The CFO's expanding role in the ESG ecosystem

A discussion on the vital role the CFO plays in today’s expanding ESG ecosystem, from the perspective of REITs and the real estate industry.

In this episode of the Better Finance podcast, Myles Corson is joined by Fulya Kocak, senior vice president of ESG issues for National Association of Real Estate Investment Trusts (Nareit) and Serena Wolfe, chief financial officer of Annaly Capital Management. Together, they discuss the increasing stakeholder focus on environmental, social and governance (ESG) issues within the real estate investment trusts (REITs) and the broader real estate sector. The conversation starts with a look at how the pandemic has influenced agility within REITs to become ESG change agents for other sectors.

The impact of the global pandemic has pushed businesses to adapt and embrace innovative ideas for decision-making processes along with acting as agents for change. While it proved to be an adaptability test for almost all sectors, it was also an opportunity to identify gaps and issues that could be solved with great solutions.

For real estate companies, the pandemic led to changes in how they operate including updates to cleaning protocols in anticipation of reopening of workspaces. Additionally, property owners and landlords invested in new technologies for indoor air quality, studied energy consumptions versus occupancy and witnessed an increase in health and wellness rating applications.

Annaly Capital Management brought together its infrastructure, IT infrastructure and human capital in ways never considered before, in response to the magnified importance of emergency planning and system resiliency.

Given the challenges faced through the pandemic, investors are not only focused on how businesses are responding to COVID, but also the business continuity plan. This shift in focus was also influenced by the  acceleration in momentum to implement improved ESG practices and meet the changing expectations of stakeholders. From a CFO standpoint, it’s about being proactive and instrumental in helping the company and the executive team define what ESG means for the company and industry.

The CFO is now critical in managing change, assessing where their company is today and how to benefit from situations in the future. It’s an opportunity to make a long-lasting, meaningful impact in the face of  continued uncertainty and disruption. 

Key Takeaways

1. Stakeholder engagement is a critical part of the CFO’s role around ESG. CFO leadership today is more proactive and instrumental in helping the C-Suite define what ESG means for the organization.
2. Good sustainability leadership is not tied to a title or a person. The key is to have passion, the ability to endure change and implement strategies, and strong communication and collaboration skills.
3. There’s an incredible amount of entrepreneurship and interest around ESG topics. CFO’s should empower their people to embrace new ideas, because it’s an opportunity for everybody to make a long-lasting, meaningful impact. 

Related non-EY content

• Top Takeaways from Nareit’s 2021 REIT ESG Dashboard
• Nareit’s Fulya Kocak Publishes Second Book on Sustainability
• 2021 Outlook for REITs and Commercial Real Estate: Risk and Resilience
• REITs & ESG: Environmental, Social & Governance
• Annaly 2020 Corporate Responsibility Report