ESG emerged as an effort to promote concrete actions by companies to improve the environment, their relationship with their employees, and the surrounding community.
In line with this purpose, in 2005, the UN proposed the Principles for Responsible Investment, based on ESG criteria.
Since then — and even more after the pandemic — governments, investors, and market players, in general, have favored commercial dealings with an ESG company and encouraged its expansion.
But what does ESG mean?
The acronym ESG stands for Environmental, social, and governance, which refers to the company’s environmental, social welfare, and best management practices.
In alignment with the Sustainable Development Goals (SDGs)1 and the 2030 Agenda, ESG guidelines are now being applied internationally. For instance, by 2025, 57% of mutual fund assets2 in Europe are expected to be in funds with ESG criteria.
This approach can be used to address and deal with the following issues:
Actions to reduce environmental impact
- Carbon emissions reduction.
- Energy efficiency.
- Global warming.
Social responsibility actions
- Confidentiality and data protection.
- Equity and respect for human rights.
- Occupational safety.
Corporate governance actions
- Anti-corruption policies.
- Transparency policies.
- Fiscal responsibility.
Benefits of applying ESG criteria within the company
1. Increased investor confidence
Today, a smart investment is one that is profitable in financial terms and also sustainable in time. Hence, this is one of the factors that play a major role in the decision of potential investors.
2. Increased profitability
Thanks to the interest aroused by a company with a well-defined strategy, the organization acquires greater liquidity and reliability from investors and lending institutions. In fact, many of them offer special credit lines for companies that prove the ESG criteria’s implementation in their operations and social responsibility strategies.
3. Improved corporate image
By projecting a positive image in the market, a competitive advantage is generated over other companies in the sector, which leads to the acquisition and loyalty of new customers.
4. Talent attraction and retention
Organizations that demonstrate integrity in how they treat their employees and take actions to reduce their environmental impact are attractive to the most competitive profiles, which is why they constantly add value to their teams.
5. Lower risk and volatility
This is one of the advantages for which ESG investment portfolios are commonly recognized, which also tend to generate higher yields and ensure return on investment.
According to the results of a study by S&P Global Market Intelligence, in 2019, 26 low-yield funds3 doubled the value of their portfolios in 2020 in the midst of the COVID-19 crisis by showing the implementation of these principles.
What does ESG mean in the Real Estate market?
In the industrial real estate sector, ESG criteria are reflected in actions such as the construction of LEED buildings, water treatment plants’ installation for shared spaces, and the commitment to the use of renewable energies.
Campaigns for granting scholarships to students in vulnerable situations, construction of rural schools, furniture donations, or reforestation projects are also considered part of this practice.
Advance Real Estate: an ESG company
At Advance Real Estate, we are committed to environmental care and social welfare through our work in acquiring, operating, and leasing industrial projects in Mexico. That is why we work based on ESG principles, manifested in actions that involve the entire industrial community that make up our employees, customers, and suppliers.
Information Sources
- blog-es.checklistfacil.com/esg
- www.concur.com.mx/news-center/que-son-los-criterios-esgm-mx
- inmobiliare.com/criterios-esg-como-nuevos-impulsores-de-valor-para-el-sector-inmobiliario-industrial
- onu.org.gt/objetivos-de-desarrollo
- www.un.org/sustainabledevelopment/…/la-asamblea-general-adopta-la-agenda-2030-para-el-desarrollo-sostenible
