Inside A $1.4B Multifamily REIT's Efforts To Make Money By Going Green
Veris Residential has already made one pivot in the past year — previously called Mack Cali, it is selling off its office assets and becoming a residential specialist. Now it is in the process of making another leap.
The New Jersey-based REIT with a market capitalisation of $1.4B is betting that trying to put environmental, social and governance matters at the centre of its business will be good for its bottom line.
“We don’t think ESG compromises shareholder value, and actually think it creates long-term value, not just for shareholders but for all stakeholders,” Veris Chief Operating Officer Anna Malhari told Bisnow, in an interview alongside Karen Cusmano, who has just been promoted to Veris’ senior vice president, head of sustainability and ESG, following 21 years at the company.
Malhari and Cusmano spoke on the day Veris released its 2021 ESG report. The report revealed the company cut a portion of the carbon emissions from its portfolio by 34% compared to 2019 levels, against a target of a 50% cut by 2030: a good start, though there is a long way to go.
Cusmano and Malhari talked Bisnow through how it had used proptech, gamification and human psychology to make the cuts it had, how it was going to achieve its diversity aims, and just why it thinks this will make the company money in the long term.
On the carbon emissions side, Veris has a target of reducing its scope 1 and scope 2 emissions by 50% by 2030 — put simply, the emissions from the operations and common parts of buildings it manages, but excluding the emissions from parts of the portfolio occupied by tenants.
Its target of a 50% reduction by 2030 is verified by the Science-Based Targets Initiative, an external body that validates climate targets, and would help keep Veris’ emissions at the level needed to limit global warming to less than 1.5 degrees Celsius. Ensuring its buildings use 100% renewable energy has been a big part of this, and Malhari said utilising proptech solutions like systems that monitor a building’s energy usage were highly effective.
“A lot of these technologies have a relatively low cost and short payback time, so they can reduce emissions and make savings on operating expenditure very quickly,” she said.
Asked why it had not set a net-zero carbon target, Malhari said that was the natural next step, "but we want to commit to a target that is realistic and not just a statement. We want to be authentic, to commit to reducing emissions rather than just purchasing offsets.”
Malhari said that to become a net-zero company, the company would need to reduce its scope 3 emissions. That means reducing the emissions created by tenants — not an easy job in a portfolio with 6,691 units.
Cusmano said the company was introducing green lease amendments across part of its portfolio, which outline to residents a commitment to reduce energy and resource consumption as much as possible.
She said providing residents with the right information about reducing their carbon footprint could help them to do so — if that information is presented in the right way.
“This year we set out some Veris sustainability guidelines, which are nine bullet points on areas where residents can engage with how to conserve resources,” she said. “Then we provide them with kind of micro lessons, easily absorbable information, where each month we reinforce one of those points by providing them with a bit more information.”
One example? Turning off the tap while you brush your teeth can save 1,000 gallons of water a year.
Veris is trying to encourage changes in how its residents use electricity by tapping into the way people respond to incentives, in one case working with power and technology company Con Edison at one of its buildings in Westchester. If residents use electricity at less busy times of day, they can essentially sell energy back to the grid, with some residents earning up to $100 a year.
Cusmano pointed to recent research from the American Council for an Energy-Efficient Economy that found that when shown energy efficiency scores in rental listings, tenants will pick more energy-efficient properties, and younger renters, in particular, are willing to pay more for greener properties.
Incentives play a role in another way — the bonuses of senior Veris executives are tied to hitting ESG targets, although Malhari did not say how much the company’s leadership would forgo if ESG targets were missed. Across the whole company, there are financial incentives for Veris staff to help the company reduce energy and resource consumption and for making suggestions to improve ESG performance.
“We wanted people to be thinking about it,” Cusmano said. “It’s meant employees have started coming forward with ideas, coming to me directly. That’s exactly what we wanted.”
Diversity and inclusion also plays a big role in the company’s ESG strategy, with a goal of gender equality at the management level by 2025. Currently, 25% of the company’s management is female, and 38% self-identify as ethnically diverse. Across the company, Veris Residential’s workforce was 40% female and 50% diverse.
As with its residents, the company is utilising micro-lessons to improve employee awareness of issues around diversity. Rather than sitting everyone down for a day for a diversity training course and then not mentioning it for the rest of the year, the company has small online training modules on issues like leadership and unconscious bias. Employees are able to compete to see who has completed the most units.
“People look forward to doing it, and those leaderboards make everybody want to compete, and they take these micro-lessons in without even realising it,” Cusmano said.