Real estate managers no longer consider ESG a matter of changing lightbulbs and installing low-flow toilets in their buildings but are now weighing a lot more effects that environmental, social and governance factors have on returns.
In the past, real estate managers' interest in making their buildings more eco-friendly was driven by tenant demand, mainly in the office sector, said Elena Alschuler, head of sustainability for the Americas in the Baltimore office of LaSalle Investment Management Inc. Today, the accelerants are a combination of the regulatory environment and investor pressure, she said.
"Investors are starting to see that it (ESG) does have an impact on returns," Ms. Alschuler said. It not only impacts the expense side but the income side as well, she added.
Real estate managers like LaSalle are more focused on sustainability than social or governance aspects of ESG, Ms. Alschuler said.
There's a heavy focus on energy consumption and how to make properties more sustainable and less susceptible to climate risk, she said.
In real estate, the "S" and the "G" are not applicable in the same way as it would be for managers that invest in companies, Ms. Alschuler said.
Companies are getting the same pressure as real estate managers to be more sustainable and are looking to their landlords for help, she noted.
LaSalle is heavily focused on the long-term impacts of climate change.
"Climate change is a real thing," said Jacques Gordon, Chicago-based global head of research and strategy at LaSalle Investment Management. "Climate change and climate migration will be a major driver of the movement of people" from less developed countries or regions, which do not have the political or financial wherewithal to take measures to help allay the ravages of climate change, to more developed countries, he said.
The continuing impacts of climate change, mainly rising sea levels, could displace 214 million people around the world, according to a LaSalle study released in June.
Developed nations will have to deal with the "ripple effects of climate migration," the report noted.
LaSalle had $82 billion in assets under management as of March 31.