Grey Lee: ESG Guidance

Yes, it’s not just “pandemic response” mode and not just another frontier of hygiene theater.

Air quality matters. And tenants are catching on.

There are a bunch of ways people are looking at verifying the safety of the environmental quality of their buildings. I have been tuned into the Harvard Chan School of Public Health and the Boston Properties Health Security Task Force – models for how to address air quality and explaining the benefits of improved air quality.

[Quick reference: the good old CogFX study here.] [Improved indoor air leads to improved mental function for office users…and this means productivity, strategy, and morale!]

Meanwhile, CREtech CLIMATE has stepped into the arena, concerned about air quality. Their CREtech Climate Summit today hosted a variety of important observations about how tech in buildings will address climate and in turn create value for real estate enterprises.

One group who has stepped up to the challenge is Carbon Lighthouse. You’ve probably been following them as they have a great value proposition. They are kind of like an ESCO for whole-building energy use and carbon reductions. By using their system to analyze a building’s energy use, and then proceeding with their recommendations, owners & operators can wring out savings from buildings.

Now, they have a focused product offering related to air quality, harnessing their building intelligence and integration processes to deliver a great way for building users to understand the air quality of a building (and for operators to improve it). In the summit today, they called it Vairify – but I haven’t seen it on their website yet.

This is a great list of criteria to be tracking, and the user interface is really good – using the stacked carousel approach (like in Netflix) for people to see and then pursue their specific concerns. I think many buildings could benefit from this service.

I was glad to hear how this team has pivoted from the focus on carbon to use a similar whole-building methodology to track and map, and then improve, indoor air quality. They are saying it will cost an average commercial building $0.05-0.15 /sf to implement, and that this can lead to reduced net operating costs, improved tenant retention and rates, and higher overall asset value. They did flash the math on the screen but I wasn’t quick enough to get a screenshot! Check out their site where you can sign yourself up for a consultation.

Meanwhile, if you want to think this through with me, please reach out to grey@leepartners.com – I’d be happy to discuss how indoor air quality or other environmental aspects of your building(s) can become drivers of value for your business.

Thank you!

Happy Earth Day, Everyone!

The Biden Administration has announced a target of 50% GHG emissions rate reduction (from 2005 levels) by 2030. You can read the White House Fact Sheet here. This is great news – we now have a target. Some say this will enable the US to claim we are supporting our COP21 Paris Agreement goals, and will help the global economy to continue without raising the global temperature by more than 1.5C.

Will this be the case? Well…it’s a good first step to have a goal. And the attention of the US Federal Government.

Also, Janet Yellen, Secretary of the Treasury, has announced how standardized disclosure of climate related financial risk is important and she will be working with the SEC to figure that out (read more here – including a bit about UK policy). This is on the heels of an announcement earlier in April by Hester Pierce (of the SEC) contesting the wisdom of standards for ESG metrics (read more on that here). Them battles are brewin’ but I would say clarity and predictability are perennially sought by investors, and Federal guidance on how to prioritize ESG will be better than a wild west of competing standards, reporting mechanisms and otherwise.

Yellen endorsed the TCFD and will work with the IFRS and other entities that are working to harmonize reporting processes, so investors will have clarity and be able to compare claims. I think this is good for the industry and seeing as most of the reporting frameworks are made up of industry-wide volunteers working in a consensus-seeking manner, I anticipate that the results will be market-oriented and market-responsive, addressing various critiques of the SEC or Treasury even getting involved.

Any company now has a double imperative to address ESG: transition risk that the regulations will move toward disclosure and market risk that investors and other market actors will prioritize seeing into a company through ESG. So…have fun out there!

I hosted a panel for a webinar with BOMA – the Building Owners and Managers Association – on Tuesday March 29th. Our segment starts at 25:00, after a great overview presentation about LEED, WELL, and Fitwel. We had a good discussion of how to pursue healthy buildings and also how to manage a pandemic by implementing a health security program.

You can watch it here now.

