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NAREIM DIALOGUES SPRING 2017 5 DRIVING SUSTAINABILITY IN COMMERCIAL REAL ESTATE TRENDS of Real Estate Investment Trusts (NAREIT), the U.S. Green Building Council (USGBC), and many other organizations collect, analyze, and aggregate data on sustainability and corporate responsibility issues in commercial real estate. The industry has rapidly progressed from having too little information regarding sustainability and real estate to information overload. That said, the focus has now turned to determining what information is vital and is key in investment decision making. Moreover, what specific data benchmarks help identify risk, or highlight new opportunities? In addition, how can investment managers zero in on what is most important? It is a growing belief among investors that good sustainability performance is a proxy for good investment management and raises awareness on what is material in commercial real estate. For instance, recent efforts initiated by policy and financial organizations have been seeking to identify what materiality means to the investment community. One definition worked on by the Sustainability Accounting Standards Board (SASB) defines materiality for a variety of commercial sectors, with the intention of requiring disclosure of material sustainability information in future 10-K and other financial filings. Findings from McKinsley & Company 1 , MIT Sloan Management Review 2 , BlackRock 3 , and Mercer 4 highlight the discussion on portfolio exposure to "climate risk" and the meaning to investment managers. 2. RESILIENCE Managing real estate in an increasingly volatile environment The concept of resilience is gaining more attention among investors of all asset classes. For real estate, the term resilience represents a mindset that examines how to mitigate risk, anticipate issues, and protect investments from negative impacts due to climate change, natural disasters, and "black swan" events. The Urban Land Institute (ULI), American Planning Association, and USGBC 5 have jointly defined resiliency as "the ability to prepare and plan for, absorb, recover from, and successfully adapt to adverse events." They also examine the economic imperative to successful resilience strategies, stating, "the promotion of resilience will improve the economic competitiveness of the United States." The increasing attention to resiliency strategies is also apparent in public policy initiatives and private sector research. For example, significant efforts are emerging particularly at the city level and discussions on resilience as part of public policy have been accelerating. The importance of resilience is also reaching the private sector, major insurance, re-insurance, and risk companies. These entities are leading research and analysis on the impacts of climate change, and updating their models to incorporate climate risk. The World Economic Forum's "Global Risks Report" 6 identifies "failure of climate change adaption and mitigation" as one of the most concerning risks for its members. Considering these developments, resilience strategies should integrate with investment management practices, necessitating improvements in underwriting and managing real estate, and mitigating risks across geographic, market, end ecosystem perspectives. Billy Grayson, Founder and Principal, Bent Branch Strategies ©iStock.com/xijian