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  • Writer's pictureMilane Chetty

The Future of Real Estate: How FP&A is Driving Sustainability Initiatives


ESG Real Estate

Introduction

In the dynamic and ever-evolving landscape of the real estate industry, a new protagonist has emerged on the scene: sustainability. No longer confined to the realms of environmental activism, sustainability is now at the forefront of commercial innovation and investment strategies.


At the helm of these green initiatives stands Financial Planning & Analysis (FP&A), a discipline that is fast becoming the architect of the future of property investment, shaping the contours of a greener and more sustainable world. One particular tool that has become instrumental in this arena is OneStream, a unified platform for corporate performance management that stands as a testament to the fusion of financial acumen and sustainable ambitions.


The Rising Importance of Sustainability in Real Estate

In recent years, sustainability in real estate has been gaining significant momentum, fuelled by escalating environmental concerns, increasing regulatory requirements, and a

remarkable shift in investors' focus towards ESG (Environmental, Social, Governance) factors.

Emissions Real Estate Buildings

According to the Global Status Report released by the UN Environment Programme, buildings contribute nearly 40% of greenhouse gas emissions, it's not just desirable but absolutely imperative for the real estate industry to pivot towards greener strategies.


In addition, according to a survey by the Global Real Estate Sustainability Benchmark (GRESB), there is a growing trend of real estate companies and funds integrating ESG into their operations. This shift is largely driven by the increasing recognition of the financial benefits of sustainable practices, as well as the risks associated with not addressing ESG issues.


At the vanguard of these green initiatives is the discipline of Financial Planning & Analysis (FP&A). Once seen as a backstage function, FP&A is now stepping into the spotlight, becoming the architect of the future of property investment. It is shaping the contours of a greener and more sustainable world, leveraging financial acumen to drive sustainable ambitions.


OneStream: A Powerful Ally in the Green Revolution

OneStream is making a profound impact as a comprehensive FP&A tool. In an industry where complexity is the norm, it offers a unified platform that simplifies financial processes, improves decision-making, and ensures effective corporate performance management.


OneStream's ability to create accurate, real-time financial models and forecasts makes it an invaluable ally in driving sustainability initiatives. OneStream provides the much-needed analytical capabilities to evaluate the potential return on investment of implementing energy-efficient technologies across a property portfolio. It can also delve into the financial implications of transitioning to renewable energy sources, offering invaluable insights that can help organisations balance their financial performance and environmental responsibilities.


Scenario Planning and Future-proofing: A Peek into the Crystal Ball

Organisations can leverage scenario planning to proactively anticipate and prepare for a multitude of potential situations, enabling them to make more informed decisions across operational, financial, and strategic domains. According to the FSN Global survey, businesses that allocate time for scenario planning consistently observe tangible enhancements in budgeting, planning, and forecasting outcomes.


Scenario Planning Process

OneStream's scenario planning capabilities can help real estate companies prepare for a range of possible future situations. This includes potential changes in environmental regulations, evolving market trends, or the economic impact of climate change. By modelling these scenarios, companies can make informed decisions that not only benefit their bottom line but also contribute to a more sustainable future.


Global building emission reduction scenarios

Source: 2022 GLOBAL STATUS REPORT FOR BUILDINGS AND CONSTRUCTION


A recent UN environment programme study revealed that it is crucial for commercial buildings to reduce their carbon emissions by 50% over the next few decades.

Using OneStream, a company can model the financial impact of such a regulation, analyse the costs and benefits of various strategies for compliance, and develop a sustainable and financially sound action plan.


Source: IEA 2021. All rights reserved. Adapted from “Tracking Clean Energy Progress” (IEA 2021c).


Implications for Property Valuation: The Green Premium

As companies adopt sustainable methods and strive to shrink their environmental impact, the notion of a "green premium" is gaining increasing prominence in the world of real estate. The fusion of FP&A with sustainability is revolutionising property valuation paradigms within the real estate sector. In today's property landscape, strong sustainability credentials have evolved from being an appealing add-on to a crucial factor influencing a property's worth. The implications are significant, as it can directly impact property valuations and shape overall financial strategies. To leverage this to their advantage, businesses need to prioritise sustainability in their investment decisions. By doing so, they can enjoy the financial benefits of the green premium while also playing their part in promoting a more sustainable future.


OneStream's sophisticated analytics is revolutionising the realm of property investment, empowering businesses to target properties ripe for growth driven by sustainability. The advantages of this strategy are numerous, providing investors the opportunity to capitalise on the 'green premium', yielding significant profits while concurrently advancing the worldwide sustainability mission.


Tracking and Reporting Sustainability Metrics: The New Language of Transparency

With a growing number of investors and stakeholders demanding transparency on ESG performance, having an effective system for tracking and reporting sustainability metrics is paramount. OneStream rises to this challenge by providing the capability to integrate sustainability metrics into regular financial reporting. This makes it easier for companies to demonstrate their commitment to green initiatives, enhancing their reputation, strengthening investor confidence, and ensuring their compliance with an increasingly rigorous regulatory landscape.


Furthermore, by providing a clear view of a company's ESG performance, OneStream allows businesses to identify areas for improvement, set targets, and measure progress over time. This not only fosters operational transparency but also drives continuous improvement in sustainability performance, reinforcing the company's commitment to creating a greener and more sustainable future.


OneStream ESG

Conclusion

In conclusion, FP&A, supercharged by powerful tools like OneStream, is playing a pivotal role in shaping the future of the real estate industry. By driving sustainability initiatives and enabling informed, strategic decision-making, FP&A is influencing not just the profitability and growth of real estate companies, but also contributing to a broader societal push for a more sustainable future.


As we navigate the uncharted waters of the 21st century, the synergy between FP&A and sustainability is likely to become even more pronounced. This opens up a world of exciting opportunities for those who find themselves at the intersection of finance and real estate, creating a dynamic and impactful arena where financial prowess meets sustainability ambitions.


The fusion of finance and sustainability in the real estate sector is more than just a trend—it's a transformative shift that promises to redefine the industry and our built environment. As we continue to grapple with the challenges of climate change and resource scarcity, the role of FP&A in driving sustainability initiatives will be more crucial than ever, presenting a unique opportunity to make a significant and lasting impact on our world.


The future of real estate is green, and with the help of FP&A and tools like OneStream, we are well on our way to making this vision a reality.


Contact us to find out how PRYZM's out-of-the-box "Real Estate" FP&A solution in combination with OneStream's ESG solution serves as a catalyst for clients to streamline their processes and bolster sustainability. Our innovative solution is designed to seamlessly integrate with existing OneStream platforms, thereby eliminating the need for disruptive overhauls. It provides a comprehensive suite of tools that empower clients to harness the power of their data, enabling them to make informed, strategic decisions that drive sustainability and profitability.











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