The speakers were Ben Myers, Vice President, Sustainability at Boston Properties, and Melissa Miller, Account Manager at Janitronics. These two companies have formed a symbiotic partnership over the years and worked together to address COVID-19 by standing up a Health Security Task Force in the early days of the pandemic, and issued scientifically-validated guidance for their office locations in April, 2020. This guidance was provided as an open-source resource to the entire industry, and has been updated for 2021 as the science has advanced. Because Boston Properties has had a long term commitment to sustainability and meeting stakeholder (not just customer) needs, and because of Janitronics’ long-term trustworthiness and attention to detail as a valued vendor, they were able to team up effectively to meet the challenging times.

We discussed how healthy buildings enhances the tenant experience and improves retention rates. In the post-pandemic world, office operators may be challenged by reduced demand. Ben says there will be a flight to quality, and Boston Properties is ready to come in ahead of the pack, due to their focus on the customer and especially their attention to health and health aspects of buildings. He mentioned that he sees them pursuing strategies to address indoor air quality on an ongoing basis, rather than periodic testing, and has an IAQ Technical Working Group developing a program right now.

On the webinar, we looked at how BXP has embraced the Fitwel system to validate their healthy building efforts, using their important categories of: promoting occupant safety, increasing physical activity, instilling a sense of wellbeing, supporting social equity, and advancing public health. They have won the “Best in Building Health” award from the Center for Active Design and developed the first ground-up Fitwel-certified project in the nation, at the Back Bay Station redevelopment project.

Janitronics has embraced the system as well, as they are the front-line of engagement for healthy building outcomes. Their cleaning services mean they are in every part of the building, every day, and can implement health strategies on an ongoing basis. They have had many of their employees attain Fitwel Ambassador and have an internal resource committee to share best practice. This means they can respond better to their client, Boston Properties.

I have been leading the strategy at Janitronics to embrace healthy building strategies. Their commitment to the topic also means they are helping Boston Properties at the other end of the enterprise: the investors. With ESG as such a huge attention-grabber at the institutional investor level, it is important that vendors like Janitronics can feed up into the metrics that Boston Properties is pursuing for their ESG reporting.

In the months to come, I’ll be working with Janitronics to pursue many ESG metrics such as GHG emissions, water use, and waste generation. We are tracking employee issues like diversity, trainings, and social services (Janitronics provides financial literacy training, for instance). And there are also governance issues to track, such as gender pay equity, conflict of interest policies and whistleblower protections. ESG enables a business to see into non-financial aspects of their operations in order to avoid risk and engage transparency to the benefit of their stakeholders. Investors like this.

I look forward to working more with Janitronics and Boston Properties to advance sustainability in the built environment. Healthy buildings are good for people right now, and for future generations. Let me know if I can help you with your ESG journey.

Team up with me to delve into ESG and enhance your corporate social responsibility.

Services:

ESG Assessment – I will examine your business to determine where, in regards to ESG, you are excelling and where you are in need of support.

ESG Framework – to shape attention and engage with stakeholders, let me help you develop an ESG strategy and framework to build from.

ESG Reporting – I’ll help your company report your progress at a number of different entities including GRI, CDP, and more.

This coming week I’ll be moderating a panel for BOMA Boston, the property and facilities managers’ organization. You can sign up here.

We are excited to present on LEED, WELL, and Fitwell, and how each of these systems shape attention and drive performance on sustainability and health outcomes for buildings. Using these systems tracks indicators and pushes management to deliver on improvements for better occupant experiences.

I’ll be guiding a short conversation among key stakeholders at Boston Properties and Janitronics on how they use rating systems and scoring programs to focus attention on health outcomes. Their sustainability priorities have created organizational infrastructure that engaged a fabric of professionals across their teams. The interpersonal relationships of this infrastructure became a crucial strength at the outset of the COVID pandemic.

With solid working relationships and trust, these team members had high collaboration and functionality, and became the go-to group to handle the pandemic response. They created the Boston Properties Health Security Plan, which had guided response work and ensured safety for users of their buildings. Their protocols were adopted by many real estate operators across the globe – kudos to them! [Here is the March 2021 updated version of this Health Security Plan]

With progress on the pandemic front due to successful public health interventions and the roll-out of the vaccines, people are starting to see the path back to “business as usual” and the return to offices. Our extended experience of work-from-home has altered the equation permanently. Various companies like Salesforce and even the Commonwealth of Massachusetts are planning to let people work from home in significant ways in the future. How will commercial real estate respond? CRE value depends on tenants paying for space!

