How REITs Are Embedding ESG Into Day-To-Day Operations

REITs are embedding ESG into corporate strategies, business operations and talent management practices, according to the latest research from Nareit.

REITs and publicly traded real estate companies are increasingly enhancing ESG data and disclosure, strengthening board oversight of ESG, implementing programs that prioritize the health and wellness of stakeholders, and putting in place climate mitigation and adaptation strategies to reduce carbon emissions while increasing resiliency, Nareit says.

“The REIT and publicly traded real estate industry is committed to implementing innovative and impactful ESG practices,” said Nareit President and CEO Steven A. Wechsler. “This report demonstrates the progress our industry has made in owning and operating real estate responsibly, planning and practicing for resilience, and placing a premium on the people who are key to the success of these efforts.”

Approximately 90% of REITS report having oversight of ESG at the board level, while 82% integrated ESG risks and opportunities into their strategy and financial planning in 2021. Another 87% offer mental health support as part of their health insurance, while 81% offer programs that improve work-life balance, such as childcare, flexible work arrangements, and parental leave. And more than half of Nareit corporate members report linking executive compensation packages to ESG performance in 2021—compared to approximately one-third in 2020. That year, half of new REIT directors were women and 31% were people of color—up from 48% and 13% in 2019, respectively.

In addition, 83 of the largest 100 REITs by equity market cap own green-certified buildings in their portfolio, while 62% of REITs aligned their disclosures to the Task Force on Climate-Related Financial Disclosures (TCFD) framework in 2021, up from 35% in 2020.

“This increase in REITs aligning their disclosures with the TCFD framework reflects REITs’ increasing recognition that TCFD bolsters investor and lender confidence that climate-related risks are being appropriately assessed and addressed,” Nareit noted in the report.