Strategy for CRE investors to follow under Biden administration


The Global covid-19 parliament, which is extreme economic destruction, is likely to yield only about a 7% annual reduction in carbon dioxide emission. It is shocking that even such drastic economic collapse collectively contributes to reducing only a mere single-digit number.

The outgoing executive administration’s lasting impact on the clean energy landscape and the natural environment will lead the US economy in a climate-aligned approach. Furthermore, the UN environment program has suggested cutting down the global emissions by 7.6 % each year until 2030 to achieve Paris Agreement goals.

These are some of the challenges carried over from past years for the Biden government.

America has had an administration whose primary focus was not on environmental stability for over four years. Thus, the Biden administration’s arrival is here to bring ample and profitable opportunities for commercial real estate owners who are Pro sustainable.

The new government hopes for the many CRE owners and investors who are active in adapting to the changing climate needs.

Policy certainty is on the table, again.

The cabinet pics are sign-off policy certainty with regards to legislation and the rules entered on environmental sustainability. John Kerry, who helped author the Paris agreement, has been chosen as the climate Czar.

The treasury secretary is Janet Yellen, who is the co-founder of the Climate Leadership Council. This pick of leaders suggests that the incoming administration is looking forward to a commitment to diverse, sustainable, equitable, and effective climate policies. Hence, it is clear that Biden’s government is here to bring policy certainty on the table, once again.

What does this mean for CRE stakeholders?

Biden’s administration means that the commercial real estate stakeholders need to get their businesses aligning and complying with the Biden-Harris climate plan as soon as possible. The burden administration is allegedly anticipated to incorporate various climate provisions into the missions and core functions across different federal agencies.

Therefore, it is safe to say that the clear winners would be those investors and stakeholders who can align their strategies to the incoming administration’s climate policies.

#1 – The power of ESG is here to stay

One of the foremost essential things CRE stakeholders must understand is that the power of ESG is here to stay and is expected only to increase in the coming years. The importance of investors, consumers, and producers on organizational sustainability is seen to follow an increasing trend, and it is only expected to grow.

ESG practices can be seen as a kind of value-add asset, which, according to real estate counselors, is critical while framing CRE investment strategies. This does not mean that CRE investors must change their overall approach towards investing, but what matters more is the kind of approach investors take.

The shift needs to happen from solar focusing on conventional financial returns to ESG returns as well. Consumers will start to prioritize sustainable practices more than anything. CRE investors who can capitalize on this and provide the brand perception of being a sustainably responsible brand are detrimental in long-term investing success.

#2 – Learn, Adapt, Act, and Repeat

When CRE investors are thinking about incorporating sustainable practices in the investment strategy, one of the biggest challenges would be understanding how to evaluate the progress of their sustainability goals.

In other words, performance benchmarking of sustainable practices and assess the overall improvement of their decarbonization goals can be very challenging. However, many brands out there are an inspiration for minimizing the carbon footprint.

Today’s cloud-based artificial intelligence and IoT platforms are also providing various useful energy performance benchmarks.

Thus, the evaluation and performance benchmarking of sustainable practices have never been so easy or even affordable. This strategy not only focuses on improving energy cost savings, but their timely and digital solutions can also be used to bring commercial real estate properties into compliance with the new energy or emissions regulations.

Being quick to learn, adapt, take action on it, and repeating the whole process is the key to achieving long-term investment success.

#3 – Understand that sustainability is your fight, too

While it’s good to think about sustainability as a brand-boosting or a profit-increasing objective – it is also essential to understand that sustainability is also your fight. This change in perception alone will make the journey of switching into a CRE investor who is conscious about environmental responsibility much more comfortable.

Statistics say that buildings account for nearly 40% of global carbon dioxide emissions. Thus, it is not a surprise that dense administration vision includes reducing this carbon footprint in the United States.

This raises and calls for the need to formulate and regulate emission standards, form new rules for equipment efficiency, and monitor the climate risk disclosure requirements by CRE investors.

Thus, sooner or later, all CRE investors will be forced to comply with the decarbonization principles. Hence, the best you can do as a proactive CRE executive is to set your voluntary decarbonization targets with comprehensive metrics which will help you evaluate and maintain progress.

This will not only help you in being proactive – but it will also help you identify the energy waste and increase your energy cost savings while also mitigating future compliance risks.

#4 – Sustainability in CRE investment strategies is a long game

Commercial real estate investors must understand that incorporating sustainability in commercial real estate investments is a long game. One must realize that the value of every decision you make for your investments will affect your sustainability profile.

For instance, even something as small as replacing equipment at the end of its useful life is a decision you need to inform.

Making decisions irresponsibly will leave a harmful impact on your sustainability profile and might also attract compliance risks. Responsible CRE investors must bring in place frameworks that will determine when, how, and what equipment must be replaced.

The standardized sustainability practices can help optimize the financial and energy performance of your commercial real estate building and thus improve your overall sustainability profile.

Understandably, it can be quite challenging for CRE owners, investors, and executives to make decisions around ESG initiatives as there is no legislation and guidance in hand.

However, one must understand that a proactive CRE investor will see what’s coming in the future and revise his investment strategies accordingly. The above considerations can help you take a proactive approach and win the long game instead of other CRE investors who might not adapt immediately.

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