REframing ESG

A new framework to refocus and simplify the approach to ESG in property to achieve outcomes and what wealthy individual are doing in this space
Written By:
Flora Harley, Knight Frank
2 minutes to read

Everything Everywhere All at Once, both the title of 2023’s Best Movie Oscar winner and a neat summary of the current state of ESG. Broad enough to mean just about anything to anyone.

Coming from the hottest year on record, the implications of this lack of focus have never been clearer, yet, as previously noted, the phrase has garnered all the wrong attention – being increasingly politicised, with some lawmakers in the US banning ESG as an investment screener and one of the early proponents, Larry Fink, stating he will no longer use the phrase.

So how can we get ESG back on track, and understand it is the idea we need to focus on rather than terminology? 

Perhaps it's all about messaging and a clear definition of outcomes. In a new instalment of our Sustainability Series, we offer a more focused way to view ESG and real estate to reinvigorate decisions - our Five REs of ESG:

1. REduce consumption
2. REnewable energy generation
3. REusing resources
4. REstore nature
5. REengage stakeholders

Emissions reduction is the common thread through all five, but ultimately, most legislation and ESG action boil down to one or more of the five areas and regulation is often aimed at transparency to drive these. 

Sustainable luxury?

In The Wealth Report 2024, we note that a new fascination has taken off, tracking private jets which only highlights the wealth carbon footprint gap. This phrase is best explained by a report by Oxfam and the Stockholm Environment Institute, which states that the wealthiest 1% of the global population is responsible for more emissions than the poorest 66%.

According to our Wealth Report 2024 Attitudes Survey, this focus and attention are inciting lifestyle changes, with almost two-thirds of UHNWIs attempting to reduce their carbon footprint, while a fifth are trying to measure it. Some 40% of UHNWIs are switching to electric vehicles (EVs), and this rapid adoption will affect property owners and investors as charging facilities are increasingly sought in homes, offices, and retail locations.

But not all transport is made equal: just 10% of UHNWIs plan to reduce air travel, while 14% intend to cut down on private jet use. 

Property has a big role to play here, too. Two of the top three actions for reducing emissions were improving the energy efficiency of homes and investment property. More broadly, UHNWIs are increasingly looking towards renewable energy investment (27%) and implementing ESG screeners within their broader (24%) and property investment decisions, which we examine how this differs from other market actors in the report.

Looking ahead, we can expect more attention to be paid to lifestyle externalities and investment decisions regarding sustainability, particularly as the 'Next Generation' of wealth have a greater focus on sustainability, as Liam Bailey points out with our Next Gen Survey results in the report. 

For more on how UHNWIs factor ESG into property investment decisions and what we mean by our Five REs of ESG, read the full REframing ESG report here