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ESG refers to environment, society and governance. It reflects the long-term sustainability development ability of enterprises by evaluating their performance in natural environment, social responsibility and corporate governance.
As "Carbon Peak and Neutrality" has become a national strategy, ESG concept has also accelerated its penetration into industrial development and enterprise strategic layout. Since the "Carbon Peak and Neutrality" target is directly linked to the environment, green industrial development has become a key work to accelerate.
Recently, KWG was officially awarded the “International certification of Carbon Champion" by the Asian Chamber of Commerce of Enterprise Carbon Champion Program, with the rating of "Standard level", which is the first Chinese real estate enterprise to obtain this certification.
In 2022, KWG will start the first year of "zero carbon", which is expected to open a new situation of sustainable development of the enterprise.
ONE: The "Carbon Peak and Carbon Neutrality" target leads the enterprise ESG practice, and green building becomes the trend
In order to cope with global warming, China officially put forward the "Carbon Peak and Carbon Neutrality" goals in 2020, namely, strive to peak carbon dioxide emissions by 2030, and to achieve carbon neutrality by 2060, and wrote the "Carbon Peak and Carbon Neutrality" into the government work report.
As the "Carbon Peak and Neutrality" target is directly linked to the environment, green industrial development has become the mainstream. As an industry with high-emissions and high-energy-consumption, and involving a huge industrial chain, the transformation and upgrading of real estate is extremely urgent. Under the guidance of the policy, real estate enterprises actively practice ESG’s green development concept, taking green building as the main focus, and actively promote the green transformation of the industry.
Green architecture originated in the 1960s. In 1963, Paola Soleri, an Italian-American architect proposed the new concept of "arology". Subsequently, it took the lead in the development of the United States, Britain, Germany, Japan and other developed countries, and promoted the continuous optimization and improvement of building implementation, technical system, evaluation standards, policies and regulations.
Table: Foreign green building standard system and typical project cases
Source: CRIC
Green building started late in China, but developed rapidly. Since 2013, with the release of the National Green Building Action Plan, the number and area of green building evaluation and identification projects have shown explosive growth. By the end of 2020, China’s total green building area had reached 6.645 billion square meters.
As an important practitioner of green building in China, real estate enterprises have actively carried out the plan. At present, Vanke, Jinmao, Zhongliang, Landsea and other enterprises have publicly promised that their new buildings meet the green building standard 100%. From the overall development of the industry, large real estate enterprises occupy a dominant position in green project reserve, technology R&D and application, operation and management, etc., and are the main force of green building landing and certification in the industry.
By the end of 2020, KWG has 80 certified green building projects and 49 projects in the process of certification. Through continuous improvement of technology, KWG has been able to accurately identify projects and areas with high energy consumption and take measures to reduce energy consumption.
Among them, Suzhou Swan Harbor Park and Ningbo Meiyunge project have obtained the two-star green building standard. In 2022, the high-end aesthetic benchmark "JADE" series project KWG | Landmark Arte Master Piece of the Greater Bay Area adopts prefabricated building technology, green concepts from project design to construction, and achieve energy conservation and emission reduction.
Picture: KWG Green Building Certification Structure
Source: Annual reports, CRIC
TWO: Against the background of industry downturn, further strengthen the ESG concept of real estate enterprise from internal management to focus on "Carbon Peak and Carbon Neutrality" and sustainable development
In the past two years, due to the impact of the epidemic and the strong regulation of "three red lines" and other policies, the operation of real estate enterprises has shown obvious vulnerability. Especially since the second half of 2021, due to the significant downturn of the real estate market and the concentrated maturity of debt, the liquidity of real estate enterprises is generally tight, with frequent defaults, and the industry is deep in credit crisis. In this context, the sustainable development ability of real estate enterprises has attracted much attention, urging the accelerated infiltration of ESG concept at the enterprise management level.
In the new stage of development, the evaluation of real estate enterprises will no longer be limited to financial indicators. In the future, regulators and capital market will pay more attention to the performance and rating of real estate enterprises ESG, which will force more enterprises to pay more attention to ESG and increase investment in ESG. We believe that the priority layout of real estate enterprises will show stronger competitiveness in ESG track, and under the stable operation mode, it is more conducive to the rapid and orderly implementation of ESG in a short period of time.
In 2021, KWG established an ESG Committee under the Board of Directors to elevate sustainability and ESG issues to the board level. The company is committed to achieving carbon neutrality as it moves towards 2030, while maintaining the reliable role for the supervisory board in decision-making. At the business level, KWG adheres to the positioning of urban comprehensive operator, maintains a steady strategy for a long time, and enhances sustainable development ability.
In terms of social responsibility, all office buildings of enterprises have fully participated in epidemic prevention and provided convenient vaccination sites. In addition, it has also been constantly innovating in public welfare activities. With the help of the creative mode of the Internet, it has joined hands with the Guangzhou Charity Association to carry out the "Colorful Hat Action" of KWG Uart Space, focusing on the mental health of children with severe diseases and raising funds for them.
On the whole, KWG is strengthening the layout of ESG in an all-round way and has made substantial progress. The stable operation also lays a good foundation for the further improvement of ESG competitiveness.
Picture: Schematic diagram of sustainable development capacity construction of KWG
Source: CRIC
THREE: With investment opportunities, the application value of ESG is gradually released in the capital market
At the same time, the concept of ESG also drives the investment boom of ESG, and the application value of enterprise ESG in the capital market is gradually released. The investment opportunities of green bonds, ESG bonds and ESG funds open up a new financing channel for real estate enterprises.
Up to now, dozens of real estate enterprises have successfully issued green bonds, including Modernland, Landsea, Cifi, Yango and Zhenrong Group.
KWG has issued a US$378 million principal tranche in May 2021, green senior notes with an annual interest rate of 6%. For KWG, we should pay more attention to and invest in ESG work and seize the opportunities of ESG. In the future, we can make more attempts to issue ESG bonds and include them into the investment targets of the fund, so as to win broader development space for enterprise.
Table: Green USD bond issuance of some real estate enterprises in 2021
Source: Corporate report, CRIC
Conclusion: Under the goal of "Carbon Peak and Carbon Neutrality", it is the general trend for real estate enterprises to practice ESG concept. KWG starts the first year of "zero carbon" and accelerates the layout of ESG. On the whole, it has positive significance to improve the intrinsic value and efficiency. However, the realization of ESG value cannot stay at the conceptual level. It requires long-term investment of enterprises, and the short-term benefits are not obvious, which is also a realistic challenge faced by enterprises.
