ESG In Real Estate: How The Environment Is Impacting Decision-Making
Full name of ESG: Environmental, Social, and Corporate Governance (ESG) is the acronym for ESG. Companies that use ESG are compelled to consider ethical practices, social responsibility. And environmentally friendly practices when putting any procedures or processes in place. We quickly and noticeably changed the way we work, live, communicate, & invest after the COVID-19 epidemic. Therefore, it is vital and necessary to bridge the gaps found in our diverse ecosystems, from infrastructure to healthcare.
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Climate change and pandemic-related disruption drove investors to actively incorporate environmental, social, and governance (ESG) factors into their investment decisions, hence 2020 was unavoidably a turning point in the adoption of ESG factors in tangible assets, such as infrastructure & real estate. Additionally, the ongoing occurrence of extreme weather phenomena in India and around the world, such as torrential rain & flooding or previously unheard-of heat waves, has elevated the significance of taking environmental issues into account during all decision-making processes.
By 2025, the anticipate value of ESG assets is predicted to be USD 53 trillion. Or over one-third of the estimated USD 140.5 trillion in total assets under management (AUM). Unavoidably, this shift in perspective is bringing forth important new trends. And changing how real estate is develop and financed in India.
ESG Integration in Investments in Infrastructure
It is impossible to overestimate the significance of ESG integration in infrastructure projects. It is critical to evaluate the potential environmental impacts of projects on factors like biodiversity, resource use, and perhaps energy transition before investing. Due to the presence of infrastructure within communities. The management of social concerns is another vital differentiator for the development and asset management of such projects. Factors like Health, Safety & Environment (HSE), Community Engagement, as well as the Implementation of Diversity, Equity, & Inclusion Initiatives Play a Significant Role in Infrastructure Asset Management from The viewpoint of risk mitigation and these projects’ ability to produce superior risk-adjusted returns.
Developers’ Attitudes Towards ESG Are Changing:
ESG no longer has the same value that it previously did in the perspective of developers. As more investors show interest in portfolios that incorporate ESG elements. Future-ready developers in India are placing a greater emphasis on ESG compliance. Additionally, developers are aiming to make the switch to a zero-carbon economy in order to adhere to worldwide best practices for climate change. According to a poll, demand for jobs in India’s ESG sector surged by over 468% between April 2019 and April 2022. Indicating that more companies are taking this issue seriously.
An increase of green buildings
Worldwide, nations have made commitments to achieve carbon neutrality within the next few decades. The real estate industry is essential to the growth of green buildings. With an emphasis on resource efficiency, waste management, and constrained energy usage. Facilities with low carbon emissions are being built through the deployment of technology. Additionally, the carbon footprint of the sector is decrease via more efficient and intelligent buildings. Safety issues for both employees and the environment are crucial in global infrastructure. India was rank third in the world for having over 2.8 million gross square metres of 146 certified structures and spaces.
Regulatory Objective:
Despite the fact that many developers are switching to ESG, regulatory pressure has been important in this sector. While pressing laggards to keep up with the reforms, the Budget and India’s emphasis on reaching net-zero carbon emissions by 2070 ensure policy support for environmentally friendly investing & infrastructure development that complies with ESG requirements. In reality, starting in FY 2022–23, reporting in accordance with the new Business Responsibility and Sustainability Reporting criteria will be necessary for the top 1,000 list companies by market capitalization.
In order to boost green finance and lower the financial risks related to climate change. The RBI is also predict to shortly create regulations for regulate enterprises.
Conclusion: ESG in Real Estate
Without a doubt, as the country and the rest of the globe work towards a sustainable future, ESG in infrastructure & real estate is poised to become the norm rather than the exception. The author is Senior Vice President of NAREDCO – Maharashtra and Vice Chairperson of the Nahar Group.
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