Despite recent anti-ESG sentiments, regular ESG reporting has proven itself to be a good business practice. It provides investors with a transparent view of an organization’s multifaceted impact on all stakeholders, serving as a form of risk management by regularly informing investors about a company’s ESG accomplishments and progress.
Benefits of consistent and timely ESG reporting include:
Attracting and retaining new and existing investors: Historically, investors have looked almost solely at financial data to determine a company’s worth. Today, however, investors often also analyze ESG metrics to assess the long-term prospects of a company’s non-financial and financially linked risks and opportunities.
In the real estate industry, we have seen transparent ESG reporting encourage accountability and drive value for investors. In the multifamily sector specifically, housing that is climate resilient and operationally optimized is poised to meet higher resident standards and adapt to changing regulations. In fact, research has shown that REITs with strong ESG initiatives may have better operational performance than those without such initiatives. For example, companies with sustainable building practices are better prepared for changes in building code law or government incentives for green buildings, and they often have lower operating expenses and higher rental income. Additionally, strong ESG practices are more attractive to residents, which can lead to higher occupancy rates and more stable cash flows, in turn maximizing value for shareholders over time. In fact, studies have shown that between 2013 and 2020, companies with high ESG performance tended to score 2.6x higher on total shareholder return than medium ESG performers.
Ensuring a culture of stakeholder transparency and engagement: ESG reporting is a valuable tool for informed data management that also ensures ongoing and transparent engagement with company stakeholders—both inside and outside of the organization. Consistent and proactive ESG reporting provides stakeholders with a view into its current ESG performance, as well as the opportunity for the company to set or reexamine future strategic plans and goals to benefit stakeholders.
To start, let’s look at an organization’s internal factors. Employee morale can greatly benefit from a strong ESG reporting program. By demonstrating their care for the well-being of their employees and residents, companies can establish an otherwise difficult-to-create sense of purpose and engagement. This makes it easier to attract new talent; retain and motivate existing employees; and connect them to a company’s overall brand mission. Altogether, ESG achievements are often viewed by employees as a source of pride and a major factor in overall job satisfaction.
Turning to the world outside of the walls of an organization, resident feedback provides an opportunity to anecdotally measure public opinion of a company’s broader ESG program. This starts with encouraging residents to voice their opinions on ESG and share where the company can improve. Such encouragement makes residents feel heard and valued.