Xempla

Tag: esg

  • State of Asset Management in Australia

    State of Asset Management in Australia

    A lot of significant focus has been going around Asset Management. Similar to any other component, technology is playing a vital role in the transformation of asset management enterprises in Australia which are required to control portfolio risk, perform ESG practices, reduce operational costs, and meet net-zero targets on time.

    The widespread technology’s influence on the reduction of maintenance costs and added value for the customer is rapidly gaining traction. The Cost savings factor is a no-brainer – all organisations had to leverage technologies to decrease their operational cost with digital transformation, driving the customer experience.

    Setting up and maintaining short to medium-term goals may appear to be a daunting challenge for new businesses, but it is not entirely impossible. In this article, I’ve outlined the key trends and drivers around enterprise asset management and the built environment from the podcast episode with Umesh Bhutoria and Jeff Sharp.

    Emerging Trends In Asset Management Industry In Australia Compared To Those Worldwide.

    #1 Ageing Workforce 

    In the next seven to eight years, 60% of O&M workers will retire. Without a doubt, the ageing workforce is a major challenge, and there will be a need to replace them with the institutional knowledge.

    The realities of the future of the workforce cannot be avoided, but there are several ways to prepare, among which is through upskilling and leveraging data, and many asset management organisations in Australia have already begun to use more and more data to enable them to make better decisions.

    #2 Use of Technology

    If you’ve ever wondered, “How can you use asset data to make a difference in this industry?” or “Can asset management companies leverage this data to deliver better solutions?” Then, Keep on scrolling!

    During the Podcast session, Jeff Sharp of EY shared how he is working with his team in Australia and they’re integrating data to make real change. 

    Organisations now collect an incredible amount of data sets from multiple sources and have access to more data than ever before. In Australia, it is becoming more common to combine multiple data sources to create a single source of truth while layering one data source over another to generate better solutions.

    Key Drivers Influencing Change In The Enterprise Asset Management Markets In Australia

    #1 Cost Savings

    Asset management companies often underestimate the amount of cost reduction measures which are available. Identifying the highest expenditures related to operations & maintenance is the easiest way to uncover cost-saving options. Determining what and where are you spending the most on and considering these expenditures from both costs and a value perspective.

    The possibilities of reduction in operational costs, the introduction of newer technologies, and leveraging data into this industry have made room to extend asset life – span.

    #2 Sustainability

    When it comes to the environment, the decisions we take now have a long-term impact later. Sustainability and Net Zero is no longer a “trending topic,” but rather, there is an immediate need to reduce the pace of the changing climate. 

    Various sectors have started ESG practices and taking steps towards transitioning to a net-zero emissions future because of the impact it has on tenants and the entire contract. And in that sector, asset performance management has a significant role to play.

    Watch the video to discover more about how we assist O&M teams in being cost-effective and meeting customers’ ESG goals —>

    The Real Estate Or Built Environment’s Playbook To View Enterprise Asset Management In A New Light.

    There is a real divide between design and construction versus operations and maintenance which must be bridged. Organisations must have a pipeline in place so that data from the design and construction phase can move to the operational phase. 

    In order to maximise value and avoid losing information during the process, it is, therefore, necessary to utilise existing data from the development stage from which sensitive information, such as pictures, etc., can reach the operations & maintenance side.

    Despite the fact that some players are ahead in the market. Other organisations can take their time and focus on finding one solution at a time. Then can begin to work on data structures for the entire facility, allowing them to leverage existing data and do away with data silos. A data foundation should be built gradually, so try not to rush.

    Our blog provides succinct summaries of the key trends, and drivers influencing Asset Management Industry in Australia. To learn more, listen to our podcast episode!

    According to us, the sectors with the most potential for transformation are mining, utilities, and real estate. Which sectors, in your opinion, have begun their transformation journey? 

    To share your thoughts, Get in touch with Umesh Bhutoria or Jeff Sharp via LinkedIn. 

