In today's rapidly evolving business landscape, sustainability is no longer just a buzzword - it’s become table stakes to remain in a leadership position.
Among the many companies striving for sustainability, one standout performer is Vornado Realty Trust (Vornado). Listed on the NYSE and a member of the S&P MidCap 400, Vornado is a leading owner, manager, and developer of office and retail real estate. Their portfolio is concentrated in New York City, Chicago and San Francisco with iconic buildings such as 731 Lexington Ave., The MART and 555 California. (Moynihan Train Hall pictured above.)
Vornado is also an industry leader in sustainability policy. As of 2022 they own and operate more than 28 million square feet of LEED certified buildings, with over 23 million square feet at LEED Gold or Platinum. Their 2022 Sustainability Report further highlights receiving multiple awards for continued sustainability leadership including a 12th NAREIT Leader in the Light Award; Energy Star Partner of the Year with Sustained Excellence, and being named by GRESB as a global “Sector Leader” for Diversified Office/Retail REITs, ranking #1 in the USA amongst peers.
However, the highlight from the report that is arguably Vornado’s most impressive: sourcing 100% renewable energy credits (RECs) for electricity of their directly managed properties. The report notes that the RECs include those sourced from hydroelectric, wind, and solar facilities in both New York and California. These RECs offset consumed electricity for 416,000 MWh in 2021 and 435,000 MWh in 2022.
In outlining Vornando’s approach, SVP and Chief Sustainability Officer, Lauren Brust Moss, notes this all fits within the companies Vision 2030 commitment to reach carbon neutrality. “In 2021, we made a SBTi commitment to reduce our Scope 1 and 2 emission intensity by 64 percent per SF by 2030 below a 2019 base year. Our commitment is 1.5°C-aligned, the most ambitious designation offered. [We] procured RECs across our portfolio to document our commitment to renewable energy and the environment, including sourcing from hydro energy facilities located in the State of New York. Vornado was one of the first public REITs to make a commitment to carbon neutrality, building upon the work that began in 2012.”
This aligns with the thinking of others formerly on the Vornado sustainability team: “the path forward is more sophisticated than the low-hanging fruit that has already been completed, but we have a few things in our favor,” says Daniel Egan, formerly Senior Vice President, Sustainability & Utilities at Vornado, now Managing Director, Americas Head of Real Estate ESG at Blackstone. “One is technology advancements, such as artificial intelligence, building automation, and leveraging building data and analytics to better understand a building’s relationship with energy and identify more opportunities to reduce consumption.”
One disadvantage is that buildings located in dense urban markets have limited opportunities for on-site renewables, leading many property owners to consider alternatives. “All of these components together—energy reduction and products to source our energy renewably—that will get us to net zero carbon,” Egan says.
The Potential of RECs with Additionality:
An analysis of Vornado's journey reveals a significant opportunity for even greater impact through the inclusion of RECs with additionality. Incorporating RECs with additionality that demonstrate a commitment to increase new renewable energy generation, Vornado could accelerate the transition of the grid to renewable energy sources. Sourcing RECs with additionality would also help mitigate the long-term costs associated with renewable energy procurement, strengthening an already laudable sustainable approach as Vornado's business continues to grow.
Furthermore, RECs with additionality would also provide Vornado with a more impactful marketing claim for sustainability purposes. By highlighting their commitment to not only sourcing renewable energy but also driving additional renewable energy generation, Vornado could differentiate itself as a true sustainability leader.
There’s no doubt that Vornado's success in sourcing 100% renewable electricity using RECs is a testament to their dedication to environmental stewardship. The potential inclusion of RECs with additionality presents an opportunity for Vornado to enhance their environmental impact further. By embracing this approach, Vornado can contribute to the accelerated adoption of renewable energy, mitigate costs over time, strengthen their sustainability claims, and scale their emission reduction strategies effectively. As Vornado continues to navigate the challenges and risks associated with sustainability, their commitment to innovation and progress positions them as a model for sustainable corporate practices in the future.