Welcome to ‘The ESG Crunch’ with Tom Allport, a Q&A focused on Sustainability & ESG in the Built Environment.
This Q&A series is an opportunity for our Lead ESG & Sustainability Consultant, Tom Allport to discuss all things Environmental, Social, and Governance (ESG) with some of the leading players and decision-makers in the space. Each week we will ask burning questions centered around the critical role of ESG in shaping business strategies, fostering sustainable innovation, and driving societal impact. This series will provide a platform to share insight into how these leaders are integrating ESG principles into their organisations, navigating challenges, and advice for aspiring entrepreneurs looking to join the ESG & Sustainability industry.
With roots in a family business dating back more than 100 years, Tishman Speyer is a private company well known as a leading owner, operator, developer, and investment manager of real estate in the United States, Europe, China, Brazil, and India. Since 1978, Tishman Speyer has acquired, repositioned, developed and/or operated over $128 billion of property, including over 218 million sf of office, retail, residential, industrial and life science space.
How did you find yourself working in the ESG & Sustainability space?
My journey into ESG & sustainability wasn’t a straight line. There are those lucky individuals who’ve known their path since childhood, but that wasn’t me. I had this blend of interests in nature and technology, but it didn’t exactly point me in a specific direction. After a couple tries that didn’t quite hit the mark, I decided to dive into engineering – a decision that eventually paved the way to a Master’s in sustainability. I graduated right in the midst of the global financial crisis, which might sound like bad timing, but sustainability courses were a rarity at the time, and the job landscape was vastly different. I was fortunate to be able to snag roles that directly related to environmental sustainability primarily assisting major corporates with their carbon footprints, eventually becoming an accredited Carbon Trust assessor. I remember back then there were reports emphasizing the built environment as a prime route for cost-effective emissions reduction – a notion that still rings true.
After those early steps, I entered the real estate world taking on advisory and leadership roles at property consultancies like JLL and Colliers. Being exposed to the bigger picture fuelled my drive to better understand how ESG could become more influential. The journey progressively covered more of the ‘S’ and the ‘G’ and led me to work with a range of stakeholders on aligning both internal and external strategies with evolving market dynamics. As time progressed, my interest gravitated toward the investment side of the industry.
What does your role at Tishman Speyer entail?
As Head of ESG for our European platform, my role is to orchestrate the integration of ESG principles at every stage of our property investment decisions, with the ultimate goal of rendering my position obsolete in the future. This mission involves cementing procedures that guide us toward a range of objectives, including asset decarbonisation, enhancing occupant well-being, and fostering meaningful connections between our properties and the communities they inhabit.
As a member of the global ESG team, I shoulder the responsibility of ensuring our regional strategy aligns with our overarching global ESG framework. Additionally, I contribute to shaping high-level strategies within the global ESG committee and chair the European ESG committee to keep things humming and relevant to local market expectations.
Could you share some insights into the ESG & Sustainability priorities at Tishman Speyer?
Our commitment to be net zero by 2050 or sooner really drives a big part of our ESG efforts. Broadly, the journey progresses from boosting energy efficiency to investing in renewable energy, installing onsite renewables where productive, transitioning away from scope 1 emitting systems by embracing electrification, and using credible offsets only as a last resort. To realise our net zero ambitions, we initiated thorough audits across our core European portfolio in 2021, mapping out pathways for each asset. Since then, we have been actively implementing these plans, and extending net zero strategies beyond the core portfolio.
In parallel, we’re incorporating the Task Force on Climate-related Financial Disclosures (TCFD) recommendations into our reporting. This step not only boosts transparency but also empowers us to evaluate both physical and transition risks, which, in turn, enable us to develop effective mitigation strategies. Concurrently, our attention is focused on our social programs at the asset level, ensuring that our approach meaningfully benefits the well-being of our communities, and on promoting diversity, equity, and inclusion both internally and externally.
With ESG being so broad across industry and so nuanced within Real Estate, what specific focus do you and your team have?
We’ve got a tailored focus depending on the investment strategy adopted for each vehicle. It’s not a one-size-fits-all deal – core funds and value-add have their own set of targets, and the recent implementation of the SFDR (Sustainable Finance Disclosure Regulation) has reinforced the need to align with the inherent attributes of our vehicles. There’s also an underlying emphasis on data quality which is vital to inform our day-to-day operations.
Beyond the above key priorities, we’ve really been diving deep into elevating the indoor spaces we provide. This journey commenced by focusing on the basics, like improving cycling facilities beyond guidance and aligning our property management policies with industry best practice. This led to the certification of several buildings within our core portfolio under the Fitwel standard. We then got a good grip on indoor air quality management at Taunusturn, a high-rise building in Frankfurt, where an intensive endeavour resulted in the attainment of a RESET Air certification – the inaugural office building in Germany to secure such an accolade. Presently, we are delving deeper into the intricacies of the WELL Building Standard, the leading global rating system for health and well-being, for our value-add projects across Europe, assuring that our developments consistently align with the preferences of customers looking for Class A assets that prioritise sustainability and wellness for their workforce.