  • ESG in the Built Environment:The Real Estate Industry’s Growing Importance

    ESG in the Built Environment:The Real Estate Industry’s Growing Importance

    Climate change has made it plainly obvious how certain businesses have turned a blind eye towards the environment for years. Even after so many pledges and virtuous display of corporate social responsibility, very few trust business to do right by the planet and society. The gravity of global challenges and the impact of business on them have brought environmental, social and governance (ESG) issues under intense scrutiny by all stakeholders – from shareholders and employees to customers and people at large.

    Today, a company’s operations and growth prospects are closely assessed in terms of its ESG performance, irrespective of sector and size. However, the real estate sector is of special focus to the ESG agenda. ESG practices in real estate were fundamentally born out of necessity. But the theme of such practices should slowly move away from merely preventing damage, towards creating a positive impact and delivering solutions. 

    Why ESG Should be Top of the List for the Real Estate Industry?

    1. Real Estate’s Big Environmental Impact

    We can safely say that investors’, customers’ and the general public’s heightened awareness on climate change in recent years is making ESG climb up the priority list for companies in just about every industry. And when you consider that buildings alone are responsible for a whopping 40% of the world’s carbon footprint, you already know where we need to pick up the most pieces!

    The real estate industry, with its large-scale and complex system of assets for heating, cooling, lighting and other purposes, causes a significant amount of operational emissions and energy waste. Real estate establishments have a long lifespan and normally cannot be relocated, leaving them vulnerable to regional consequences of ESG risks such as stricter regulatory requirements, shifting preferences of society, and exposure to extreme weather events.

    2. Global Commitments to a Net Zero Future

    Commitments from governments and organisations around the world are increasing demand for the adoption of ESG initiatives by real estate companies.

    World Green Building Council CEO Cristina Gamboa says

    “We require a solution focused response to the urgent need to significantly reduce upfront emissions in buildings. We will accelerate action to achieve our goal of slashing embodied carbon by 40% by 2030 and securing net zero embodied carbon by 2050, in addition to our net zero operational carbon goals.”

    The GlobalABC’s 2021 Global Status Report shows that real estate’s current efforts since COP21, will not be sufficient to achieve net-zero by 2050. Real estate even rose to its villainous status at the United Nations Climate Change Conference (COP26) in Glasgow earlier this year. There will be a special focus on the industry, as an entire day was set aside to address the huge implications of the built environment on climate change goals. Despite increases in energy efficiency, global building energy consumption and GHG emissions continue to rise and be locked in for decades. 

    Also, building floor area is nearly going to double by 2050. Newly designed buildings are certainly more efficient, but 70% of buildings that will exist in 2050 have already been built, so decarbonising our current stock is a top concern. 

    3. Greater Integration of ESG in Investment Decisions

    In response to rising environmental challenges, commitments to net-zero targets, and evolving preferences of investors, real estate companies will undoubtedly have to make massive improvements in their ESG strategies. 

    Investment decisions are becoming increasingly dependent on ESG factors. In order to make informed decisions, investors require information on how real estate companies are performing on ESG issues, catering to customer demands and meeting legislation. Therefore, building owners, operators and occupants clearly face the material dangers of climate change and potential future costs of lagging behind in sustainability measures.

    The same report mentioned in the figure above finds that 74% of investors in UK commercial property think the importance of ESG credentials will increase over the next 12 months. 

    What’s more, 81% believe it will become even more crucial over the next 3 years, highlighting how important real estate’s commitment to ESG is for investors.

    But ESG in the real estate industry can be far more impactful. A report by Deloitte suggests that ESG integration among businesses and investors can serve as a key differentiator for real estate companies, improving reputation and as well as financial performance. The industry’s urgency for transformation presents an ideal opportunity for real estate to concentrate efforts on the “E” in ESG to drive long-term value creation for all stakeholders. 

    ESG as a Value Driver for Real Estate

    Real estate companies that perform strongly on ESG metrics can attract tenants who are progressively looking for efficient, healthy and green certified buildings. Beyond this, ESG-oriented companies can increase profitability through higher property values, tenant retention and improved return on investment.

    The gap between green rental premium and brown rental discount is widening. There exists substantial evidence that green buildings command higher rents over equivalent non-green buildings. This indicates strong signals for a “brown discount” on properties with comparatively weaker sustainability credentials.

