Andrew Alesbury, managing director at Telesto Strategy, sat down for a video interview at Nareit’s REITworks: 2024 Sustainability & Social Responsibility Conference, held in McClean, Virginia from Sept. 10-12.
Alesbury shared insights on addressing rising climate risks and advancing sustainability in real estate. He outlined three key steps for REITs that are just starting to integrate climate risk analysis into their portfolios. First, they should assess their exposure to various climate hazards. Second, they must evaluate whether this exposure is tolerable or if changes, such as asset divestment or targeted acquisitions, are needed. Lastly, if high exposure is identified, REITs should develop strategies to mitigate risk, particularly in the context of likely climate scenarios.
Alesbury also discussed the challenges in realizing the full potential of sustainability and decarbonization in the real estate sector. He identified two main barriers: the failure to recognize "win-win" opportunities, where sustainability initiatives also provide financial returns, and the complexity of implementation. Many sustainability efforts, like LED lighting or heat pumps, can reduce carbon footprints while offering a return on investment, but successful implementation requires collaboration across various teams.
He also touched on innovative ways REITs meet ambitious emissions reduction targets, even in resource-constrained environments. He emphasized the potential of future grid greening, which could automatically lower Scope 2 emissions, providing REITs with a "default win" in sustainability. This allows for more ambitious efforts in other areas, such as Scope 1 emissions and building energy efficiency.