The first step to making a real estate portfolio sustainable is understanding how environmentally friendly it is – or isn’t – and in what ways. For owners and operators with numerous assets in a wide variety of locations, it is no small task to gather data on energy use, water consumption, greenhouse gas emissions and waste management, let alone make sense of it all.

“If you have dozens of properties in a handful of states, chances are you might have many times more service providers that are giving you utility access, collecting your waste, providing water,” Jake Fingert, managing partner for the proptech venture firm Camber Creek, says. “Different jurisdictions collect and store that data, so it can be really challenging for a real estate owner to analyze, measure and benchmark that data in a consistent way.”

This is where technology comes into play. Firms are turning to software systems to help aggregate and analyze the myriad environmental impacts of their assets. These tools not only lay the groundwork for future optimization, but are becoming essential for meeting obligations to leadership boards, investors and government regulators.

“Sustainability presents a fairly unique challenge for a business such as ours because it requires us to gather information laterally across varied business lines, as well as vertically, originating from individual assets… up through our organization, touching each lifecycle intervention, to be presented succinctly at the board level,” says Alex Edds, head of sustainability in Europe for Chicago-based LaSalle Investment Management. “Few other areas of business require this multifaceted approach that involves so many internal and external stakeholders.”


Real estate accounts for a significant proportion of global carbon emissions


Investor QuadReal believes it can cut residential carbon emissions massively by replacing gas-powered central heating systems

As with ESG pursuits in real estate more broadly, the environmental component of real estate technology has seen the most progress in recent years. As Clelia Warburg Peters, managing partner at New York-based proptech investment firm Era Ventures, puts it: “It’s like the E is in font size 50, and the S and G are in size 12.”

Warburg Peters chalks this dynamic up to recognition of real estate’s outsized impact on carbon emissions globally. “Other than oil and gas, it’s the single largest industry contributing to carbon emissions,” she says. “It’s 40 percent, which encompasses both construction and the management of properties.”

‘Understanding where you are’

Warburg Peters believes innovation on this front can largely be divided into three areas: measurement, solution and financing. This is, as she puts it: “Understanding where you are, figuring out what you’re going to do with it, and then figuring out how you’re going to pay for it,” with technology affecting each category to some degree.

On the measurement side, systems vary from straightforward aggregation of existing data from utility and service providers into a single location, to more sophisticated networks of sensors that track things like space usage. Groups such as Measurabl, Audette and Carbon Title serve as one-stop shops for relevant ESG data.

Brookfield Asset Management uses ClearTrace, a blockchain-based carbon accounting platform to track and record the energy purchases for its New York office tower One Manhattan West, to verify that it is powered exclusively by renewable sources, says Lisa Brylowski, vice-president of operations for Brookfield’s real estate business. The system monitors real-time energy consumption by individual tenants to help them reach their own ESG goals.

Similarly, the Toronto-based manager uses an artificial intelligence system in its multifamily properties to track energy consumption patterns and preferences among its tenants to optimize energy consumption without sacrificing occupant comfort.

At the heart of Brookfield’s ESG ambitions is a centralized environmental data system that accounts for all relevant inputs for the firm’s entire $264 billion portfolio, which spans more than half a billion square feet of commercial space, Brylowski says.

“We seek technological systems, programs and devices that add value to our real estate operations and investments and we pilot hundreds of solutions each year, some with success and others not,” she says. “There is no doubt that our use of technology has improved our ability to meet stakeholder and regulatory demands, improve our asset performance and monitor our renewable energy procurement, all creating value for our stakeholders.”

Other solutions-oriented innovations include building design and management platforms, such as PassiveLogic, which serves a single point of control for a property’s various operating systems. It uses artificial intelligence and digital twin technology – a three-dimensional, virtual replica of a property – to help with systems optimization.

Meanwhile, some groups are leaning on advancements to old technologies to achieve their ESG goals. QuadReal, the real estate investment arm of the British Columbia public sector pension fund, is using heat pumps to power its sustainable objectives.

“Our use of technology has improved our ability to meet stakeholder and regulatory demands, improve our asset performance and monitor our renewable energy procurement”

Lisa Brylowski
Brookfield Asset Management

Jamie Gray-Donald, the group’s senior vice-president of sustainability and environmental, notes that QuadReal is running a pilot program that will use energy-efficient, in-unit heat pumps to heat and cool residential suites using electricity. This will allow it to replace natural gas-powered central heating systems. The firm expects to increase energy efficiency between 30 percent and 60 percent while cutting carbon emissions by up to 90 percent.

