Choosing Real Estate ESG Software: Three Key Considerations For Buyers

Choosing Real Estate ESG Software: Three Key Considerations For Buyers

The real estate sector continues to feel the pressure to improve transparency around the environmental, social and governance impacts of buildings to satisfy demands from investors and regulators. Yet, ESG data quality issues continue to plague the industry, with data silos hindering accessibility. Real estate and property teams are left scrambling to get their houses in order ahead of looming regulatory deadlines.

In response, over the last 10 years there has been an influx of ESG data management and reporting software tailored to the needs of the real estate sector. These solutions promise to streamline arduous data collection and reporting processes and empower teams to boost their portfolios’ ESG performance through analytics. Critically, they aim to eliminate the need for error-prone manual data collection and report creation, and improve data quality by highlighting missing and inaccurate data.

The industry is buying into the value proposition of these software systems. Verdantix research finds that 62% of organizations plan to increase their spend on sustainability and ESG data management software in 2024. Building investors are showing similar interest – research from NAREIT finds that 55% of surveyed real estate investment trusts (REITs) have adopted technology to support ESG data collection and monitoring.

The rapid spread of ESG has birthed a plethora of software vendors for buyers to choose from, ranging from disruptive start-ups to established building technology giants and specialized ESG data management vendors. To support buyers with shortlisting, Verdantix has produced a Buyer's Guide detailing 18 prominent real estate ESG data management and reporting software providers.

Three considerations for buyers of real estate ESG software
Aside from technical functionality requirements, there are several factors that buyers should consider to ensure that a vendor aligns with their current and future requirements:

• Location, location, location.
  The real estate ESG data management and reporting software landscape remains fragmented, with few providers currently serving all geographies. Vendors often tailor their offerings to accommodate regional ESG regulations and considerations. Many provide out-of-the-box functionality to automate reports for national regulations or certifications. Buyers should ensure that the vendor’s regional focus aligns with the location of their portfolios to meet their needs effectively. This is particularly relevant for owners and investor of national level portfolios.
  
  
• Flexibility to adapt to current and future needs.
  Each firm, investor or landlord is unique in its ESG requirements, objectives and ambitions. As a result, bespoke features and functionality may be required. Decision-makers should therefore evaluate their current and future needs for platform customization to accommodate specific data sources, reports, or analytics tailored to their unique requirements, and consider the extent, ease and cost of personalization with the vendor. However, buyers should aim to have as many of their requirements as possible met out of the box to avoid extensive customization, which can lead to complexity, issues with future upgrades and a range of unintended consequences.
  
  
• Additional or hidden costs.
  There can be additional or ‘hidden’ costs associated with platform implementation and configuration, such as integrating new data streams, adding more buildings, software updates or upgrades, or purchasing additional licenses. Buyers should discuss their ESG roadmaps with vendors to identify potential future costs.

For a deeper dive into how to navigate the real estate ESG software market, read Verdantix Buyer’s Guide: ESG Data Management And Reporting Software For Real Estate (2024). Verdantix research subscribers can also watch our webinar on How To Select ESG Management Software In The Real Estate Sector.