How listed property companies are getting on board with sustainability reporting

More listed property companies are improving their sustainability reporting across the globe, a sign of increasing pressure from shareholders and regulators to go green, as well as corporate leadership’s realization of the economic benefits of leading the pack in the race to decarbonization.

More countries, from Canada to the UK to New Zealand, are announcing mandates for Task Force on Climate Related Financial Disclosures (TCFD)-aligned reporting. In Japan, the corporate governance code, which requires listed companies to disclose data aligned to the TCFD, has been updated. The move has nhelped push Japan into the “highly transparent” category for the first time in JLL’s biennial Global Real Estate Transparency Index. 

And change is afoot at corporate level, with a growing number of listed real estate investment trusts (REITs) reporting their own ESG progress. The U.S. has seen rapid adoption of sustainability reporting, according to listed trade association NAREIT, with the country’s top 100 listed companies all now reporting publicly on their ESG efforts. In 2021, 80 of the largest 100 REITs by equity market cap issued stand-alone sustainability reports, up from 66 in 2020.

A few years ago, less than half of all REITs in the U.S. reported their carbon emissions, now 78% do so, NAREIT found.

“The first step for many companies has focused on sustainability reporting. The next step is demonstrating steady progress toward decarbonization, an area that has become even more important for investors as they seek out responsible investment opportunities and assess their assets based on ESG criteria,” says Jacques Gordon, Global Strategist for LaSalle Investment Management. “With boardroom leadership being increasingly held accountable, companies across the listed property sector have sharpened their focus on the net zero challenge.”

The game’s bond

Notably, more property companies have been turning to green bonds, which last year represented an increasing share of U.S. REITs’ overall debt capital, according to S&P Global Market Intelligence. In the U.S., Healthpeak Properties last year issued its first green bond offering of US$450 million senior unsecured notes due in 2027, representing an important crossover between two of the largest asset classes, fixed income and real estate.

More broadly, the signs are that higher transactional activity based upon green criteria will emerge; some 82% of U.S. REITs surveyed by NAREIT were integrating ESG risks and opportunities into their strategy and financial planning, pointing the way for what could be even further improvements.

“Public companies remain more transparent from a disclosure standpoint, have more direct pressure from shareholders and are usually among the first in line for higher regulatory requirements,” says McAuley. “That’s leading other parts of the real estate market in terms of sustainability disclosure.”