When Markets Drive Change: Linking Sustainability To The Business Of CRE
ESG data platform Measurabl is making headway toward its goal to change how real estate views sustainability. In July, BlackRock launched its sustainability-linked global real estate exchange-traded fund, iShare, informed by Measurabl’s ESGx Securities product. The fund incorporates environmental, social and corporate governance, prioritizing allocations that demonstrate better sustainability performance.
This follows the news that London Stock Exchange-owned index and benchmark provider FTSE Russell selected Measurabl as the exclusive sustainability data provider for its green and target index series. FTSE Russell benchmarks more than $320B in assets.
“The rising requirement to systematically channel flows towards companies and assets with unambiguous sustainability credentials is not only prudent risk management but speaks to the long-term viability of investment,” London Stock Exchange Group Global Head of Real Assets Ali Zaidi said. “Measurabl’s groundbreaking asset-level approach enables FTSE Russell to create benchmarks with quantifiable sustainability uplift and contributes towards our shared goal of greening the built environment.”
These developments exemplify the systemic change the real estate industry is going through when it comes to ESG, fueled by data and technology, Measurabl CEO Matt Ellis said. The industry is starting to see that improving buildings’ environmental performance, including energy consumption and use of raw materials, isn’t enough.
“To generate the collective action, we need to tackle climate change. It’s not only about changing lightbulbs,” Ellis said. “We need to realize the competitive advantage of sustainability by linking it to leasing, lending, bond scrutinization and capital allocation. The lever to get to improved sustainable real estate is better outcomes for the business of real estate by tying together sustainable and financial outcomes.”
Creating this incentive across global markets is now possible through better use of data, Ellis said. In July, Measurabl launched Quantum, a vast cloud platform that houses all the granular data from every building that Measurabl tracks.
Quantum contains data on assets totaling more than 18B SF across 93 countries, including 37% of the world’s top asset managers. All that data is aggregated and anonymized before being made available to specific customer segments such as property managers, lenders, investors and property owners who can leverage data for their own purposes.
“Quantum is our way of connecting building sustainability with capital markets,” Ellis said. “The various products that sit on top of Quantum allow a building owner in, say, France to grant permission to their data to whomever holds the loan against it in New York, offering the chance for easier, more accurate exchange of information, including structured incentives such as green loans. Before Quantum, this data was siloed, less accurate and delayed.”
The concept of linking real estate’s environmental performance to capital markets has been building for the last decade, Ellis said. He cited the example of Fannie Mae, which created the first green lending program in the U.S. in 2012.
For multifamily owners to qualify for a loan through Fannie Mae’s program and benefit from lower interest rates, they had to guarantee certain energy and water reductions in the building. Since then, many large banks have offered similar programs, offering sustainability-linked loans and bonds.
“It’s all about getting to the actual business of real estate — buying and selling, leasing, fundraising,” Ellis said. “While improving energy performance is a pragmatic part of owning properties, it’s not going to get us to where we need to be to tackle climate change.”
The key challenge facing global real estate is that while institutionally owned real estate can be improved, the majority of commercial properties are owned by individuals who have little incentive or funds available to make necessary environmental improvements. Ellis said Leaders of the Urban Future is a step in the right direction, but there is further to go.
“We need to get the biggest market movers and capital providers signed up to this concept, to engage them to leverage data to drive sustainability,” he said. “But how do we engage smaller, mom-and-pop-owned real estate? By doing something as basic as offering more affordable interest rates if their property's sustainability performance is improved.”
To link the environmental performance of individual assets with the cost of capital from lenders and equity sources takes a high level of data connectivity. This is why Measurabl launched Quantum.
As the adoption of Quantum ramps up, Ellis said experience tells him the real estate industry will move from voluntary ESG reporting and green benchmarks to a much more structured approach based on actual data, delivered in a timely fashion.
To demonstrate the value of recording actual energy consumption against industrywide benchmarks, Measurabl offers a free tier to allow property owners to try out the platform. Cost of technology to measure sustainability should no longer hold people back, Ellis said. Above the free tier, Measurabl has reduced the cost of monitoring a property’s environmental performance down to tens of dollars per building per month.
“We need to rip off the Band-Aid of self-regulated reporting because it’s holding us back,” he said. “We need proxies for being green to give way to actual metrics on energy use or carbon intensity that we can use in the business of underwriting, lending and leasing. Every building has meters. Anyone can do this.”
Measurabl’s top unique selling point is that the business has been collecting this data for 10 years. Quantum has data on assets with a value exceeding $3T, which it can use to create better benchmarks, and it has information for lenders looking to create green lending programs, Ellis said.
Another selling point is that Measurabl’s technology and cloud are proprietary. Owning its own infrastructure opens up opportunities to innovate, Ellis said. More data leads to more insights, greater incentives and connectivity between parties, all tailored to each investor, property owner or lender.
“We’re shooting for sustainable real estate, a journey that is specific for every single customer,” he said. “The outcome to improved sustainability needs to be a competitive advantage for each business, which manifests in lower cost of capital. But the outcome will also be collective action — that’s when markets change.”
This article was produced in collaboration between Measurabl and Studio B. Bisnow news staff was not involved in the production of this content.
Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.
