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Data Driven Performance - Get Started on Your Journey to Making a Positive Impact

In last week’s blog we looked at how ESG is shaping the future of Property Management. This week I want to pick up on a topic that is receiving a lot of air time at the moment and one I am passionate about.

ESG reporting in the asset management space is not new, although very recently the financial sector is taking note as a result of rising awareness of the materiality of climate change impacts, and pressure from consumers. This subject was highlighted in The Financial Conduct Authority last week, calling for greater scrutiny on companies ESG claims to ensure that activities are actually delivering the outcomes stated. This level of focus will accelerate the need for real measurement and verification of ESG claims.

There has been much debate in recent times about the role of data in demonstrating that ESG led strategy is paying back. And the approach to ESG data, management and disclosure within the asset management sector are ripe for digital disruption.

For all businesses, better ESG ratings are generally positively correlated with valuation and profitability.

ESG Performance and Management Outcomes

According to a recent McKinsey article on the ways ESG creates value, real buy-in comes from demonstrating that ESG priorities link to value by showing leaders “how”. And that 'how' has historically been challenging to quantify and measure.

But now, with emerging platforms and dashboards that help the data 'speak' the opportunity to demonstrate ESG performance and related value is becoming more feasible for firms.

The McKinsey article also suggests that the outcomes of bringing your ESG data and management to a digital platform must enable firms to:

● Own your ESG narrative by accurately communicating the company’s performance to different stakeholders.

● Better explain the connection between sustainability and operational/financial performance.

● Avoid perceptions of green washing by demonstrating a commitment to accountability and credibility through coherent commitments, actions, and performance.

● Support the process of continuous improvement (define, measure, manage, report).

● Demonstrate your company’s leadership in accounting for and managing the ESG issues most material to your business.

As a stakeholder in our collective future and a long-time proponent of building performance I personally welcome collective drive towards a greener, socially equitable and sustainable future.

ESG Opportunities

1. Data

The perceived value of sustainability investments and practices is inevitably linked to the accuracy and consistency of data.

Sustainability managers need comprehensive digital tools and real-time, AI driven insights to gain control of their ability to keep up with the latest ESG disclosure requirements, trends and stakeholder requests for information.

Also, sustainability managers and relevant internal teams including senior management need to speak the same language regarding the company’s ESG issues, metrics and performance.

2. Asset Management

A 2021 KPMG Survey found that the Asset Management – fit out/refurb, sales, leasing - part of the lifecycle is the area most likely to benefit from investment in IT and Digital technology and urged companies to prepare for the disruption to come. Many of the processes in the operational phase are simple and repetitive and therefore ideally suited to automation.

Real time asset performance data is where the greatest opportunity for disruption exists followed by building optimisation, customer data and connecting tenants with landlords.

The Centre for Digital Built Britain ‘The Value of Information Management in Construction and Infrastructure’ report published last month supports the view that implementation of Information Management in the operational phase is not yet fully formed. This is where the largest proportion of spend lies in the asset lifecycle, so even a 1% improvement in data related to equipment purchasing, for example, can result in significant capital savings.

3. Customer Engagement

Customer engagement is a key focus area for companies, however the KPMG survey suggests that it falls below traditional objectives of financial management, deal decisions, reporting and forecasting.

The report also states that tenants looking to renew leases are increasingly looking for smart buildings that can monitor air, water, equipment maintenance, power consumption, and occupant wellbeing. Customer engagement is a good way for owners/asset managers to understand what matters most to tenants in light of COVID and ESG reporting on the increase.

At the same time investors expect companies to report on non-financial issues, risks and opportunities with the same rigor as financial information. A good data and information strategy can communicate performance internally and externally, engendering a culture of gathering intelligence that the company needs to flourish.

4. Data = Value

Data itself has inherent value in generating insights that contribute directly to business outcomes. Smart real estate and data analytics are the two largest current technology trends, both deal with the collection of digital data and value generation from that data.

Data produced by smart devices and tenant platforms becomes a financial asset, as well as improving real estate processes. Data and analytics can provide insight into buying behaviours, development decisions, investment planning and carbon reduction.

ESG Challenges

Companies' ESG initiatives are usually published annually on their website and cross multiple themes such as how they value their customers or clients, how they contribute to society and even how they mitigate climate change. So, companies already have large amounts of data at their disposal that contribute to ESG metrics.

Quality data remains one of the most challenging roadblocks to evaluating and integrating sustainability and ESG consideration, for investors and companies alike. Data is often siloed and accessed on an ad hoc basis which is dependent on individual teams. Often there is crossover in data being used by different parts of the business but the efficiencies of inputting data once into a single system are missed.

From a built environment perspective assets themselves generate considerable amounts of data that can be utilised to examine performance and identify opportunities for improvement, often with little to no investment or intervention. The amount of data available is set to grow exponentially with the advancement of low cost sensors, smart devices and IoT.

The KPMG survey mentioned earlier, makes the case for developing strategic data and information management programmes. The survey provides an overview of data approaches across a range of global companies including real estate funds, developers, property owners and operators.

Some interesting points include the fact that COVID related home working is accelerating the data strategy implementation for a third of firms surveyed. Also interesting in relation to the previous point about strengthening data strategy for scrutiny, was that 75% of respondents cite Microsoft Excel as the primary analytics tool.

Take the first step

Start small and build over time – Net zero timelines are a big concern for firms in the ESG sphere right now, with huge pressure being played out in public, this seems like a good starting point for a wider ESG strategy

Set clear targets - Scope 1 and 2 emissions reduced to zero by 2030.

Define a strategy to achieve the targets - reduce energy demand, optimise on site renewables, offset using a recognised framework.

Review data requirements - What data is required within the strategy, what do we already have? Where do we need to invest in augmenting data? Automated utility feeds vs. manual upload of energy bills.

Connect data across the business – Typically written reports, guides or toolkits for property teams and tenants can be shared but can also be difficult to implement. Cloud based platforms are becoming more popular and more accessible. These provide a central repository for all relevant data that can also be used to communicate performance to stakeholders as well as automated reporting.

Ongoing monitoring – consistently updating the data, regular reviews to ensure progress is on track to achieve goals.

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