“We know heat pumps aren’t glamorous, but they will be the work horses that deliver the big gains,” he says.

Sea change for proptech

While QuadReal might be able to pursue its latest ESG tech ambition on its own, that puts it in the minority. A survey of real estate executives and managers by the accounting firm KPMG in 2018 found that 93 percent of them felt they needed to partner with proptech firms to keep up with the changing global environment.

This broad embrace of proptech specialists has paved the way for strong fundraising by venture capital groups targeting the space in recent years. However, like other venture-driven industries, proptech is entering a challenging new phase, with fundraising no longer bolstered by loose monetary policy and a global search for yield.

Confidence among investors and start-ups alike is at its lowest level since at least 2016, according to New York-based proptech venture capital firm MetaProp’s midyear survey of market participants. This is a sharp decline from 2021, when investors and start-ups reported record-high confidence.

Still, while this environment could hurt fledgling start-ups, Camber Creek’s Fingert sees an opportunity for existing innovations to prove their worth, particularly when it comes to ESG considerations.

“When transactions slow down, it can give people a great opportunity to look internally and look at their operations and ESG,” Fingert says. “In this day and age, when real estate groups want to improve operations, it’s done through technology.”

Finding common ground

Groups that employ these outside technologies still must shoulder the burden of at least some innovation to make sure their various third-party platforms work with one another and the firm’s existing infrastructures.

Edds notes that LaSalle found this out first-hand as it attempted to identify and index the climate risks facing its more than 1,200 assets around the globe. It found a global partner to generate the data, but that was only the beginning. The firm then had to create a network that its various teams – transactions, asset management and investment – could all use daily, both individually and toward common causes.

“We need to pull the raw data into our business platforms, align the data sets to our nomenclature, and surface that data in a way that is understood and meaningful to the colleague responsible for making property and portfolio capex decisions,” he says. Edds adds that he would like to see more uniformity come to the ESG tech space. As it stands, there are so many firms with so many different goals that it can be difficult to find technologies that are easily integrated into LaSalle’s specific systems to address its exact needs.

“This is challenging, as every organization is at a different stage in its journey, and I think it is a good reflection of where the real estate industry is right now,” he says. “We will get there, but it will take time to align systems and data points before we can all leverage the full potential of some of the technologies available today.”

If the industry fails to coalesce around a single set of goals on its own, it could well have one dictated to it by government regulators, which are in the process of developing and rolling out standards for the world’s biggest property markets.

The European Green Deal, which passed in 2020 and aims to cut carbon dioxide emissions by between 80 percent and 95 percent by 2050, will require roughly 35 million properties to be renovated by 2030, according to calculations by the accounting firm Deloitte. Real estate firms will also have to report more non-financial data to the EU Commission.

“It will take time to align systems and data points before we can all leverage the full potential of some of the technologies available today”

Alex Edds
LaSalle Investment Management

In the US, New York is leading the way with its Local Law 97, which will put sweeping emissions caps on most buildings in the city, starting in 2024. The law is seen as a potential gold standard for other US cities to follow. On a national level, the Securities and Exchange Commission is crafting new rules around climate-related disclosures that would apply to a broad swath of industries and firms.

Data-driven S and G

While technologies focused on social and corporate governance are less prevalent than environmental counterparts, strides are being made. Helen Gurfel, head of sustainability and innovation at CBRE Investment Management, says her firm is harnessing technology to promote wellness within its properties in ways not previously possible.

“Our property management teams are able to effectively connect directly to individual tenants and their employees in real time and promote various initiatives – such as partnerships related to transportation, wellness and healthy food options that support the employees’ wellbeing both at the building and remotely – and engage them to participate,” Gurfel says.

Other firms are using in-house technology to track the progress and satisfaction of the employees from underrepresented backgrounds to make sure they are not falling behind their white, male counterparts.

The areas of greatest outward social impact tend to gravitate around residential property types. They also tend to be less overtly related to technology. These include innovations
around alternatives for determining the creditworthiness of potential renters, rent-to-own schemes, fractional ownership, and assistance with down payments.

“Across the board, what we see is these different business models that are enabled by the technological rails that have developed over the course of the past decade,” Warburg Peters
says. “What is differentiating about what these businesses are able to do versus business models of the past is that they can run on the cloud and they can ingest an enormous amount of data to facilitate their decision-making.”

Like the industry’s focus on ESG matters writ large, real estate’s use of technology to address its ESG needs is still in its infancy. But if the strides taken in recent years are any indication, new innovations will continue to redefine this field and its pursuits.