    According to the World Green Building Council, better decarbonisation systems in buildings result in increased marketability, and play a major role in preserving property value. Such mitigation measures in real estate properties have also been found to save money by optimising asset use, leading to cheaper long-term operations and maintenance costs.

    It’s About Your Bottom Line

    Studies and real world examples have proven over and over again that good environmental practice is excellent for business. When done right, ESG initiatives not only address sustainability, but can also contribute to cost savings, social equity, tenant and employee health and well-being. 

    • Sustainability has been linked to enhanced cash flow at the building level, 
    • There is a direct link between portfolio sustainability and stock market success, 
    • A link between sustainable buildings and greater profits for real estate investors. Returns are also starting to fall for companies that are reluctant or unable to disclose their ESG performance.

    Leading real estate companies are proactively managing ESG-related issues, including climate resilience and the net-zero transition. However, there remains a considerable gap between global leaders and conventional businesses. Those who haven’t yet embraced ESG strategies must quickly get on track or they will risk falling behind. There is a crucial need for building analytics solutions to make buildings sustainable and smart.

    If you enjoyed reading this article and want to take action, we want to hear from you! Get in touch via LinkedIn or send an email to chanchal chadha and we’ll be happy to talk.

  • COP26 Impact: Six ESG Mega Trends to Watch in 2022

    COP26 Impact: Six ESG Mega Trends to Watch in 2022

    The trends that set the tone for a more sophisticated ESG environment gathered steam at the Paris Agreement in 2015. Six years later, these trends further intensified and evolved at the 26th United Nations Climate Change Conference of the Parties (COP26), which provided clear direction for ESG-oriented action from governments, business leaders, and the financial industry. Those who have progressively embraced the ESG movement know that companies with strong corporate governance and good business practice are best-positioned for the future.

    Down below are six ESG megatrends likely to feature prominently in the actions of companies, investors, and regulators in ways that will redefine the ESG landscape in 2022.

    Six Esg Megatrends To Watch In 2022

    1. Growing Multi-Sector Collaboration & Finance on ESG Issues 

    If 2021 taught us one thing, it was that global challenges require global collaboration. Fighting climate change is perhaps the biggest environmental challenge of our time. While governments have always been billed with this responsibility upfront, the good news following COP26 is that private sector players and capital owners have allied to contribute as well. 

    Apart from world leaders pledging to deliver on climate goals at COP26, more than 30% of the 2,000 largest publicly traded companies in the US have committed to going net-zero by 2050. Over 250 banks representing 40% of financial assets worldwide have joined the Principles for Responsible Banking movement, in which the banking community finances actions to build a socially just and sustainable world. Nearly 300 member companies work together in the Business for Social Responsibility coalition, and the world’s largest investors are joining Climate Action 100+.

    Expect more public-private partnerships, collaborations between companies, investors, financial institutions, and industry coalitions to tackle environmental issues, mobilize climate finance, and set standards for responsible business.

    2. A New Common Standard for ESG Disclosures 

    The announcement of the International Sustainability Standards Board (ISSB) at COP26 opens a new chapter in the field of ESG compliance and reporting. The ISSB, which will be formed as a merger of the Value Reporting Foundation (VRF) and the Climate Disclosure Standards Board (CDSB), likely by June 2022, is an important step towards a consistent reporting framework. The board will unite all different frameworks and build a common, global baseline of sustainability standards to better assess the ESG impact of businesses. 

    A new common standard like this means compliance with ESG regulation will become easier, and companies will be able to honour their roles in realizing the goals of COP26. 

    3. From Greenwashing to Integration of ESG Principles

    The last 5 years have seen a remarkable rise in interest over ESG from investors, asset managers, and corporate boardrooms. That said, private companies and sustainable finance evangelists are being confronted with growing criticism over “greenwashing” as part of their CSR activities and investment portfolios. For a long time, ESG has been used as nothing more than a marketing tool to persuade the public into believing that a company’s products and operations are environmentally friendly. 

