Data, digital risk and the ESG agenda

Data plays a vital role in helping real estate fulfil its environmental, social and governance responsibilities – but can present distinctive risks of its own


  • Dan Hughes

11 October 2021

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Buildings are changing: no longer passive concrete blocks, they are smart data collection platforms where we live, relax and work. And as the role of technology and data grows, the way we understand the performance of a building is also changing.  

Whether it is the influence of an office on an employee's productivity or the increasing attention paid to the environmental, social and governance (ESG) agenda, the property sector is having to consider new factors in its decision-making. Technology is a powerful tool for dealing with these, but it also brings new digital risks that must be addressed.

Technology, data and the environment

The role of data and technology in meeting the sector's ESG responsibilities is substantial. Using environmental issues as an example, buildings are responsible for nearly 40% of the world's carbon emissions but there are many ways that technology can help reduce these numbers. 

First and perhaps most important, technology allows us to measure and understand real estate's impact on the environment, and how to improve it. That understanding is provided by data – data on how much energy a building is using or how much carbon is being produced. This allows us to track and improve performance. As the well-known saying goes, 'What gets measured, gets managed'. Effective use of data means deriving actionable insights and this is a vital factor in understanding and reducing buildings' impact on the environment. 

We can also assess how a building's energy use affects other performance metrics through data gathered from existing systems, new software and, in particular, new sensors. By combining all these insights, we are able to understand how to improve the building's overall efficiency to better meet occupier or customer needs. 

Finally, technology is simply becoming more energy-efficient. Taking light bulbs as an example, LEDs can use 85% less energy for the same output as traditional halogen bulbs. It is not just lighting: all the technologies, whether heating systems or elevators, we use are becoming more energy-efficient, meaning that buildings have less impact on the environment. 

'Effective use of data means deriving actionable insights'

Governance and risk

Data and technology can also help the sector fulfil its social and governance responsibilities as well as its environmental ones, for example improving communications and engagement or transparency and speed respectively.

However, as we embrace technology, there are two major challenges to consider: the risks presented by the technology itself, and the need to understand what we are comparing. Failing to address these two points will at best mean a lot of hard work and investment is deemed worthless – and at worst it will stop buildings from operating effectively. 

The first challenge the sector faces is how to address the risks from technology itself. There are a huge number of digital risks that people responsible for buildings must consider. 

Facial recognition

The use of this technology can offer enormous benefits; access to parts of a building may be seamlessly controlled through the use of facial recognition or improved security from the identification and tracking of people. However, there are some significant questions that building owners and managers must consider given society's – and, increasingly, regulators' – concerns with its use. For example, how do you inform people that you are using facial recognition software, and explain why you are using it? How do you make sure that the information is not being used for purposes other than that which it is intended? 

Cyber security

As the operations of a building become ever more connected, the risk of a cyber attack increases. Whether hackers gain access to corporate data or financial information or prevent a building from running properly by interfering with its systems, they present many challenges to buildings and businesses. 

External data

Real estate relies increasingly on external data to inform its decisions, as do consumers. The influence of external data sets on buildings will grow, from user reviews to air-quality readings to social media posts. 

Keeping track of this rapidly changing data is challenging, but being able to monitor the data that affects the performance of a building is nonetheless valuable. Reviews, traffic reports or air-quality information may all be used by the consumer to inform their decisions, which means there will be greater incentive to manipulate the data sets for anyone who has an interest in a particular outcome. Property professionals will therefore have to be much more alert to the influence of external data sets on the performance of their buildings. 

Apples with apples

The risks identified above lead on to the second major challenge that the property sector must address. If we are moving into a world where ESG factors are a fundamental part of understanding building performance, how do we make sure these are considered in a consistent way?

For example, what do we mean when we talk about an environmentally friendly building? Would a hypothetical building that is highly energy-efficient but still accounts for significant carbon emissions be considered environmentally friendly or not? If a building moves its data centre off site and invests in carbon offset, is it considered greener than one that does not, even though the actual impact on the planet is arguably no different? Similarly, does a building qualify as well governed if there is no specific process in place to address the vast range of digital risks it faces?

This is where a common framework becomes essential, and RICS is currently working with other organisations to develop the International Building Operations Standard to address this issue. This framework will help us understand building operations so we are able to compare apples with apples – not just within a building, but across the whole sector. 

ESG considerations are quite rightly rising up the agenda – but without digital risk processes being in place at a building level or a consistent framework for understanding building operation at a market level, it will remain little more than rhetoric. 

Dan Hughes is the founder of Alpha Property Insight 

Contact Dan: Email | Twitter

Related competencies include: Data management, Ethics, Rules of Conduct and professionalism

RICS Data Standard

The RICS Data Standard (RDS) allows users to capture, share and exchange data on land, property, real estate, and infrastructure assets. The RDS references and supports a range of RICS and international standards covering property measurement, valuation, due diligence, life-cycle costing, brokerage, leasing, and building surveying. 

The RDS is available under the MIT License and RICS can provide technical support on the implementation of the RDS, for further information and support please contact Data Standards at RICS.

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