This article is sponsored by Apex Group
Technology may be ubiquitous but there is no uniform approach to how it should be used. For investors, this means that even when they have clear goals in mind, such as those concerning ESG impact, achieving them through digital solutions may not always be straightforward. Data may be insufficient, inconsistent or incomplete.
Karlien De Bruin, director, ESG commercial development and Marie Measures, chief digital information officer at Apex Group, discuss how investors can tap into a host of benefits through data use, ensuring goals around strategy, security and sustainability are met.
How can a business ensure it has the right digital data strategy?
Marie Measures: Data lies at the heart of what we do. It is the lifeblood that runs through all our processes and systems. The input of data, its transformation and the output we derive ultimately determines what we provide to clients and investors.
Without a clear strategy, there is a risk that you are not looking closely at the data you are collecting and how it can be used. The risk being is that the information and services you provide are not meeting business needs and goals won’t be met.
To build an effective digital data strategy, start by looking at your overall business strategy. What are your goals – both internal and those held by external stakeholders? Then, focus on what data or insights are needed to achieve them.
You also need to include data governance and quality. If you aren’t, you could be collecting the wrong kind of data, too much, or not enough, which will damage the quality of your outputs.
As you do on your overall business strategy, look at market insights, competitor developments and industry trends relating to data. This will ensure your data strategy aligns with your business needs.
Karlien De Bruin: One of the most exciting trends in real estate is the potential use of data not just to analyze what has already happened but to use data to manage performance on a more real-time basis. Advanced tools and access to data have created a lot of excitement in this area but we are not quite there yet.
Novel tools to help with data visualization are being launched all the time and this is clear with the development of smart building technologies. These allow data to be fed into various systems – even mobile apps – to identify potential problems. Predictive maintenance is an area where real estate is looking to use data to mitigate potential challenges before they become bigger issues in the future.
The main problem holding back the development of some of these solutions is the initial cost of installing the necessary data collection tools. In the future, however, the use of real-time software is likely to become commonplace. Real estate investors won’t just use building data to acquire green certifications, they will use it to make fundamental business decisions.
Are data demands from investors increasing? How can technology help to ensure that managers meet these demands?
MM: Data demands are increasing massively. This is why data and digital strategy are becoming more important. Investors want access to real-time data; quarterly reports sent by email are not enough anymore. They want to see how their investments are performing and the factors influencing them.
Self-service is also becoming a major trend in terms of how investors are accessing and using data. They want to understand their investment portfolio, not simply be told how it is performing. ESG is just one example where this is in evidence.
“Quarterly reports sent by email are not enough anymore”
To be sure that their sustainability goals are being met, investors need first-hand awareness of their specific investments. Are they in areas with exposures that they would be disappointed with?
Through technology, investment data is being exposed externally to more and more stakeholders. As such, it is essential that you build a data platform that allows for self-service – one that is simple, easy to use and secure. Investors need to be able to analyze and filter data to find their own bespoke answers.
How is technology enabling investors to carry out their own activities with greater regard for ESG goals?
KDB: In terms of the kinds of technologies being used by investors, this largely depends on the kind of market they are in. Typically, in public markets, there is a lot more data available. You can gain access to detailed datasets and even link with these via APIs.
For private markets, data doesn’t flow so easily. As a result, you may have less technologically advanced methods being employed, such as raw documents and Excel spreadsheets. The data gathering process also tends to be very manual and labor intensive.
Traditionally, real estate owners would achieve green certification once a year. They would send data to a certification provider where it is rated, scored and analyzed. Then they get their results back, but they are already out of date.
“Businesses need to be collecting the right kinds of data before they can report on it. The good news is there is a push in the market towards uniformity for comparing ESG metrics”
Karlien De Bruin
Unfortunately, there can still be issues with scaling some of the technological solutions that investors are employing, which is a particular challenge when it comes to things like ESG goals.
Typically, if investors wanted to scale their use of data to achieve green credentials across their entire property portfolio, the only way to achieve it was to employ more people. Fortunately, the world is moving towards a system where technology is reducing a lot of this manual labor.
What other challenges exist around the use of technology by investors to analyze ESG metrics and deliver on sustainability goals?
KDB: There can be a lack of uniformity around ESG metrics in the real estate market. This problem can manifest in different ways.
Firstly, even within the same business, there may not be consistency in terms of which metrics are reported year-on-year. This means you can’t track changes over time.
Secondly, there are variations between different businesses. Not all businesses measure the same metrics. And even if they do, they may use different calculation methodologies.
Challenges around data availability can also crop up. Ultimately, businesses need to be collecting the right kinds of data before they can report on it. The good news is there is a push in the market towards uniformity for comparing ESG metrics.
It is often stated that ESG goals are guilty of focusing solely on the environment while neglecting social and governance issues. This need not be a problem though as different ESG goals are connected to one another.
Environmental metrics are relatively easy to measure compared to social and governance metrics. But environmental improvements often spill over into social and governance benefits.
Enhancing your office’s environmental credentials, for example by improving its air quality, has been shown to improve staff productivity, mental health and many other areas.
Environment, social and governance impacts are not mutually exclusive. This means that businesses can use their environmental ambitions as a means to an end in terms of their social and governance goals.
Looking ahead, what are some of the major opportunities presenting themselves in terms of technology use in real estate?
KDB: Accessing more real-time data is exciting as it moves ESG from being purely a reporting requirement to a management tool to reduce risk and increase performance of the various real estate assets. In terms of the movement towards net-zero real estate, it is not good enough to simply buy carbon credits anymore. This is a passive approach. There is an expectation that real estate owners and operators will actively try to reduce their footprint first. In order to do this, you need to set specific targets with deadlines and then track your progress towards those targets. This is all driven by data.
With data so important to investment strategies today, how can the security of this data be protected?
Marie Measures: It is true that as soon as you expose data outside any business, you need to restructure your security strategy. Internally, you have to ensure that your strategy places a great deal of focus on data governance – identifying who can access, what data and how. Your data governance team needs to work closely with your CIO to ensure your cybersecurity initiatives are robust.
One of the methods that businesses can employ to safeguard their data involves strong encryption. The use of encryption ensures that sensitive data can’t be intercepted. Looking at data leak protection software is another valuable approach, so only authorized information can leave your digital environment.
There are lots of different technological solutions aiming to protect data. Tools like multi-factor authentication are the norm to control who can log-in to access data and to prevent data from falling into the wrong hands. But strong cybersecurity is not simply about more technology – it requires a mindset shift too.