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Business management & development 2,000


Number of investors signed up for GRESB.


1,200


Number of property companies covered by GRESB’s 2020 real estate benchmark.


GRESB


their progress to a public that is increasingly well informed about environmental issues and the potential dangers of climate change. For example, Hyatt can say with confidence that, under its 2020 environmental framework, it has achieved its 25% per square metre greenhouse gas reduction goals early across its three regions’ format for bathroom amenities. Equally important, however, is the fact that such data can be used to satisfy the needs of investors and regulators who increasingly want to dive into the detail as they push for higher standards. Around the world, there is a push for stricter environmental legislation and new targets for renewable energy use. This is happening everywhere from Europe to the Middle East, where the federal government of the UAE is pushing forward with mandatory green building codes and an improvement in the low level of energy efficiency in existing buildings. The Emirates Green Building Council was established way back in 2006, but its efforts to improve energy efficiency are encapsulated in the new green building code that will, at first, be implemented in government buildings but will no doubt extend to other sectors in due course. Globally, the climate for investors is changing and new benchmarks are steering them towards a more detailed sustainability assessment across their portfolio. One example is the Global ESG Benchmark for Real Assets (GRESB), to which more than 2,000 investors have already signed up, including many that focus predominantly on the hotel sector. Its 2020 real estate benchmark covers more than 1,200 property companies, real estate investment trusts, funds, and developers with a combined portfolio or more than $5.3trn. GRESB is an assessment protocol that looks specifically at the sustainability performance of real estate portfolios and assets. Institutional investors use its data and analytical tools to identify opportunities and risks associated with sustainability. In Europe, the EU classification for sustainable investments – known as the EU Taxonomy – provides the world’s first-ever green list for economic activities. Its aim is to provide standardised definitions to help investors to accurately and realistically evaluate the environmental impact of their investments. Though it has a wide scope, the EU Taxonomy details clear due diligence processes for real estate funds. Then there is the G20’s Task Force on Climate- Related Financial Disclosures (TCFD), created in 2015 by the Basel-based Financial Stability Board (FSB), which seeks to make companies’ climate-related disclosures more consistent and more comparable. According to a recent report by real estate services and investment company CBRE, the scope and depth of mandatory reporting is very likely to increase to reflect recommendations like those of the TCFD. It also notes that certain G20 nations – most notably the UK –


16


intend to make the TCFD requirements mandatory. In fact, CBRE expects that by 2030, TCFD will be the leading framework for reporting climate change impacts. For Toora, the Sustainable Finance Disclosure Regulation (SFDR) – brought in by the EU in March 2021 – also has major implications, given that it set out new ESG disclosure rules for asset managers, and brings a new set of transparency obligations and periodic reporting requirements for investment management companies.


“There is a big push from regulators to make sure that investors are held accountable for their investments,” she says. “Future-proofing is essential, which means investment in sustainability or a hotel could become a stranded asset. As the majority of real estate is already built, that is not straightforward, so it is easier for new builds.”


“Investors have to consider the hold period,” Toora adds. “The days of investors always flipping assets are over. They have to think about the long-term effects of climate change, extreme weather events, the effects of sea levels rising, which means flood and fire protection, not just energy efficiency and emissions. In a few years, institutional investors will not invest in any development that does not have sustainable features.”


A diverse future


There are many ways in which the industry can respond to regulatory pressure, investor demands and consumer preferences. The future may see hotel owners enforce green leases on tenants, enshrining sustainability in the terms of business. In other instances, the conversion of office properties into hotels could become an increasingly viable option to reduce the cost of tearing down buildings and starting from scratch. Hotels could also play a more significant role in mixed-use developments (MUD) designed with sustainability at the top of the agenda and with all occupants contributing to the performance of a green MUD. Modular construction – which is faster, needs less labour, creates less disruption to local communities, and is easier to adapt to the needs of evolving regulations and the potential of new technologies – could also become more common. The pandemic has provided an opportunity for reflection, a chance to rethink the future of the hotel industry, creating room for new ideas around sustainability. “Hotels have been very creative and some of the changes they have made during the pandemic are very sticky and will save costs in the future,” says Toora. “They will be more resourceful in their energy use and continue to focus on cost savings, which will have an impact on sustainability.”


It may be hard to predict precisely how hotels will innovate to create a more sustainable industry, but one thing is for certain – hotels will have to be green. ●


Hotel Management International / www.hmi-online.com


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