There are reporting frameworks available for any real estate company’s needs, which can positively facilitate their journey towards sustainability-related disclosure.

Sustainability Disclosure: Peeling back the layers

There are reporting frameworks available for any real estate company’s needs, which can positively facilitate their journey towards sustainability-related disclosure, say sustainability consultants Anelisa Keke and Natalie van der Bijl.

Novices to sustainability disclosure could be easily confused by the multiple reporting-related regulations, frameworks and guidelines in the local and international market. Some frameworks provide conflicting guidance to real estate companies, and the technical terms used further fuel their complexity.

South African disclosure

Real estate companies aiming to start their sustainability journeys and disclose their progress may find the “alphabet soup” of frameworks daunting. In 2022, the JSE Sustainability Disclosure Guidelines1 and Climate Disclosure Guidelines2 represented a useful point of departure for property companies, although they are not sector-specific. The SAREIT Association assisted its members and the broader sector by publishing a sustainability reporting guideline in 2024, which provides a reference for first-time reporters, and consolidates the various best-practice sustainability-related disclosure frameworks and guidelines into a user-friendly format.3

The SAREIT guidelines provide suggested “core” disclosure metrics that can apply to virtually every organisation, and “leadership” metrics that are considered best practice. We anticipate that as market standards shift over time, some leadership metrics may become core to investors. For example, “Total water withdrawal from all areas with water stress, with a breakdown by following sources if applicable: surface water, groundwater, seawater, produced water, and third-party water” is a leadership metric that may become core as localised water stress levels intensify.

International disclosure

In June 2023, the IFRS Foundation published IFRS S14 and IFRS S2.5 IFRS S1 intends to provide a global baseline for companies to report on the sustainability-related risks and opportunities that are relevant to primary users of general purpose financial reports, and which could have a material impact on a company’s financial prospects. IFRS S2 focuses on climate-related risks and opportunities. Companies that aim to apply IFRS do not need to apply financial materiality in isolation; they can apply other impact-based reporting frameworks such as the Global Reporting Initiative (GRI) over and above IFRS in order to provide a complete picture of their risks and opportunities.6

IFRS S1 is likely to extend existing disclosure efforts and have a significant impact on the reporting landscape in South Africa. If implemented widely, it would give investors the tools to start pricing sustainability-related risks for the sector and identify companies that have mitigated those risks and maximised the opportunities associated with the transition to a lower-carbon economy. This will be an iterative process; however, companies aiming to apply the IFRS standards should not underestimate the investment required to do so. Arguably the biggest hurdle to full adoption will be the quantification of short, medium and long-term risks and opportunities.

Many local real estate companies own assets or portfolios in the European Union (EU), but some may be unaware of the multiple sustainability-related disclosure requirements associated therewith, at an asset or an entity level. As a point of departure, real estate companies should understand the sustainability-related legislative and reporting requirements and market expectations regarding real estate in the EU during the due diligence phase of the acquisition. This will help them anticipate the compliance-related expenditure and operational changes that will be required to meet these expectations. For more guidance in this regard, refer to the PRI guidance on ESG7 in due diligences.

In addition to the above, local real estate companies with an EU footprint should monitor developments relating to the Corporate Sustainability Reporting Directive (CSRD),8 an EU regulation that requires certain companies to report on the risks and opportunities arising from social and environmental issues, and on the impact of their activities on people and the environment.9 The scope of CSRD is in the process of being adjusted to reduce pressure on small businesses.10 However, even if a local real estate company is excluded from the ambit of CSRD in terms of the amended requirements, the sustainability-related risks and opportunities associated with its EU footprint may still be relevant to its IFRS S1 and S2 disclosure.

South African real estate companies aiming to align their portfolios with sustainability-related best practice can also consider the European Public Real Estate Association’s (EPRA’s) voluntary Sustainability Best Practice Recommendations Guidelines.11 This is aimed at EU-based real estate companies that are members of EPRA but could also be a useful reference point for offshore asset owners.

What is a real estate company to do?

The international guidelines above can be daunting, particularly for real estate companies that do not have the resources to hire well-trained sustainability teams who can apply a multi-jurisdictional view of sustainability-related reporting requirements. Real estate companies should focus on understanding the basics regarding sustainability in the real estate sector before taking on IFRS, CSRD and/or EPRA. The SA REIT guideline is a good place to start, including for unlisted entities that may be planning to list on one of the South African exchanges or access local and international capital markets.

Lastly, as artificial intelligence takes centre stage for many businesses, it can also be a useful tool when gathering data required to meet disclosure requirements. Without leveraging AI, the manual tasks required to gather non-financial information can demand resources and administrative capacity that real estate funds often lack. That said, real estate companies should apply their judgement to information gathered or collated through AI to ensure its accuracy. It should be supported by a robust internal control framework to check the quality and accuracy of the input data and resulting outputs.

This article provides a point of departure for listed and unlisted real estate companies that need to understand the layers of sustainability disclosure frameworks. Companies will need to sift through what is available to identify the most appropriate frameworks for them, taking into account the maturity of their sustainability journey at a point in time. If applied prudently, the right frameworks can help them provide context to the market and adequately disclose the progress they have made on their sustainability journey.

Natalie van der Bijl has over 19 years’ experience in sustainability in the property, pharmaceutical, petrochemical and financial sectors. She has played a pivotal part in elevating the knowledge of ESG at various levels of the organisations she has worked for, and driven projects on social impact, climate risk and preparing ESG Reports. She has a Postgraduate Certificate in Futures Studies from the University of Stellenbosch, a Postgraduate Certificate in Sustainable Business from Cambridge University and a Postgraduate Diploma in Management from Wits Business School.

A highly regarded senior professional in both the reward and sustainability disciplines, Anelisa Keke’s executive experience within a listed company gives her a wider perspective on the myriad issues that corporate South Africa faces today.

Her skills span the fields of sustainability, reward and tax, having worked as a consultant as well as a chief sustainability officer at a large REIT. Anelisa is an admitted attorney and has an LLB and MComm in Tax, both from the University of Cape Town.

References

  1. Johannesburg Stock Exchange “JSE Sustainability Disclosure Guidance” (2022), available here.
  2. Johannesburg Stock Exchange “JSE Climate Disclosure Guidance (2022), available here.
  3. SAREIT Association “Sustainability Disclosure Guide for South African REITs” (2024), available here.
  4. IFRS Foundation, General Standards for Disclosure of Sustainability-related Financial Information (2023), available here.
  5. IFRS Foundation, “Climate-related Disclosures” (2023), available here.
  6. IFRS Foundation “IFRS Foundation and GRI to align capital market and multi-stakeholder standards to create an interconnected approach for sustainability disclosures” (2022), available here.
  7. Principles for Responsible Investment “Responsible investment DDQ for real estate investors” (2023), available here.
  8. European Union “Corporate sustainability reporting” (2022), available here.
  9. Ibid.
  10. European Union “Commission simplifies rules on sustainability and EU investments, delivering over €6 billion in administrative relief” (2025), available here.
  11. European “EPRA Sustainability Best Practices Recommendations Guidelines” (2024) available here.
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