ESG (Environmental, Social and Governance) has emerged as the latest catchphrase to define sustainability in organisational practice. However, understanding what ESG means in practice and how it applies in the real estate sector remains mute. Building rating tools have significantly influenced market adoption of sustainable building practices. This paper explored ESG reporting and prevalence of sustainability rating tool use by Australian Real Estate Investment Trusts (AREITs), through a content analysis and comparison of 10 AREITs sustainability and/or annual reports. Findings revealed a higher emphasis on the Social component of ESG, mainly focused on aspects of Community and Customer relations, surpassing the Environmental and Governance criteria in terms of number of occurrences and investments disclosed. ESG strategies were found to be interconnected, with actions mainly defined by a combination of environmental, social and governance aspects. Leading AREITs, classified as frontrunners, were characterised by more detailed disclosure of their actions, alignment with global financial standards and a strong commitment to financial disclosures related to ESG and sustainability. Sustainability rating tools were commonly used to demonstrate ESG credentials, mostly focused on performance-based tools, yet an increasing focus was dedicated to social sustainability, especially in health and wellbeing of building occupants. Findings from this research help establish AREITs reporting practices of ESG and sustainability, albeit it should be acknowledged there is some disconnect between corporate sustainability and the asset portfolio's sustainability. It also provides the property industry with a better understanding of the profile of current ESG and sustainability characteristics in real estate, enabling prioritisation and reflection in the ESG consideration requirements under the International Valuation Standards.
Ghosn et al. (Tue,) studied this question.