    ESG includes a wide spectrum of responsible actions expected of corporations, leading to a rise in “ESG investing” over the years

    COP26 presented a reality check for many business leaders and global organizations. With climate change becoming more visible by the day, we expect more and more stakeholders to understand how ESG principles can and should be integrated into investment decisions and corporate risk management. Further, companies that can better measure their ESG impacts and risks will be better equipped to make smarter capital allocation decisions. 

    Only companies that make the move away from check-the-box exercises to an outcome-driven approach to ESG operations will be able to successfully drive transformation.

    4. The Role of the Built Environment Comes to the Fore

    For the first time, at COP26, buildings received the attention of governments and policymakers as they looked to remove this huge barrier to a net-zero world, in a session dedicated to cities, regions, and the built environment. The attention was long overdue. 

    Buildings use about 50% of extracted materials and produce 40% of annual global carbon emissions. And the total building floor area around the world is expected to double by 2060. All countries are rapidly urbanizing, and we need to check the environmental impact of buildings across their lifespan – their operational emissions from heating, cooling, and lighting as well as embodied emissions involving the production and transport of materials used in construction. 

    The role of the built environment will certainly take centre stage in the quest for reversing climate change and will form a crucial part of ESG considerations for companies. ESG also prioritizes the well-being of occupants, tenants, and employees within the building. This means that good air quality and safety measures are going to be extremely important for ESG-oriented real estate companies. Thankfully, technologies already exist that can help drive down emissions and make the built environment a safer and more sustainable place to live, eat, play and work. 

    This brings us to our next ESG megatrend…

    5. Data and Technology Will Drive Smart ESG Practices

    Data and digital technologies grabbed global recognition as ways to speed up climate mitigation and adaptation at the Glasgow Climate Summit. As Commissioner Thierry Breton said in his speech on the green digital transition at the EU Pavillion side event of COP26 – “Connectivity enabled by digital technologies carries the enormous power of cutting global carbon emissions. 5G, Internet of Things, Artificial Intelligence, digital twins, blockchain, satellite technologies, and so many others can help to reduce them by 15% by 2030!”

    Data and technology will enhance the ability to implement and measure ESG related practices and assess their impact on long-term value creation. Better visibility and access to information like asset maintenance schedules and resource consumption will play a major role in linking financial performance to ESG indicators. 

    For example, digital twins allow operators to look at real-time data across a building’s entire assets including HVAC, security, and occupancy systems, which can then be used to cut down costs, optimize resources and reduce greenhouse emissions. 

    6. The Rise of the CSO: Increased Focus on Metrics & Executive Compensation

    Another ESG trend that will continue to grow into 2022, is the dramatic increase in the position of Chief Sustainability Officer (CSO) at companies around the world. According to CSO recruitment firm Weinreb Group’s latest report, of the total 95 CSOs hired in publicly traded US companies since 2007, 43 have been hired in 2020 and 2021 alone. McDonald’s, Walmart, HP, Aramark, FedEx, Morgan Stanley – they all have one.

    As companies focus on ESG related metrics, a greater proportion of executive compensation is also becoming performance-based instead of time-based. Even though ESG linked executive compensation can turn into a topic of contention among investors and shareholders, the role of the CSO is expanding and changing. This includes the leap beyond the ‘E’ in ESG to include social justice, diversity, and inclusion at the workplace. Chief Sustainability Officer, Head of Sustainability, Head ESG Officer – we’re expecting more of them in 2022!

    Seizing the ESG Moment

    If 2020 was the year of awareness and 2021 the year of commitments, 2022 is going to be the year of action. As the foundations are being laid for the trends highlighted above, you can expect to see the extensive implementation of sustainable practices and meaningful collaborations on environmental, social, and governance issues. Energy management for asset maintenance is also becoming the center of sustinable practices.

    Stakeholders who fail to seize the ESG moment will likely suffer greater risks and lose out on crucial opportunities compared to ESG leaders in several key areas, ranging from easier access to finance to improved business performance and exploring new business projects.

    What are your thoughts on the ESG trends we’re going to see in 2022? How are you preparing to embrace ESG as part of your business strategy? Let us know!