A Brief Summary

The investment industry is taking energy efficiency seriously as investors started becoming climate-focused to protect their investments and the world against climate change. Environment, social and governance (ESG) have been in the limelight for the last 10 or 12 months, with apartment owners showing interest in environmentally responsible housing, which led owners and developers to reduce energy consumption.

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Affordable housing investor Avanath Capital Management is not new to ESG. The firm has had an internal platform since its inception. “We are always looking for ways to optimize energy use and incorporate sustainable strategies throughout our portfolio,” says John Williams, president and CIO, Avanath Capital Management. “Our goal is to lessen our carbon footprint and environmental impact through proven strategies that we believe will accrete value to our investors. Our goal is to also deliver robust reporting on progress and set benchmarks for others in the industry to follow.”

A developer that charges market rates Sustainability has also been a priority for the Procopio Companies. For most of its new development projects, the firm obtains an environmental certification, whether it be one of the LEED credentials—which CEO Mike Procopio refers to as "the gold standard"—Fitwell, or one of the numerous other accreditations available to developers. The business wants to pursue a specific certification based on the property's location and use, but the investment strategy also plays a role.

We take a look at our departure strategy. "We look at those ESG goals if we think this is something that will be acquired institutionally," Procopio adds. "Will the building be acquired by a fund with a mandate to buy LEED Silver or above buildings?" Is it going to be purchased by a fund that solely invests in net-zero energy? These things are becoming more frequent, so it's an examination of not only what matters to us as a developer, but also what matters to our customers."

Cabot, Cabot & Forbes also uses technology to keep track on energy usage. On new projects, Sullivan collaborates with specialists that utilise energy modelling tools to better anticipate the building's future impact. These models can predict anything from carbon emissions to the property's energy expenses, allowing developers to make modifications ahead of time to help lower the footprint before the structure is ever built.

While energy modelling and dashboard software are useful for tracking use, the majority of technology targeted at lowering output is placed at the property level, where it has the most influence. LED lighting, for example, is a low-cost upgrade that has a big impact. "You [put LED lights] everywhere, partially because it's cost-effective, but also to fulfil energy criteria mandated by the building code," Sullivan explains.

Balance is the goal. It has been the catalyst for developers to integrate energy-cutting features, and technology has been the method of execution. More owners and developers are realizing the importance of ESG and adopting new policies, and it is having an impact.