JLL issued a report that describes the trends and “emerging user profiles” for office space. The takeaways are that 66% of workers want to work remotely following the pandemic, and about half the workforce will want to work half-time in offices. Does this mean an outright 25% reduction in demand? I think the types of enterprises matter, the type of work matters.

Reports like this are shaping the narrative around #ReturnToWork and the future value of #CRE. JLL fails to describe the real health benefits of a curated workplace experience and the economies of scale that such curation/management have on productivity. Of course, most workplaces skip this stuff, but it will be competitive advantage for tenant market share in the months and years to come.

Separately, I assert JLL’s report is quite a myth-maker and subject to confirmation bias: 2000 respondents? What 10 countries? Pray tell how a “representative” sample of worker types can truly be constructed. And of course, in such a limited market (office experience), can people really know what they want? For which purpose? Their satisfaction or the satisfaction of their employer paying for the space?

I believe there will continue to be a value proposition for office space, not just the “socialization” and corporate culture dimension highlighted by JLL, but also a fundamental focus on productivity for tenants through health and creativity curation. Regardless, observe the circus of these reports coming through from everyone scrambling to address the “shrinking” demand for office space!

Looking back one year ago, from the Gensler report of April, 2020: “Be open to new ways of working. The longer we work from home in large numbers, the more new habits and new ways of working will begin to take shape. We will have discovered different ways to collaborate virtually, which may likely continue when we return to the office. Workflows and communication might improve. We should embrace these changes and let them flourish.”

We are entering a new era for real estate: impact investing is here.

For years, investors prioritized financial return and various social impact aspects of real estate were seen as “side effects” or otherwise not central to the investor.

Nowadays, it is hard to be distant from community relations and other effects of real estate development. Project proponents actually gain entitlements for doing more for the community – such as providing public access to green space, adding retail space to a multifamily development, supporting wildlife habitat and more.

The above project is an example of the work done by Placetailor, a design-build firm in Boston committed to sustainability and community regeneration.

Now, you are invited to support their work to address the triple bottom line. Investors are welcome to explore the opportunity to purchase shares in a new social impact investment fund. Placetailor will use the funds to secure sites, design, and build new net-zero, non-toxic, affordable housing in Boston.

Contact me if you are interested in reviewing the prospectus.

I made it up Mt. Washington over the weekend. It was a fine day but a chilly 5F at the top! My legs were jelly on the ski run down Sherburne Path to close out the day, though…

ESG: Environmental, Social, and Governance metrics are an important arena for real estate operators to engage with.

By using ESG metrics, a company can investigate aspects of the business that are not directly financial, but have impact on financial performance.

Nowadays, customers, investors, and other stakeholders are paying more and more attention to a company’s environmental issues, to the way they treat their employees, and even types of policies or protocols they honor.

If you have questions about ESG and want guidance to meet the needs of stakeholders who are asking you about it, I am happy to help.

I have supported ESG for a variety of companies and organizations. I can help set up a program for reporting, or provide guidance on implementing policies, or simply coach an executive to stay ahead of the topic.

I look forward to working with you!

Grey

The semester is off to a great start. I’m am really excited and looking forward to the experience of being “the teacher.” Though really, I’ll be learning a lot more than I teach!

Here’s what I posted on LinkedIn: “Green Buildings, Urban Resilience, and Sustainability in Communities” is connecting a great student cohort at Harvard Extension and giving me a chance to share my subject matter expertise in a new way. I might post some of my readings here for you all, just so you can kind of follow along! hashtag#MoreGreenBuildings and hashtag#MoreResilientCities, hashtag#LetsGo!”

I was asked by my colleague in green building, Tom Gloria (who runs the Sustainability Masters program at the Extension School), to think about teaching, earlier this summer. One thing led to another and I jumped in. I did a lot of reading and sorting of my files to find good stuff to use – on green buildings, on resilience, on urban sustainability, and on change management and systems thinking. I am looking forward to bringing in some of the leadership, communications, and behavioral science that I gained while at the Kennedy School. This has been a big push but so far it is already rewarding.

The course link is here, and here is a link directly to the syllabus. The class meets online each Tuesday night this fall, from 7:20-9:20 through Zoom. I am looking for guest lecturers, so if something on the syllabus seems like your favorite topic to talk about, drop me a line. Thanks!