More Pressure on Corporate Tenants to Adopt ESG & LEED Standards

More than ever, Environmental, Social and Governance (ESG) has climbed to prominence in corporate America.?But, regardless of how you feel about measures to implement enforced corporate ethical practices, its growing influence will have irrefutable effects on your business (if it hasn’t already).?

In this article we will review what you need to know about ESG and LEED standards as a corporate tenant, where such programs are most common, and how they’ll influence your budget going forward.

ESG and its Role in Commercial Real Estate

To accommodate the environmental aspect, many businesses are turning towards their footprint to improve their overall sustainability. In fact,?they may no longer have the choice to do so.?Growing pressure to adapt to carbon neutrality has?launched a wave of legislature and fines targeting those who do not meet code.

To circumvent costly slaps on the wrist, companies are turning towards organized standards of environmental best practices for their businesses. The LEED (Leadership in Energy and Environmental Design) standard created by The U.S. Green Building Council (USGBC), is the most well-known qualification. And as such, has captured most of public attention.

LEED certification?is a globally recognized symbol of sustainability achievement and is awarded to buildings that meet certain criteria in the areas of energy efficiency, water conservation, material selection and indoor environmental quality. Buildings can be certified at various levels based on their performance within the LEED rating system.

“Certifications like LEED are almost mandatory for new development projects in major urban markets these days, with many companies looking to the programs to enhance their reputation and meet ESG goals.”

-Propmodo

The Demand for LEED Certified Buildings

As the most popular green building standard, LEED certification has become sort of a buzz-word in the industry.?Occupying a LEED certified building is a simple way for corporate tenants to align themselves with the movement towards sustainability.?Doing so puts them on the right side of the cultural consciousness, and perhaps more valuable in the court of public opinion.

Because this, we’re seeing an increasing number of LEED certified buildings. On the inverse, demand for older,?environmentally-challenged?buildings is dipping significantly.

“Among the country’s 30 largest cities, 40 percent of office space has some kind of green certification.”

-Propmodo

This number is poised to climb further as stricter environmental edicts get phased in the next decade. For example, in New York, the Climate Mobilization Act, passed in 2019 implemented greenhouse gas emission limits on commercial buildings larger than 25,000 square feet.?Properties that exceed the limits will face fines of $268 per metric ton over the limit starting in 2024 with stricter standards plotted to begin in 2030.?

Now, on top of local fines,?Both the Securities and Exchange Commission (SEC) and U.S. Treasury Department released proposals that forced public companies to disclose their greenhouse gas emissions and climate risk data.?

So faced with steep fines, of course corporate tenants are looking towards LEED certified buildings. Peter Templeton, USGBC president and CEO, said in prepared remarks.?“It was a strong year for LEED certifications across the US as companies and governments embrace LEED as?a tool for meeting ESG goals?and organizational commitments to climate action, occupant wellbeing, and resource efficiency.”

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