2023 Winter Issue - 44

" International investors, particularly those with a portfolio in Europe, have been able to
see the transition to more carbon-neutral, energy-efficient buildings already because
Europe is ahead of the United States when it comes to energy efficiency. "
-AARON JODKA, COLLIERS INTERNATIONAL
in most states and with most utilities. Some utilities
just don't have the capacity. And there are still tenants
who are very reluctant to share data, which further
complicates access, reporting, measuring, and
monitoring. Also, climate risk assessments, typically
generated by third-party companies, are often difficult
to interpret and thus can add complexity and
challenges with implementing risk reduction strategies
as well as with appropriately characterizing the
risks within both financial and ESG reporting mechanisms.
Recently ULI issued a report, How to Choose,
Use, and Better Understand Climate-Risk Analytics,
that I think is really helpful, because these are big
databases with algorithms and analysis, and unless
you're a science geek, it's not easy to understand
them fully.
What kinds of innovative strategies
exist or are needed to address the
uncertainties and complexities of ESG
investing?
JODKA: International investors, particularly those
with a portfolio in Europe, have been able to see the
transition to more carbon-neutral, energy-efficient
buildings already because Europe is ahead of the
United States when it comes to energy efficiency. So
they can see what works and what the challenges
are and apply that knowledge to their properties
in the United States. When it comes to alternative
sources of energy generation in the United States,
we're still trying to figure out what's fair for municipalities,
owners, and utility companies. For example,
states like New York and Massachusetts have a high
level of solar power adoption, even though they
are not the sunniest states, because they have net
metering, and building owners who generate excess
electricity from photovoltaics can sell it back to the
utility or get credit. If we could figure out ways to
make that work for both users and utility companies
in more states, we could see some real gains.
WALRAVEN: Automation of data capture through
innovative metering methods is still an area of
opportunity that will provide greater visibility into
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URBAN LAND WINTER 2023
performance, which will make it easier to understand,
underwrite, and invest in ESG opportunities.
Another strategy, engaging with tenants, may not
seem innovative, but it's critically important to
reducing complexities, getting better insights, and
aligning interests with stakeholders. For example,
as landlords engage more with tenants on transparency
and focus on performance, risk and uncertainty
will be reduced. As one example: for emissions
inventories and reporting, if landlords and tenants
can share more information, then information will be
based more on actual data/performance and less on
proxy/estimated data, which again will improve confidence
and reduce uncertainties. Not a lot of chief
executive officers of publicly held companies like
the word estimates in anything that they're disclosing,
particularly for which they have fiduciary and
legal obligations.
RAH: We need monitoring mechanisms and safeguards
in place that can more easily prevent practices
that might look good on paper in terms of ESG
criteria focused on energy and carbon but in fact do
not have a good impact environmentally or socially
on the ground. An example of this would be data
centers located in areas that have a high level of
water stress achieving energy efficiency and lower
carbon footprints through water-intensive cooling
methods. This can be damaging to the communities
and the businesses themselves in the long run. We
don't yet have good metrics to take these effects
into account.
BROOKE: ULI recently issued a report called Mitigating
Climate Risk Impact to Real Estate Value in
the Greater Bay Area, and one of the proposals
is to create a group forum, bringing together key
stakeholders-owners, investors, developers, auditors,
valuers, government officials, regulators, and
financiers-to develop key strategic objectives for
China's Greater Bay Area. These types of industry
collaboration are very encouraging, especially if they
focus on a portfolio or an area, set key objectives,
and develop pilot projects. For investors, there is a

2023 Winter Issue

Table of Contents for the Digital Edition of 2023 Winter Issue