chapter comes into focus,” PwC, 2023.