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ESG for CRE? The impact of ESG on commercially leased real estate and considerations for landlords and tenants
Corporate Real Estate Journal,
14
(2),
154-168
(2024)
Abstract
Environmental, social and corporate governance (ESG), although not universally defined, continues to drive commercial, political and investment decisions in nearly all areas of commerce. This includes leased commercial real estate (CRE), in which property owners and occupiers may have differing ESG considerations for the same property. In the US, commercial lessors and lessees find themselves navigating domestic and international pressure with respect to ESG in a context of increasing political polarisation around ESG in business decision making. In an effort to offer a practical and politically neutral approach to ESG in CRE, this paper describes the meaning and history of ESG, explores ESG trends in CRE, and focuses on tools and concepts to help navigate materiality concerns with respect to leased CRE, whether site-specific or portfolio-wide, to support CRE professionals in allocating property owner and occupier obligations, reducing risk and maximising long-term sustainable operations at commercial properties.
Keywords: ESG; sustainability; commercial leasing; building performance; risk management; energy efficiency; lease agreements
The full article is available to subscribers to the journal.
Author's Biography
Rebecca A. Davis is a Partner in Arnall Golden Gregory LLP’s Litigation & Dispute Resolution and Environmental practices. With more than 20 years’ experience litigating and consulting on environmental matters, Rebecca skilfully counsels her clients through issues related to regulatory compliance, remediation, permitting, due diligence, brownfields and alternative energy projects. Rebecca is adept at handling complex environmental litigation and enforcement cases, including CERCLA and RCRA liability, storm water violations, toxic mould, lead-based paint violations and property diminution claims in federal and state courts. She is experienced in counselling renewable energy companies on various matters including public financing opportunities and grants, power purchase agreements, siting and various regulatory matters. She has also represented a large publicly traded energy company on multiple solar power projects within the southeast US. In the regulatory arena, Rebecca counsels her clients on environmental, social and governance (ESG)-related matters and associated risks, which enables them to understand the changing landscape and help shape their ESG initiatives. In addition to her environmental law practice, Rebecca is an accomplished business litigator, representing clients in class actions and cases involving construction, complex commercial disputes, high-volume e-discovery, real estate and mass torts. She also represents both governmental authorities and private companies in connection with high-profile economic development projects. Prior to launching her legal career, Rebecca worked as an environmental consultant, microbiologist and speciality insurance adjuster. Committed to providing focused and efficient results for her clients, she leverages her technical background to provide innovative solutions to complex problems.
Caroline E. Magee is Of Counsel in the Real Estate practice of Arnall Golden Gregory LLP and a member of the Retail industry team. With more than 15 years’ experience in real estate, acquisitions and financial transactions, Caroline focuses her practice on retail leasing and commercial real estate transactions. She provides tailored and actionable solutions to landlord, tenants, retailers, property owners and managers, franchisors and franchisees, in addition to developers, lenders and investors. Caroline has a background in environmental, social and governance (ESG) and sustainability for commercial real estate. Previously, she supervised a team of lease management professionals as the Vice President of Strategic Initiatives and Sustainability for a commercial leased real estate software and lease portfolio management company. She also previously practised at an Am Law 25 company in the Corporate Finance and Investment group, where she managed diligence and the drafting of commercial contracts in private credit, real estate finance and securitisations across sectors, including data centres and franchise brands. Prior to entering legal practice, Caroline served as a Lieutenant in the United States Navy, specialising in surface warfare. In addition to practising law, Caroline currently serves as a priest in the Episcopal Diocese of Atlanta.
