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CRE Opinion

ESG and the Bottom Line: Why Doing the Right Thing Pays Off

HKS' Dan Noble: "ESG is a powerful framework for future design thinking and will help us to create a more just, equitable, diverse, and inclusive world."
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Courtesy HKS

The average life expectancy of commercial buildings today is approximately 50-60 years. Sometimes they become obsolete in far less time depending on design and construction quality, maintenance, and adaptability to changing market needs and conditions. Smart investors evaluate building value carefully, and in recent years, the role of environmental, social, and corporate governance (ESG) has emerged as a major consideration.

The built environment generates nearly 50% of annual global CO2 emissions—27% in building operations and 20% in building materials (embodied carbon). The global scientific community set a target for all new buildings and major renovations to be zero carbon by 2030 to limit global warming to 1.5℃. But, according to current scientific data, 2030 is too late. To reach the 2030 goal, all new construction and major renovations need to be carbon zero now. That means eliminating all on-site fossil fuels and powering all buildings with 100% on-site and/or off-site renewable energy.  

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Dan Noble, HKS

In a recent HKS-sponsored seminar, Hines Vice President, Global ESG Adam Slakman outlined the increasing importance of ESG to Hines investors and tenants. The firm just published its Embodied Carbon Reduction Guide last month, which outlines its plan to reduce carbon emissions. And Adam shared that many of their investors are enlisting Hines’ aid in bringing their real estate portfolios into compliance.

Beyond consideration of sustainable issues in development and redevelopment, we are also looking at building design in a different way today. While context and site considerations have always been important, today we take more of a macro view of how buildings fit into the larger urban landscape; how they relate to the prevailing climate conditions, habitat, and geography; and how they impact the people that interact with them. The more human-centric elements of design—wellness, accessibility, equity, and resilience also play a big part in assessing and maintaining asset value.

It is more important today than ever to enlist ideas and feedback from a diverse cross-section of people in the planning process to make sure that the places we design now will be an asset to the community for many years to come. With design intervention, we can knit together communities that have been torn apart or devalued. This is something our firm is doing in cities across the globe and right here in Dallas at Southern Gateway Park in Oak Cliff. Revitalizing neighborhoods by introducing green spaces and repositioning underutilized buildings improve the quality of life in our cities and create new economic opportunities.

Especially after two years of the pandemic, a healthier building environment is a major marketing advantage for buildings today. Indoor air quality, accessible outdoor spaces, biophilic elements, and smart building systems are all considerations that can increase the appeal of a building.

I am advocating for a more holistic approach to urban planning and building design. It is the right thing to do for our communities and the best investment for all stakeholders. ESG is a powerful framework for future design thinking and will help us to create a more just, equitable, diverse, and inclusive world.

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