ESG data analysis: unleashing the power to reach new dimensions

Recent technological advances in the analysis of data for ESG purposes have probably gone further than for any other aspect of real estate. One reason is that it is such a new area, which means that the best solutions can be adopted from scratch, rather than re-inventing the wheel. So whether you are thinking about carbon emissions data for buildings, climate-related risks across portfolios, or the wider ESG agenda, digital technologies are now starting to have a significant impact.

Claire George of Savills Investment Management, who chairs the INREV Technology Committee, says that digital innovation is having a big impact due to the sheer amount of data involved. ‘Data on energy use, which these days is often generated by BIM systems, can be provided to a very high frequency,’ she explains. ‘Clearly, the more data points are produced through smart metering, for example, the more sensitive and potentially useful any analysis can be. Analyses for commercial assets will need to reflect different operating conditions across the day and the working week. Digital analysis allows for instant results for any timeframe, while AI can also help identify patterns in the data that may not have been immediately obvious to a human observer.’

This leads to another advantage of AI in digital analysis, namely the way it can be used to help overcome weaknesses in data. ‘One instance could be where a smart meter has developed a fault and fails to produce any readings for a certain period. In such a case, the analytical software should be able to estimate the measurements based on the recent past and correlations with other elements of the data. Clearly, this is not ideal, but it can often be the least bad way of meeting reporting requirements in the ESG area, such as those imposed by increasing regulation.’

In the context of multiple types of reporting for regulation purposes, using this kind of technology can save a lot of time.

‘Those organisations with the scale to embrace the full technology pathway from sensors through to digital reporting can streamline what can otherwise be very laborious tasks,’ says Claire, ‘potentially also raising accuracy significantly. But there does need to be a commitment to having the right kind of data science staff in place to ensure the latest technology is employed effectively.’

Regulation is just one of several factors driving the adoption of state-of-the-art digital ESG analytics. ‘There is now constant pressure from investors to be able to assess which properties are proving to be green in practice and not just on paper, which can help to avoid the risk of ending up with stranded assets. And fund managers also want to understand the characteristics that can make buildings more energy efficient, not just for ESG reasons but to improve energy efficiency for the benefit of tenants – and over the longer run such analysis can even feed into the development of new buildings.’

Claire notes that climate risk is another area where real estate professionals want to understand the impact of a wealth of influences: ‘the landscape they’re building on, the materials they’re using, the weather in different locations, air quality and so on. Digital analyses bringing these kinds of factors together are still very much in their infancy, but that could mean there’s even more potential to leap ahead.’ 

Download the ESG Data Analysis paper.