Conquering What Makes an ESG Strategy Hard for Multifamily

Establishing a company-wide ESG (environmental, social and governance) strategy and overcoming external and internal obstacles is a white-hot topic in multifamily. The attention is trickling down from portfolio investors to the property level at an increasing rate. The ESG issue has spawned lots of questions lately, as regulators talk about releasing formal plans for new reporting guidelines in early 2022. To understand the importance of ESG and how to tackle it, operators must first realize why property management investors are so focused on the issue. According to a recent Harvard survey, sophisticated investors say that factoring ESG information into decisions about where to put their money is important because it affects investment performance. ESG is believed to provide information primarily about risk and strategic return potential rather than a company’s competitive position. Reasons the majority of respondents believe non-financial information is material to investment decision-making include: The effects on a company’s reputation and brand Exposure to potential threats of litigation and regulatory intervention Signaling of a company’s long-term approach to business strategy Just as these reasons resonate with investors, they are also relevant to property owners and operators. The significance of ESG to a portfolio is that sustainable practices make great, lasting value because they improve performance, thereby boosting asset value. Yet it can be hard to grasp at the property level, the true foundation for ESG strategy and tactics. An effective plan must have buy-in from top to bottom, and performance is based on setting goals, benchmarking and then constantly measuring individual assets in a portfolio. For rental property owners and operators, realizing the performance of a particular asset within a portfolio can mean the seemingly arduous, time-consuming and frequent task of manually chasing down a significant amount of oper...