The rise of the Chief Sustainability Officer in real estate

Often, a multidisciplinary team supports the CSO, including data analysts, building services engineers and legal compliance experts, to effectively address the wide-ranging challenges of sustainability initiatives.

"The role of the CSO depends on the maturity of the organisation, who their stakeholders are, how they are impacted, and the company’s vision. It could be a number of priorities, for example cost reduction, diversity, equity and inclusion (DEI) or supplier management," says Su-Fern Tan, CBRE's Head of ESG for the Pacific.

"For investors, the focus may be on green leases and existing portfolios. Developers working on large projects may need someone with a more technical background, such as architecture or engineering," says Ada Choi, Head of Occupier Research and Head of Data Intelligence and Management, Asia Pacific, at CBRE.

Choi adds that the role of the CSO varies significantly depending on the type of company. "For developers with large projects, the focus is on creating state-of-the-art, energy-efficient buildings. For those managing existing portfolios, the challenge is to retrofit and improve the sustainability of older buildings," she explains.

Overcoming challenges

Despite the growing recognition of the role of the CSO and the work they oversee, the survey found that challenges remain. Infrastructure support and financial barriers are cited as major obstacles, particularly in relation to the greening of the region's electricity grid and the energy efficiency improvements needed to achieve net zero targets.

According to David Fogarty, Head of Sustainability and ESG Consulting Services for Singapore and Southeast Asia at CBRE, the real estate sector presents its own challenges and opportunities for CSOs.

Companies in this industry must balance business aspirations with sustainability goals. This balance is particularly delicate because real estate development and management have substantial environmental impacts, from construction emissions to energy consumption in buildings, he says.

"Real estate has a significant carbon footprint, and achieving net-zero targets requires comprehensive strategies that encompass every aspect of a building's lifecycle. From design and construction to operation and eventual deconstruction, sustainability must be integrated at every stage," Fogarty adds.

Implementing sustainability initiatives sometimes faces internal resistance, mainly due to financial constraints and a lack of understanding among stakeholders of the long-term benefits.

Reflecting on her experience as a CSO earlier in her career, Tan recalls: "The first six months of the CSO role are about discovering and understanding what sustainability means to the business. It's about assessing the maturity of the organisation and creating a role that meets those needs."

"There is always pushback, especially from those who see sustainability as diverting funds away from other priorities. But progressive clients understand that sustainability activities pay higher dividends, for example, lower vacancies and higher rents. Boards and Executives are starting to see that sustainability can drive business success and has a part to play in overall company strategy," Tan says.

The survey also found that just over half of the surveyed asset owners in the region have committed to achieving net-zero emissions by 2050. About half of the surveyed asset owners are actively reporting Scope 1, 2 and 3 emissions, indicating a strong commitment to managing their carbon footprint.

On the other hand, many multinational tenants are aiming to reach net zero by 2030, creating a discrepancy in target dates between surveyed real estate asset owners and occupiers.

“Since many MNCs, such as those in the services industry, do not have hard assets or deal with manufacturing or products, they usually have a more aggressive target for their net zero emissions,” explains Choi. 

While their target is understandably more ambitious compared to those, for example, dealing with building materials and construction activities, asset owners should also aim to ramp up their net zero efforts to support tenants in achieving their sustainability goals, Choi advises.

The carrot and the stick

Regulatory pressure is increasing in Asia Pacific, with many countries and regions adopting more stringent ESG reporting standards and regulations.

For example, Hong Kong SAR, Singapore and Japan have announced their intention to refer to the ISSB standards in future reporting regimes, including potential mandatory reporting for listed companies.

South Korea, India, Malaysia and the Philippines have ongoing discussions with regulators on the feasibility of adopting the ISSB standards domestically.

Meanwhile, mainland China has recently sought feedback on a new draft guideline to create a uniformed disclosure regime for corporate sustainability and that will evolve into a country-wide standard by 2030.

Choi points out that supportive policies and incentives are just as important in helping companies achieve the sustainable development goals that policymakers have in mind.

For example, the Hong Kong government subsidises electric vehicle (EV) conversions and encourages landlords to install EV chargers. Singapore has similar incentives for retrofitting old buildings, says Choi.

As an incentive, green finance has also emerged as a promising driver of sustainability initiatives, with 75% of asset owners in the survey using it. However, the high interest rates and costs associated with green bonds and loans can be a deterrent.

"While green bonds offer discounted loans, the audit and compliance costs can be high in the prevailing high interest rate environment. But the long-term savings and lower risks make it worthwhile," says Choi.

The role of proptech

Accurate data collection and reporting is essential for effective ESG management. Ensuring data quality across different geographies can be challenging, but innovative solutions are helping to bridge this gap.

"Good data quality and transparency are critical to avoid greenwashing,” says Fogarty, highlighting the importance of consistent data collection methodologies and platforms.

Innovative proptech solutions help with data collection, energy management and building design to achieve various sustainability goals. "Technology helps us collect better data, monitor energy use and design more efficient buildings. It's an important tool in our toolbox," says Fogarty.

Choi agrees, adding that innovation is key to overcoming many of the challenges faced by CSOs. "Sustainability is a constantly evolving field, and innovation is essential to keep up with new regulations and market demands.”

“Whether it's new materials, energy systems or data management tools, innovation drives our ability to meet sustainability targets," she notes.

CBRE’s distinctive approach

When asked how CBRE differs from other sustainability consultants, they point to the firm's comprehensive, end-to-end service that spans the entire lifecycle of real estate assets.

"Unlike planning, architecture or engineering firms that focus primarily on design, we manage the entire lifecycle of running real estate, which includes managing, leasing, selling and upgrading assets, and the financial transactions that support those activities," Tan explains.

Choi adds that the firm's extensive market knowledge and presence across the Asia Pacific region enables it to integrate sustainability into broader business decisions, ensuring that ESG initiatives drive business success rather than simply meeting compliance requirements.

"We live and breathe real estate. It's our bread and butter. With our sustainability consulting team on the ground in the regions where we operate, we deliver tailored ESG strategies that are deeply integrated into our clients' core operations," says Fogarty.