In recent years, the real estate sector has experienced a growing interest in sustainable and environmentally friendly practices.
Consumers, increasingly aware of the environmental impact of their choices, are looking for options that promote sustainability and reduce damage to the environment.
However, on this path toward responsible construction, a significant concern has emerged: greenwashing. This phenomenon, which refers to the misleading promotion of real estate projects as green or sustainable, poses challenges for both developers and consumers.
What is greenwashing?
The term “greenwashing” is a combination of “green”, which symbolizes environmental sustainability, and “whitewashing”, which refers to covering up or minimizing negative aspects.
“Greenwashing” refers to the deceptive practice of promoting a company, product or service as environmentally friendly or sustainable when, in fact, it is not.
It is a marketing strategy used to create a positive image and attract environmentally conscious consumers.
What is the impact on the real estate sector?
Greenwashing can have several impacts on the real estate sector.
These impacts are related to the perception of real estate projects, consumer confidence and government policies.
Some of the most prominent impacts are:
- Consumer distrust: When consumers discover that a real estate company is engaging in greenwashing practices, they may lose confidence in the brand and become more skeptical of sustainability claims.
This can result in a decrease in demand for that company’s properties and a negative impact on its reputation. - Difficulty in accessing financing: Sustainable and environmentally friendly real estate projects can receive financial support and tax benefits.
However, if developers are accused of greenwashing, banks and other financial institutions may be wary of financing their projects, affecting their economic viability. - Regulatory risk: As concern for the environment and sustainability increases, governments may implement stricter regulations to combat greenwashing in the real estate sector.
This could result in fines and penalties for companies that use deceptive tactics to promote their projects. - Difficulties in obtaining certifications: Many real estate projects seek to obtain sustainability certifications.
However, greenwashing can make it difficult to obtain these certifications, as the evaluating bodies will be more cautious and demanding to ensure that projects actually meet sustainability criteria. - Loss of competitive advantage: Real estate companies genuinely committed to sustainability may be harmed if other companies use greenwashing tactics to appear equally environmentally responsible.
This could lead to unequal competition and hurt players genuinely committed to sustainable practices.
How to avoid greenwashing in real estate?
The Disclosure Regulation, which emerges as a solution to measure compliance with ESG factors, can be a valuable tool to avoid greenwashing and promote more responsible business practices in terms of sustainability.
The main objective of the Disclosure Regulation is to establish unified criteria for measuring sustainability, which would ensure fair competition and avoid misleading practices such as greenwashing.
To achieve this purpose, the regulation proposes an extensive list of indicators to assess the main adverse sustainability impacts (AISIs).
These indicators include key aspects such as greenhouse gas emissions, water pollution, social infringements in host countries and gender wage disparities. The regulation includes two PIAs specifically related to the real estate sector:
- Exposure to fossil fuels through real estate assets: this involves assessing the amount of investment in real estate linked to the extraction, manufacture, storage and transportation of fossil fuels.
- Exposure of energy inefficient real estate assets: involves measuring and assessing the energy efficiency of properties, identifying those that consume an excessive amount of energy compared to more sustainable standards.
These PIAs are crucial for the real estate sector, as they allow investors and society in general to have a clear view of the environmental and energy implications of real estate investments and assets.
With this information, more informed decisions can be made and the adoption of sustainable practices in the development and management of real estate projects can be encouraged.
By considering and addressing these issues, the real estate industry can play a more active role in combating climate change and promoting a more sustainable future.
