By Blessing V. Bonga
THE move by Government to make Environmental, Social and Governance (ESG) compliance a legal requirement for all listed companies in Zimbabwe under Statutory Instrument 134 of 2019, has undoubtedly brought in a new perspective in the real estate sector in terms of property valuation.
The directive also positions the country’s corporate reporting standards in sync with global standards in environmental, social, and governance disclosures. In simple terms, ESG compliance is the criteria that collectively establishes the framework for assessing the impact of the sustainability and ethical practices, financial performance or operations of a company, asset or liability. It is an outline for establishments to systematically address sustainability concerns.
ESG reporting involves disclosing non-financial information related to environmental, social and governance issues to both internal (within the organisation) and external stakeholders, such as local communities.
The emergence of sustainability reporting standards stems from experiences where companies selectively shared positive outcomes while deliberately ignoring negative aspects. At the recently held Zimbabwe Construction Industry Association (ZCIA) annual conference in Harare, association Vice President, and Property Investment Manager at the National Social Security Authority (NSSA), Mrs. Joyline Murekachiro weighed in on the importance of ESG in the property sector, since this now has a significant impact when it comes to valuation.
“ESG has relevant risks and opportunities, so the parties that are included in the design and construction of structures have to be aware of the legislation and framework that relate to ESG-compliant buildings. For your own information, currently, for those who do property valuations, I am sure we are all aware that, according to the current international valuation standards, which came into effect in February this year, you are supposed to consider ESG in your valuation, which means whatever the properties and characteristics of your building, they now determine the value,” she said.
The property valuation expert added that as long as a property is not ESG-compliant, it will definitely attract a lower market value as opposed to a building that is compliant. So, when talking of environmental issues, under ESG, we usually focus on the natural world and the impact of humans on the same.
For example, the contribution to pollution when it comes to air, land, water, and also the exposure of assets to disasters such as floods and droughts, and also the characteristics of assets in terms of resource scarcity, such as energy and water consumption efficiency.
This is also where issues to do with protecting human health and comfort by considering thermal comfort, daylighting, natural ventilation, functionality, and aesthetics come under scrutiny. Of late, there has also been rampant construction on wetlands that continues to go unchecked, especially in Harare, despite continuous lobbying against the practice, by residents.
She called upon the Environmental Management Agency (EMA) to play their regulatory role to ensure that, as contractors, whatever they are constructing, is done on proper land, not on wetlands, so that we don’t affect our ecosystems.
All these critical issues discussed fall under sustainability, and need to be fully addressed if the requirements for ESG-compliance and sustainability of a building are to be met. Mrs. Murekachiro therefore challenged players in the real estate, and construction industries to seriously consider the provisions of the ESG Statutory instrument so that in the end, they give the market a product, commercial property, or residential property that is sustainable.
“Emphasis now, is that the players in the real estate industry or in the building environment are supposed to consider this so that at the end of the day, when they give us their product, say it’s a commercial property or a residential property, it has to be sustainable.
“And at the same time, it’s supposed to be ESG-compliant, and for a building to be ESG-compliant, the waste management protocols are also supposed to be considered. You have to consider materials that are recyclable. You also have to consider the issue of capital expenditure and your recurring maintenance outlays. This is to do with your operating expenses, all these have to be manageable.
“So, whatever you are considering in terms of the materials for your property is supposed to ensure that at the end of the day, the building is flexible enough in terms of having low operating costs and capital expenditure to whoever is interested in buying and occupying the building. So, it means you, as the contractor, are also supposed to comply, your company is supposed to have an ESG policy. You are also supposed to report at the end of the year when you do your financials to testify how you have complied with ESG reporting,” she added.