Sustainability has thoroughly permeated society and the global economy. All sectors have adopted it as an indispensable condition for growth and progress in the future. In fact, the future has already arrived. Policies and measures are already in place to reduce the environmental footprint of human activity, and the real estate sector is no exception.

For several years now, the housing sector has been changing to meet the pressing environmental requirements. Yet the sustainability approach goes further, affecting not only the natural environment but also society and institutional governance.

These three dimensions (Environmental, Social, and Governance) are reflected in what are known as ESG criteria or principles. ESG principles guide companies’ efforts to ensure that their activities have a positive impact on the environment and society; they also shape companies’ governance through equality and transparency policies.

In this context, how is ESG transforming the real estate sector? Are these principles being taken into account? How will they change housing in the years ahead?

Environment: commitment to sustainable construction

The most noticeable change in the sector is the adoption of sustainability criteria in construction to reduce environmental impact while creating more comfortable homes for residents. Current trends include:

• Energy efficiency. The real estate sector consumes a large amount of energy, so it’s vital to improve energy efficiency in buildings. This can be done using technologies such as thermal insulation to properly protect buildings from heat and cold, as well as renewable energy sources such as solar panels and geothermal systems. Testa Homes is fully committed to this goal. In fact, in the last edition of The District Show we won the award for the Best Real Estate Operation with the Greatest ESG Impact, having installed more than 4,200 solar panels in 62 buildings.
• Technological innovation. New technologies are being employed to make homes more efficient, including remote temperature control systems, automatic lighting with presence and motion sensors, and smart thermostats.
• Carbon Footprint Reduction. Construction activity has a major impact on the environment. But the impact can be mitigated by adopting new, more responsible processes and applying circular economy principles to avoid waste by reusing and recycling materials.
• Green Certificates. It will become increasingly common and necessary for new buildings to have green certificates proving they meet or exceed legally required energy efficiency and sustainability standards. Examples include the LEED (Leadership in Energy and Environmental Design), BREEAM (Building Research Establishment Environmental Assessment Method), and Passivhaus certifications.

Society: attention to social demands

Another crucial aspect is actively listening to society when building homes. What people need from a home has changed, and those new needs must be met to ensure residents’ well-being. The social criterion of sustainability involves:

• Responding to social demands. Home seekers now need more functional properties that serve both for living and for working. This means having common areas with green spaces, coworking and leisure areas, and facilities such as gyms that promote physical activity.
• Housing that ensures well-being for all. Housing should be inclusive, providing comfort for everyone. This means avoiding architectural barriers that hinder mobility for those with mobility issues and adapting buildings to the needs of the elderly (who make up a growing percentage of the population) and dependants.
• Impact on local communities. Real estate firms must do business in such a way as to benefit the communities in which they operate. This will include creating employment, stimulating the local economy, and, most importantly, providing access to housing without displacing residents, paying special attention to vulnerable groups.

Governance: excellence in management and strategic decision making

Sound governance, based on ethical principles, risk management, and diversity in leadership, enables real estate companies to meet regulatory, environmental, and social challenges. It also positions them as responsible, competitive players in a market that increasingly demands corporate responsibility. Key measures include:

1. Ethics and transparency. To meet the new governance criteria companies must be transparent both in their external operations and in their internal management. This includes promoting transparency in their activities and equality in their hierarchical structure.
2. Firm leadership. Leadership models must be strong, with clear values and a sustainable vision that inspires the entire organization.
3. Regulatory compliance. Rigorous compliance with current regulations is essential, as society no longer tolerates organizations operating outside established laws, whatever the circumstances.
4. Risk management. The new risks arising from climate change are important and need to be addressed, but they are not the only ones. There are also company-specific and general economic risks. Companies need to be proactive and anticipate potential issues in order to manage uncertainty. At the same time, there are risks inherent in the business itself, relating to construction and the day-to-day management of properties and residents.

ESG criteria are in Testa Homes’ DNA

For Testa Homes, ESG strategy is key to business success. We are totally committed to creating sustainable and responsible homes by implementing our ESG vision in all our operations. We seek to create value for investors, employees, tenants, and the communities in which we operate, while driving the transition to renewable energy and prioritizing resident satisfaction.