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Finance + Sustainability = Future

As I continue to research the modern workplace, I can’t help but notice the seismic impact COVID has had on global thinking.  Suddenly, I’m finding myself connected to thought leadership around the world who are offering their perspective, and their particular experiences with regards to change and impact. 

One of the more interesting movements gaining global traction is ESG (corporate environmental, social, and governance activities).  Now before you roll your eyes based on the name – it’s important to note  these criteria help factor future financial performance of companies (risk and return.)  It turns out the natural environment is teaching us far more about our investment behavior than algorithms.  The ESG is helping financial institutions understand the true cost of profit.

In workplace, I emphasize the importance of understanding the total cost of ownership.  Tracking and mining total cost isn’t easy, but it remains a true measure of how well a company is operating.  The data for payroll and benefits is easy to quantify, but office cost – total office cost….well, the world is just now figuring out how expensive that is.  In order to get to the bottom line, you have to take a contrarian view on success and look through a lens of skepticism.  It’s hard to point out flaws, and even harder to accept them.  In the end, it helps drive out waste and preserve profits.  With ESG, it helps drive down risk by understanding impact.

During my dive into ESG, I came across so many empathetic and emotional marketing tools.  Grandparents of wealth staring into the jaded eyes of their heirs.  Melting icecaps with polar bears stuck on floating icebergs.  Fires, floods, on and on.  What I was looking for was more analytical.  Why did ESG funds perform well in Q1 2020?  Turns out, they were heavily invested by tech companies.  So obvious that tech companies would invest in ESG funds – Al Gore and Larry Fink have been telling them to since the early 2000’s.  Of course the fund will perform well – it’s got a ton of money being pumped into it by the worlds richest firms.  The high tide raises all ships. 

Then I came across this article in Seeking Alpha, a crowd-sourced content service for financial markets. Baruch Lev takes the contrarian view on the ESG factor, and his perspective is transparent.  This isn’t a linear A+B equation – just like buying tech and signing leases isn’t the only contributing factor to workplace expense.  There’s always more to it, but in today’s rushed, distracted, obtuse, noisy world, it’s not always clear.  But here’s the thing – Lev’s perspective is strictly analytical and doesn’t mention any factor of empathy influencing fund value.  That’s like saying the feel of the office (design, materials, views) doesn’t affect employee engagement or make an impression on clients and visitors. 

So what?  Well, I’m not entirely sure and because it’s 2020, I don’t have to be entirely sure right now.  What I do know is people are starting to wake up to factors of impact.  In my world, clients are really starting to understand the value of their people.  Words like remote, flexible, workflow, distributed model, digital innovation…..those words fell on deaf ears for years.  Companies are losing talent because of it.  A whole new world of funding is going to be required to infuse markets.  Institutional investments poured into REITS with Office, Retail, and Hospitality generally accounting for a combined 40-50% of these funds.  If ever there is a time for CRE and Finance to reinvent, it is now.  What if we could type the word ‘finance’ into Google images and get the results for “sustainability”?

Chris Moeller is the Founder and Managing Principal of Orion Growth, a division of Gaia Ventures, LLC.  He has been thinking through challenging business processes for 2 decades and believes behind every great process is a greater human being.  Orion Growth is restoring the human connection by fundamentally changing the way workspace is delivered.