ESG OPPORTUNITIES & LIMITATIONS FOR REAL ESTATE
Sudhir Mishra, Advocate Supreme Court of India and Founder & Managing Partner Trust Legal is of the view that ESG has become important in last 5-6 years, but compliances are still a challenge for real estate sector as have seen in various cases at the National Green Tribunals and in various courts. Real estate has always been a reactive rather than a proactive sector in terms of adoption of norms.” Aun Abdullah, Head, ESG, Lodha concurs that there is an inclination of investors and regulatory bodies towards ESG in real estate developments. “There is a need to quantify the ESG formats and its impact. While, professional developers like us had been focusing on these parameters earlier also, what has changed is that now we can align to a framework and report to a framework for disclosing and reporting and competing in the global benchmarking space.” Shabbir Kanchwala - Chief Sustainability Officer & Senior VP-Project Coordination, K Raheja Corp. adds, “If you look at from customer perspective, they are questioning the environmental impact of the building, what are the companies CSR activities and they want to invest in socially responsible companies with good governance from the point of view of risk management.” Bose Varghese - Sr. Director - ESG Practice, Cyril Amarchand Mangaldas agreed that the investors are now buying real estate looking at future proofing their business. “Built environment is the key part of the economy and the inside view is of the impact on the business and the outside view is that of the risk management. Built-environment globally is responsible for the 40% of the global emission and there is so much focus on this sector, so E is a critical consideration. The S side of complying with labour laws, labour welfare have become quite important post covid and governance or G in terms of managing the company stakeholders and law of the land are most important for the investors.” Amaresh Kumar Singh, Partner - Real Estate & Dispute Resolution, HSA Advocates shares, “There are Municipal laws dictating the construction process, building codes are there to guide on reducing carbon footprint. And we have had series of judgements, judicial proceedings which have considered all these aspects. NGT too is clear that for environmental compensation for causing degradation, they will levy a substantive penalty for restoration of the environment. But all these measures are for commercial developments and private residences do not come under the purview.” According to Aun Abdullah, “Governance is central to any company taking-up ESG and unless it is part of the vision of the management, the long term risks can erode the valuation opportunities.” Sudhir Mishra shared, “The 25% of the entire FDI coming in India comes into real-estate sector in some form or the other. And much of it is coming from the investors that prefer ESG compliant real estate firms and green rated real estate assets.” Bose Varghese expressed, “Green certification is only of a particular building but ESG goes much deeper. There is green taxonomy which is nothing but pre-defined matrix for investors. In India we don’t have the taxonomy but certain sectors intuitively are green. SEBI guidelines gives initial stages of taxonomy.” Amaresh Kumar Singh stated, “Energy, green cover and water are the fundamentals of environment sensitive development. There are various legislations in place which are mandatory in nature. For developers it is important to be on the right side of the compliance and not to take over-aggressive interpretation to circumvent the law. Shabbir Kanchwala added, “We are still a young country and we have a big opportunity and big responsibility before us to reach the goal of decarbonisation and net zero buildings." KEY POINTS The ESG ideas have got integrated into law with proactive stand taken by National Green Tribunal, the Supreme Court and the Consumer Dispute Redressal Commission. Corporate governance needs to reach and be adopted by the smaller developers across Indian cities to translate into ESG compliant organizations The proactive social initiative by realty firms can help deflate social friction that arise due to disconnect with labour and communities. ESG is a wide spectrum of topic with no single authority of law. It’s so far a voluntary action space. SEBI's framework for ESG the BRSR rating is currently for the 1,000 listed companies.
Tags : ESG opportunities limitations real estate Sudhir Mishra Advocate Supreme Court of India and Founder & Managing Partner Trust Legal Aun Abdullah Head ESG Lodha Shabbir Kanchwala - Chief Sustainability Officer & Senior VP-Project Coordination K Raheja Corp Bose Varghese - Sr. Director - ESG Practice Cyril Amarchand Mangaldas Amaresh Kumar Singh Partner - Real Estate & Dispute Resolution HSA Advocates