The South African Real Estate Investment Trust (SA REIT) Association is in the final stages of developing its Sustainability Disclosure Guide & Framework, aimed at assisting South African REITs in aligning with international best practices in environmental, social, and governance (ESG) reporting.

With increasing significance placed on sustainability reporting by international and local investors, governments, and stakeholders, the guide will serve as a valuable resource for REITs and real estate organisations seeking to enhance their sustainability reporting efforts.

By summarising the essential elements of sustainability-related information, the SA REIT Association's Sustainability Disclosure Guide empowers organisations to navigate their sustainability reporting journey effectively. Given their integral role in the national economy, REITs play a pivotal role in attracting investment, making robust ESG reporting essential.

"We recognise the imperative need for systemic change to foster a more equitable society and economy that operates within ecological boundaries, committed to sustainable development," affirms Joanne Solomon, Chief Executive Officer of the SA REIT Association.

The draft framework emphasises the importance of balancing present needs with future generations' requirements to ensure a sustainable future for all. As ESG performance gains prominence globally, driven by new regulations and increasing investor demand for transparent information, accurate and reliable ESG reporting has become indispensable. Consequently, there is a growing need for consistent, comparable, and verifiable sustainability metrics and narrative disclosure.

Phil Barttram, a SA REIT Association's Research Committee member, highlights that effective ESG reporting stems from an integrated ESG strategy. Furthermore, Barttram emphasises the multiple benefits of improved ESG reporting, including improved access to capital, enhanced corporate reputation, and potentially, the identification of mispriced real estate assets that don’t accurately reflect their environmental and social risks.

Barttram underscores the significant growth in investor interest in ESG over the past few years and the increasing focus of international regulators on ESG disclosure. While South African REITs continue personalising their ESG journey and communication with stakeholders, notable improvements in the quality of ESG disclosures have already been observed.

Barttram emphasises the importance of incorporating ESG thinking throughout a corporate’s strategy and governance, which will require many REITs to expand their internal ESG capabilities at the board and operational levels. In addition,  referencing the sector-specific disclosure standards and frameworks will assist REITS in the development of consistent and comparable ESG commitments, goals, and metrics.

As companies embrace ESG initiatives, including technologies and systems supporting future regulations and net-zero commitments, a recent PwC report cautions against short-term share price swings and pushback. However, the report underscores that neglecting ESG investments will result in significantly lower accumulated value than successful ESG approaches. Companies are advised to define a business strategy with a compelling long-term ESG roadmap, striking a balance between short-term key performance indicators and addressing investor expectations.

Aligning with international best practices, the SA REIT Association's forthcoming guide for the sector seeks to ensure global alignment and follows the guidance of organisations such as the European Real Estate Association (EPRA) and the United States National Association of Real Estate Investment Trusts (NAREIT).

While standardised data and reporting offer benefits, it is crucial to consider REITs' specific operations and locations to ensure contextual understanding.

In line with global investor priorities, effective corporate governance and greenhouse gas emissions reduction are among the key ESG-related outcomes that businesses must deliver. The SA REIT Association supports the guidance provided by the Johannesburg Stock Exchange (JSE) and recommends that its members adhere to the JSE's recommendations for reporting and disclosures.

The JSE's voluntary Sustainability and Climate Change Disclosure Guidance, published in June 2022, is an important reference for the Association and its members.

Recognising the need for reliable and consistent ESG reporting, the SA REIT Association acknowledges the value of widely embraced reporting frameworks and standards such as the Global Reporting Initiative (GRI) standards, Sustainability Accounting Standards Boards, Task Force on Climate-related Financial Disclosures (TCFD), and the 17 UN Sustainable Development Goals (SDGs).

By following key insights and patterns from these varying recommendations, the Association strives to ensure the comprehensive and meaningful integration of ESG reporting within the South African REIT industry.