• Robert Marten

Faisal Butt - ESG investments in real estate ultimately deliver greater performance

Updated: Jun 16

As property companies and investors prioritise ESG, real estate technology has also come to the fore. We sat down with Pi Labs CEO & Founder Faisal Butt, who believes technology is presenting an opportunity for property innovation to limit global warming.

Tell us a bit more about Pi Labs and your ESG initiatives? 

Our company has always believed that PropTech innovation can contribute to a more sustainable world. Our investments in Switchee, Demand Logic, 720 Degrees and QFlow, amongst others, have built platforms that monitor energy consumption, carbon emissions, air quality and environmental risk in property development. Currently, 20 percent of our portfolio companies provide technological solutions to help reduce the built environment's impact on the environment or have other ESG attributes. Traditionally, the real estate sector has been slow to embrace new technologies, which is why Pi Labs is committed to accelerating the growth of these promising innovations.

Why is ESG and green technology fundamental to the built environment?

The real estate sector is one of the biggest contributors to global warming. According to the World Economic Forum, the industry consumes 41 percent of global energy annually and accounts for 20 percent of international carbon emissions. This presents an opportunity for property innovation to play a crucial role in limiting global warming and reducing the risks associated with long-lasting and irreversible changes to the Earth’s atmosphere and ecosystems. European real estate investors also recognise climate change as a risk in their portfolios, with 73 percent expecting the risk to rise within five years. Over the next few years, we expect that the emergence of green solutions and technologies will give the industry the tools needed to control its environmental impact. 

How is PropTech changing the way the industry operates and manages assets in a greener way? Can you give examples of some of these technologies?

Heating and cooling systems are major contributors to global warming. They are often extraordinarily energy-intensive and result in pollution, localised temperature increases and the emission of greenhouse gases. Because of this, transitioning the way we heat and cool our built environment is 'low hanging fruit' for the real estate sector.

There is enormous potential for proptech innovations to improve the efficiency of the cooling and heating of buildings by intelligently managing these systems. For example, sensors and IoT-connected monitoring devices are helping future-proof buildings and enhance their investment value. When IoT devices are successfully integrated, sensors can detect when a tenant is present in a building and perform actions like triggering the lights, detecting leaks, and using traffic patterns to optimise elevator schedules. Having access to these data points provides not only an effective way to reduce waste but also minimises maintenance costs and insurance premiums for property owners. Projections indicate that over 3.6 billion internet-connected devices will be installed in commercial buildings by 2021. Meanwhile, combining sensors and adaptive monitoring tools with locally sourced renewable energy generation could potentially allow smart buildings to sell excess electricity back to the energy grid intelligently.

Why do real estate investors need to implement comprehensive approaches to responsible investment?

The adoption of sustainability performance metrics simply makes good business sense, since ESG investments ultimately deliver greater performance in the real estate sector. 

For example, analysis from M&G Real Estate has shown that investments in sustainable buildings offer a higher rental income of +53 basis points. Overall, the research found that increased initial investment in green buildings resulted in cash flows 19 basis points higher than in conventional buildings.

A five-year study by LaSalle Investment Management also found that sustainably operated properties achieved better long-term performance at both the asset and portfolio levels. This is because green properties often escape the cost of modernisation and repositioning because the buildings were developed to the latest standards. LaSalle’s research also concluded that the demand for green buildings is proliferating, particularly in the case of more solvent tenants, which is prompting reductions in vacancies and market risk.

You can find out more about Faisal and Pi Labs by visiting their website - pilabs.co.uk

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