ESG in Industrial Logistics (IL) Real Estate Environmental, social and governance (ESG)  Considerations PwC has published an English language version of its 600-page ESG Handbook for Real Estate which covers all aspects of ESG and how it affects the property business.

The handbook examines aspects such as politics and regulation, ESG in management, investment, financing and valuation as well as sustainable urban development and European Union taxonomy.

The firm points out that the real estate industry is particularly affected by environmental, social and governance factors but that a cohesive overview has been lacking.

“The challenges associated with implementing ESG criteria still raise many questions in the real estate industry. Our handbook sets the framework for action and provides answers,” explains co-editor Florian Hackelberg, professor of real estate economics and management at HAWK Holzminden.

When it comes to ESG, many might think the industrial sector would be least likely to take up the fight, however experts say otherwise.

JLL’s Accelerating Logistics and Industrial Sector Sustainability report details how the sector can help deliver on net-zero carbon by 2050. For example, the report says developers, owners and users of our largest industrial spaces are among the biggest advocates for carbon reduction. JLL’s analysis shows that 53 per cent of Australia’s top 100 industrial and logistics occupiers now have net-zero targets.

JLL head of sustainability Connor McCauley says demand from occupiers for ESG compliant industrial assets is at an all-time high, with data from GRESB highlighting the importance of ESG among industrial property occupiers.

“Investors and financiers are putting as much importance on ESG performance of industrial funds as they have historically had on commercial office, retail and residential funds,” McCauley says.

“In the 2022 GRESB submission, industrial participants were the fourth largest sector after diversified, residential and office, and numbers have been increasing each year.” He says tenants are demanding more amenities and improved environmental performance to align with their own ESG commitments, “not to mention consumers … are becoming more socially conscious about how their spending decisions can negatively impact the planet and its people, and this is having a knock-on effect in the industrial and logistics sector where the majority of transport and manufacturing emissions takes place”.

CBRE recently hosted a Supply Chain & Logistics Association of Australia event in Western Sydney, where it was noted that developers are heightening their focus on delivering more sustainable, resilient buildings, with more programs and initiatives being rolled out to upgrade existing industrial assets.

CBRE Asia Pacific head of ESG research Sameer Chopra says there is still scope for improvement. “Office and retail sectors have already made significant strides in energy reduction, particularly as a result of having rating tools like NABERs,” he says. “In the industrial sector, there remains a significant opportunity to measure, certify and improve.”

He says while there is a desire among tenants to align with ESG industrial developments, current market conditions make it difficult to quantify the advantage to property owners.

“You don’t always see a green premium in a really tight market. But whenever vacancy is a little higher, the number one thing we see is that the best green stock gets leased up, and we typically find that there’s about a 65 per cent advantage in leasing. So, you get about two- thirds more leasing deals done in green stock.”

But he says that hasn’t slowed progress because ESG is not all about the bottom line.