Opinion: ESG is Becoming a Key Driver for PropTech
2020 is a year of great changes in the real estate industry. After almost a year of new normal, alternative ways of life and work such as Work-From-Home, e-commerce, and suspension of business travel have a significant impact on all real estate asset classes, including residential, commercial, logistics and storage. We are expecting substantive changes to come gradually in the real estate industry as we step into 2021.
COVID is a serious warning by the mother nature, and it is an unprecedented opportunity for humankind to re-examine the way of development. This year, the environmental, social, and governance (ESG) initiative experienced tremendous growth. As of March 2020, the United Nations Principles for Responsible Investment (PRI) has been signed up by more than 3,000 signatories, of assets under management in total approaching to 100 trillion US dollars (about 780 trillion Hong Kong dollars).
The European investment communities have been leading the world in promoting ESG as an important element of its investment framework. The Asia-Pacific region such as Japan has been catching up fast in recent years. Hong Kong has started to catch up this global megatrend. For example, the Hong Kong Stock Exchange strengthened the mandatory disclosure requirements for ESG reports of listed companies last year, and required IPO applicants to establish corporate governance and ESG mechanisms during the listing process, so that they can meet the disclosure requirements when they are listed.
A research paper of ESG best practices in the global real estate industry this August published by Alaya Consulting, a ESG compliance consulting firm for listed companies in Hong Kong, studied companies including Vanke, Sun Hung Kai, Hang Lung, Swire Properties, Berkeley (UK), Daiwa House (Japan) and CapitaLand (Singapore), etc. The key topics include three major areas: green building, anti-corruption, and occupational health and safety. Among them, Green Building can be ideal for property technology applications.
Ways to Execute Green Building Strategy
There are a number of ways for asset owners to execute Green Building strategy, for example, (1) commitment to emission reduction targets: its resource consumption management system can be optimized and improved through the application of property technology; (2) implementing green leases: using property technology to facilitate the of communication with tenants, reducing carbon footprint; and (3) green building technology: through scientific research and development to renovate building materials and engineering technology, to make the housing end-products more energy-efficient and comfortable.
In addition to environmental aspects, property technology can be used for social and corporate governance aspects, such as to improve the transparency and authenticity of business data through blockchain technology, to optimize the interactions between internal employees and external stakeholders, and to achieve relevant sustainable development goals.
At the annual development conference of the UN General Assembly in September 2020, China pledged to achieve carbon neutrality by 2060, i.e., to reduce net carbon emissions to zero. The recently approved fourteenth Five-Year Plan has just outlined several major development directions, such as the new “dual circulation” development strategy, independent technological innovation, urbanization 2.0, and green economy, which will provide huge opportunities and scenarios for the development of property technology companies. Through the thematic investment of the combination of property technology and ESG, we believe investors can tap the great tide of China’s sustainable growth and opportunities.
PropTech Institute is an independent, non-profit association representing Asia’s PropTech community led by a team of committed professionals. The association seeks to bridge the gap between real estate and tech as well as providing a platform for founders, enthusiasts, professionals, and all those interested in PropTech to share knowledge in the application of technology in real estate.
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