What unique challenges and opportunities do you see with ESG in the UK compared to other global regions?
The UK’s innovation scene, especially in tech, continues to be a standout – this momentum could really shake things up in the real estate world. But there are many hurdles when it comes to scaling up ESG integration and tech adoption across the built environment. One big challenge in the UK is its planning system. Right now, it’s just not really helping; it doesn’t tackle important things like climate change (especially outside London), neither does it enable the use of low-carbon tech. We could do with a better way to measure and include emissions and climate resilience during the planning permission process. It’s a big opportunity in the UK, and many in the field, like the UKGBC, see that very clearly.
Amidst these challenges, progress has been made towards defining net-zero through productive collaborations among UK industry bodies. The impact of this progress has the potential to extend far beyond the UK’s borders. Additionally, the UK’s financial landscape is progressively embracing ESG criteria, opening avenues for accelerating sustainable growth.
With the potential for innovation and teamwork, along with the right financial backing, the idea of our sector becoming a major force in responding to the climate crisis seems doable – even as we navigate the complexities of the ongoing energy transition.
Globally there is a skills talent gap in the ESG & Sustainability Real Estate sector, what skills are particularly important when developing and implementing the Tishman Speyer ESG Strategy?
I’d say crucial skills to execute our ESG strategy include strategic thinking, hands-on execution, and good communication. We are at the stage where we need to link our goals to tangible results. It’s also important to work well in teams, prioritise tasks, and be creative. Our strategy involves many teams and functions, so collaboration is key. We also need to stay flexible because the world is changing fast. So, embracing change and staying aligned with evolving standards and regulations is a must.
Lastly, to help us in our mission of enabling data-driven decision making some good number crunching skills also come handy. And it goes without saying, a commitment to driving ESG up the real estate sector’s agenda!
How have your client’s ESG & Sustainability needs and priorities changed in the last 12-18 months?
We have seen a number of shifts driven primarily by EU legislation deadlines and greater ESG scrutiny across the investment process. One trend that has been gaining good momentum is understanding the risk associated with a term that, although a bit alarmist, is now part of the property lexicon – carbon ‘stranding’. The ascent of the CRREM (Carbon Risk Real Estate Monitor) tool is a true reflection of this trend. While CRREM isn’t without its imperfections, we view it as a significant initial step towards benchmarking carbon – so much that we’ve actively joined an industry coalition dedicated to adapting it for the US market.
Simultaneously, we’ve seen a shift towards using more bottom-up metrics over the conventional broader ESG ratings as a primary tool. Detailed, tangible data on specific, asset-level areas such as energy performance or physical climate risk has become a common request. Market participants now seem to seek genuine, verifiable figures that provide transparency, steering away from the risks of greenwashing.
What challenges and opportunities does Tishman have with ESG & Sustainability?
Where do I start?! The practical implementation of our strategy across our diverse portfolio can get quite tricky and be slow at times. I’m not known for being very patient so there’s that too. More generally, meeting investor expectations as their ESG strategies mature, finding the right partners to buy into our vision, and adapting to the changing legislative landscape while striving for a more responsible business approach is a big puzzle.
How have you found the market in 2023?
Inflation pressures and geopolitical uncertainties are continuing to have a market wide impact on how real estate projects secure financing and how investment strategies are being crafted. Amidst this volatile period, one aspect that has remained constant is the high customer demand for Class A properties in desirable submarkets across Europe, particularly in the office sector. The flight to quality, coupled with limited supply and a large share of outdated stock, is fuelling this competition, making it even more pronounced.
The discussions surrounding our work habits continue to dominate the headlines, of course. Interestingly, we are hearing more and more from corporates in different sectors a desire to see more faces back in the office. While flexible work isn’t going anywhere, some offices are evolving into true destinations successfully luring people to come more days – our asset in Paddington, which combines first-class amenities in a great waterfront location, is a good example of this with occupancy levels in 2022 slightly above pre-lockdown. This shift is redefining how we perceive these spaces, hinting at their potential to be vibrant hubs for customers and visitors while offering both stability and attractive returns for investors.
Lastly, the demand for ESG & sustainability (mostly from the capital markets), combined with the push from regulations, is only going in one direction. This wave of change signifies a broader shift towards an era where environmental and social considerations drive business choices, amplifying the potential for positive change on a larger scale.
Finally, what advice would you give to aspiring ESG & Sustainability talent in today’s market?
Let’s apply the rule of three:
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