How to Achieve Your ESG Goals and Increase Property NOI

It is perhaps natural for apartment owners and operators to fret when thinking about a potential future of stringent environmental regulations and reporting requirements. But the growing movement toward sustainable practices and away from fossil fuel consumption presents multifamily companies with opportunities to powerfully benefit their bottom lines.

That was one of the messages from panelists in the Energy Sustainability Management: How to Achieve Your ESG Goals and Increase Property NOI session at the 2022 Entrata Summit.

“ESG (Environmental, Social, and Corporate Governance) should be considered one of the largest profit drivers for your portfolio,” said David Bailey, Chief Revenue Officer at Correlate. “You can capture savings and translate it to NOI.”

Apartment operators today have a wide array of ways to grow their NOI through sustainability, the panelists noted. Options include installing more efficient lighting, HVAC and water systems to reduce energy consumption and utility bills. Operators also can increase their usage of renewable energy like solar and even build onsite storage facilities that can be used to deploy solar energy during times of peak demand. Many of these measures make operators eligible for financial incentives like tax deductions and credits.

According to Chris Buzby, Co-Founder and Chief Experience Officer at Breakerbox, a common mistake companies make when developing ESG and energy plans is not making the process a company-wide undertaking. 

“It’s about understanding what your goals are and having the whole team there,” he said, adding that operators should also determine their risk profile and find partners they can work with collaboratively to meet their goals, identify tax incentives and secure competitive pricing.

The panelists also emphasized the importance of having clear, usable data about energy consumption when designing ESG plans. “You can see where there’s an outlier (in consumption and expense) in your portfolio,” Buzby noted.

Another mistake companies sometimes make is implementing sustainability measures and alternative energy usage in something of a piecemeal fashion, Bailey noted. 

“Opt your portfolio in,” he said. “Owners make it hard on themselves by doing things ad hoc. Let us look at your whole portfolio and put together a longer-range plan that allows you to get out from behind the eight ball.”

Developing a long-range, comprehensive ESG plan is critical as environmental regulations and scrutiny begin to increase, the panelists added. 

More than 30 municipalities now have energy benchmarking requirements for commercial and multifamily buildings, according to Buzby. In addition, the U.S. Securities and Exchange Commission has proposed a new rule that would require public companies to provide detailed reporting about their greenhouse gas emissions and climate-related risks.

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