Delos | Health Promotion and Financial Investment: Sara Neff, Senior Vice President Discusses Sustainability at Kilroy Realty

“More companies are reporting ESG metrics because more and more investors know that these are metrics they should be examining to make the best investment choices”

Sophisticated investors around the world have been using Environmental, Social, and Governance (ESG) performance metrics to help them predict the long-term financial performance of companies. But health promotion has largely been overlooked in the various systems used to report ESG metrics. Sara Neff – who was named in Urban Land Institute’s 40 under 40 in 2016 – discusses the current state of ESG and why she thinks health promotion will be an important component to measure in the future.

Delos: We’ve noticed that more and more companies are engaging in ESG reporting – why do you think that is and what issues are they facing?

SN: More companies are reporting ESG metrics because more and more investors know that these are metrics they should be examining to make the best investment choices. However, there is not industry consensus on which metrics are material, and some investors use a bit of everything. Because of that – and the fact that many reporting entities will just give you an ‘F’ rating if you don’t respond – we report to several different sources.

Delos: How are you seeing investors use ESG metrics?

SN: What I am seeing in the investor industry is that the most sophisticated investors in this space have their own proprietary ESG analyses that they’ll use based on available information. For example, some will use systems like GRESB, but they’ll break it down by aspect (management, key performance indicators, etc), slicing and dicing the numbers in their own way. These sophisticated investors really know what they are doing, but then on the flip side – you have other investors that are not as confident on how to effectively use ESG information. In addition, some investors use involuntary rating systems to quickly screen investment opportunities and they won’t invest in anything with the lowest scores.

Delos: Do you think health promotion – and particularly building health – is relevant to ESG reporting?

SN: Given the research that Dr. Joe Allen has done, I am expecting a lot of tenant demand for high health performance in their spaces. I have read his studies and if I were a tenant I would demand those specified healthy levels of CO2 and VOC.

Tenants demand all sorts of stuff from an ESG perspective– for example, requiring an ENERGY STAR or LEED certification in the lease, but the health demands from tenants haven’t yet coalesced around a particular set of parameters. I think as education around healthy buildings grows, however, more tenants will be asking for specific healthy building features in the future.

To learn more about the connection between ESG and health and well-being, read Delos’ latest industry brief Health, Well-being, and the Evolution of ESG.