ESG in US and North America
What are the challenges and opportunities for ESG in the US and North America?
In North America—specifically, the United States—ESG is not as widely implemented, compared to the European markets. This, however, is not due to a lack of interest. Rather, despite the widespread interest in implementing and utilising ESG criteria in the Real Estate market, there are no regulations or requirements for ESG in Real Estate or capital investment markets in the US.
The market for sustainable assets is an approximate $12 trillion in the US, compared to the $14 trillion in Europe, which shows that even though there is interest in the market, there is not as much action being taken throughout the US.
In the US, however, there is significant attention being paid to environmental aspects of ESG. This means there is only regulatory and industry-wide focus on one-of-three aspects of ESG, meaning that there is often little attention paid to social factors and governance in Real Estate and investments in the United States. One of the biggest limiting factors—and reasons why these other two aspects of ESG have not yet been implemented—is because of stakeholder concerns of low returns.
In fact, the Department of Labor in the US stated that there are very few supports available to aid businesses pursuing social goals, and there are no employer-sponsored pension plans designed to promote governance or social goals. This means that businesses in the US have absolutely no incentive to actively pursue and implement these social and governance attributes in the Real Estate industry.
Thus, despite the fact that ESG is widely regarded as the future of Real Estate in the US and there are tremendous benefits understood to its implementation, it faces tremendous roadblocks in North America.
This means that there is work to be done in the US in terms of more sustainable Real Estate.
In order to comply with the ESG framework, businesses in the US should strive to have a more positive social impact in Real Estate. Whether by investing in low-income housing, providing employment, implementing social enterprise partnerships, or having greater diversity and inclusion, Real Estate businesses should improve the overall social impact of their operations and investments in the US.
Businesses in the US should also continuously seek to implement ESG practices in their operations and business models in the future. One way that this could be attainable is through ESG certifications. These certifications require that businesses improve their business and investments models in order to maintain certification—something that could be beneficial to North American firms.
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