Unlocking the Power of ESG: Key takeaways from our webinar

The focus on Environmental, Social, and Governance (ESG) principles is more critical than ever.

Companies are starting to realise the importance of adopting sustainable and ethical practices. But obtaining green credentials isn’t just about meeting regulatory requirements. It’s also about driving long-term success.

In our recent webinar, we explored how organisations can successfully integrate ESG into their operations. Here are the key takeaways that every business should know.

Insight #1: Can’t Go Green Unless You’re in the Black?

One of the lingering challenges in ESG is the misconception that sustainability initiatives come at the cost of profitability. As the saying goes, "You can't go green unless you're in the black." This mindset is prevalent in companies that prioritise short-term financial results over long-term investments.

However, companies operating in consumer-facing industries are increasingly recognizing that ESG practices can enhance brand value and build consumer trust—things that have enduring value over short-term profits. 

Investors are also recognizing the alignment between strong ESG performance and financial stability. Companies with higher ESG ratings often demonstrate better employee engagement, ethical leadership, and overall operational efficiency, leading to greater investor confidence.

Insight #2: Current ESG valuations do not capture the full picture. 

A growing concern among investors is that current ESG valuations do not fully capture the evolving challenges and risks businesses face, such as employee well-being, tenant experience, and the broader impacts of a post-pandemic world.

In sectors like real estate, for example, the shift from rigid, pre-pandemic office structures to flexible, community-driven spaces highlights the need for new valuation models. Buildings are no longer judged solely by square footage and location but also by how they foster a sense of well-being and community.

For tenants and employees, this means considering how a workspace enhances comfort and engagement, especially in a hybrid work environment. Landlords, in turn, are beginning to assess how their properties influence the overall employee experience to attract and retain occupants.

Another contributor to the valuation gap is outdated risk assessment models that fail to account for the long-term financial risks of ignoring ESG factors. Data plays an increasingly critical role here. As we collect and analyze more nuanced ESG data—on factors such as well-being and community engagement—it becomes clearer that these elements can drive business success.

Insight #3: What ESG investment actually looks like. 

What does long-term investment in ESG actually look like?

Michael Blake from Savills highlighted a recent project with Delancey, a UK-based investment and asset manager which secured a successful planning application for a 200,000-square-foot life sciences hub in Islington, London. From the outset, ESG was integrated into the project to ensure not only the sustainability and community benefits but also long-term economic value for the region.

One of the critical goals was to avoid creating an isolated bubble that excluded local communities. Delancey, supported by our team, aimed to build an ecosystem where local residents could actively participate and benefit from the project, ensuring that the life sciences hub didn’t just serve external businesses but fostered local engagement and opportunities.

A comprehensive social value strategy was key to this. One notable initiative involved running educational programs to inspire interest in science among 10- and 11-year-olds. This program was designed as the first step in a long-term pipeline of local talent development, with future plans for apprenticeships and upskilling initiatives.

By the time the hub is fully operational, local people will have been equipped with the skills needed to fill lab spaces and jobs within the hub, creating a sustainable and locally sourced talent pool.

By embedding ESG into the very fabric of the development, Delancey ensured they weren’t just creating a space for life sciences but building an inclusive, thriving community that attracted both investors and occupiers with a ready-made ecosystem of talent and resources. This long-term approach not only enhanced the project’s social value but also strengthened investor confidence by demonstrating a commitment to sustainable, community-driven growth.

Insight #4: The Impact of Social Value on Portfolio Value

The incorporation of social value into real estate portfolios is increasingly recognized as a driver of both commercial and community benefits.

Social value plays a significant role in enhancing the functioning and well-being of communities. That said, it can be difficult to quantify social value's precise impact on portfolio value, several key areas demonstrate its influence:

• Creating a Sense of Place and Community
  
  Social value initiatives—such as mixed-use developments, community engagement programs, and local economic support—help create vibrant, thriving spaces. In real estate, this often translates into increased foot traffic, higher occupancy rates, and longer-term tenant retention.
  
  
• Increased Occupancy and Tenant Satisfaction
  
  Social value initiatives, such as community-focused amenities or activities, can improve the desirability of a location for both residential and commercial tenants. By engaging with local residents and enhancing the tenant experience, landlords can create environments that encourage tenants to return to office spaces or continue leasing longer. This enhances occupancy rates and asset stability, directly benefiting portfolio value.
  
  
• Access to New Investor Pools
  
  Social value also adds long-term benefits by making properties more attractive to socially conscious investors. As ESG and impact investing gain momentum, properties with strong social value initiatives are likely to attract new types of financing, often at more favourable terms, thereby increasing the overall financial attractiveness of the portfolio.
  
  
• Brand Differentiation and Premium Pricing
  
  Properties that successfully embed social value into their development plans can often command premium pricing. By differentiating themselves through strong community connections and inclusive practices, these properties stand out in a competitive market, allowing for higher lease rates and improved tenant loyalty.
  
  
  
  
  

Conclusion

Our webinar highlighted the critical role that ESG principles play in shaping the future of Real Estate. By integrating these principles into operations, businesses can enhance their sustainability efforts, strengthen stakeholder relationships, and create long-term value.

As the importance of ESG grows, it’s essential for companies to stay ahead by proactively adopting sustainable and ethical practices.