AvalonBay
March 2022
By Vert Asset Management and
Nick Dolce, Sustainable Finance Researcher
“By ensuring that ecologically responsible practices are integrated into our long-term strategy, we can protect the environment while enhancing the lives of our residents.” — AvalonBay1
Ticker
AVB(NYSE)2
Headquarters
Arlington, Virginia
Market Cap
USD $34 billion
Company History
1993 Avalon Properties is Founded
1994 Bay Communities is Founded
1998 The two merge and AvalonBay is formed
Properties
Multifamily apartments:
293 apartment communities
87,416 apartment homes
Green Building Certifications
Over 60 communities with environmental certification
50 properties are
LEED certified
10 properties are
ENERGY STAR certified
1 property is
FITWEL certified
*Data as of December 31, 2021.
Recent Awards
5 Green Stars
Global Regional and
Sector Leader: Residential
2020
2020 Nareit Leader in the Light Award Winner Residential/Apartments
A- CDP Grade Supplier Engagement Leader
Member of FTSE4Good
AvalonBay Creates Livable Urban Communities
Looking for a place to live? Want to find a community to join? Perhaps consider an AvalonBay property. With a core purpose of “creating a better way to live,” AvalonBay seeks to create developments that offer people healthier and more sustainable ways to live in pursuance of leading the real estate sector into a low-carbon future. AvalonBay Communities, Inc. is a REIT with decades of experience and success in developing, retrofitting, acquiring, and managing apartment homes throughout the most competitive U.S. markets.
Affordable Housing Programs
The company provides affordable housing options in all the cities they operate across the US by discounting rents based on regional area median income. For example, Avalon’s Bowery Place in New York City has an affordable housing program that includes studio, one-bedroom and two-bedroom apartments that have reduced rent prices for people and families who earn 40% or less of the area median income.
Community Impact Initiatives
In 2015 AvalonBay created an annual community investment with a baseline amount of $1.1M. They then sought to double this commitment in five years, only to surpass their goal in 2020 by increasing their annual community investment to $2.4M.3 This annual community investment allows AvalonBay to support nonprofits that impact many of the REITs immediate communities. Last year marked the 6th consecutive year of their partnership with the Red Cross.
Championing Diversity, Equity, and Inclusion
Internally, AvalonBay has made multiple efforts to improve their corporate governance through diversity, equity, and inclusion. According to the IFC, good corporate governance potentially enhances the performance of companies by increasing their access to outside capital while also reducing their investment and reputational risk.4 Some of the efforts AvalonBay has made to improve their corporate governance include:
- Increase representation of Women and POC within leadership team
- Multi-year national partnership with National Urban League
- 3 new associate resource groups: Black Associate Coalition, Associate Rainbow Coalition, Latinx
Employees of AvalonBay for Diversity
Project Spotlight: AvalonBay Issues Green Bonds to Invest in Green Building Projects
According to the UN Environment Programme, the built environment has the largest potential for reducing greenhouse gas (GHG) emissions by making buildings more energy efficient.5 Moreover, the US Green Building Council finds that building owners report new or renovated green buildings account for an average 7% increase in asset value over traditional buildings.6 AvalonBay issued their first Green Bonds in 2021. AvalonBay intends to allocate the estimated $400 million in net proceeds to “Eligible Green Projects” to increase the overall sustainability of their properties.7 These projects will help AvalonBay add more LEED certified properties, which have been proven to consume 25% less energy and 11% less water than non-green buildings.
For example, Avalon Hayes Valley in San Francisco, California is a Platinum LEED certified building achieving 20% reduction in energy consumption and a 23% reduction in gas use for a one-bedroom apartment compared to a non-LEED certified building. This investment saves the resident, on average, more than $150 a year.8
The Green Bond proceeds will also increase the energy efficiency of their properties and infrastructure by expanding weather-based irrigation systems.9 These systems automatically adjust watering schedules based on local weather conditions.
Most significantly, all projects will be reported on to include their quantifiable environmental benefits through key performance indicators (KPIs). These KPIs are aligned with AvalonBay’s commitment to realize their Science-Based Targets Execution Goals (SBTi’s) to reduce their Scope 1, 2, and 3 emissions and their overall energy consumption. Scope 1 and Scope 2 emissions from owned property and purchased energy, respectively, are easily accounted for today. Scope 3 emissions, which often make up a majority of a company’s carbon footprint, are emissions indirectly created by a company through several activities and are difficult to measure. In real estate, Scope 3 emissions are primarily generated during the production of building materials, by leased buildings’ tenants’ energy use, and those created from employee commuting. Corporate disclosure helps investors understand how the company integrates climate into its overall corporate strategy.
AvalonBay progress on their climate risk adaption goals
Project Spotlight: AvalonBay Science-Based Targets and Climate Goals
The World Resources Institute estimates that 75% of the world’s energy related emissions come from cities.10 With the large majority of AvalonBay’s properties situated in high-density urban areas, AvalonBay’s strategic commitment to reducing their emissions through Science-Based Targets (SBTi’s) shows the company understands the impact their operations. SBTi’s are globally aligned, climate science backed emission reduction goals that seek to reduce carbon emissions to effectively limit the earth’s temperature in compliance with the Paris Agreement.11 Setting themselves apart from many of their peers, AvalonBay has made an updated commitment in 2020 to reduce their Scope 1 and 2 GHG emissions by 53% and their scope 3 emissions by 47% by 2030. MSCI publishes a metric and their net-zero pathways analysis suggests the company is on target to reduce the company’s emissions by 3% each year.12
Additionally, the company has complementary goals around 15% water use reduction and 20% waste reduction. These three indicators – GHG, water, and waste – underpin AvalonBay’s climate risk adaptation goals.
1 AvalonBay Communities. (2021) “GREEN LIVING” Available at: https://www.avaloncommunities.com/-/media/images/community-photos/california/northern-california/avalon-hayes-valley/green-living-label/greenliving-hayesvalley.pdf?rev=e1e0fc60d88f4841a51f026c18b3b8c9
2AvalonBay Communities, Inc is 3.29% of the Vert Global Sustainable Real Estate Fund (VGSRX) as of December 31, 2021.
3 AvalonBay Communities. (2021 December 14). “Creating A Better Way to Live: 2020 Corporate Responsibility Report.” Available at: https://www.avaloncommunities.com/about-us/corporate-responsibility/-/media/4B25C8B90BD543559288F57CC06A8025.ashx
4 International Finance Corporation. (2018). Why corporate governance? Available at: https://www.ifc.org/wps/wcm/connect/Topics_Ext_Content/IFC_External_Corporate_Site/IFC+CG/Why+Corporate+Governance
5 Environment, U. N. (2017). Sustainable buildings. Available at: http://www.unep.org/explore-topics/resource-efficiency/what-we-do/cities/sustainable-buildings
6 World Green Building Council. (2017). The benefits of green buildings. Retrieved from https://www.worldgbc.org/benefits-green-buildings
7 AvalonBay Communities. (2021 August 20). “Green Bond Framework”. Available at: https://www.avaloncommunities.com/about-us/affordable-housing/-/media/Files/CorporateResponsibility/AvalonBay-Green-Bond-Framework-Aug-202-1.pdf
8 AvalonBay Communities. (2021) “GREEN LIVING” Available at: https://www.avaloncommunities.com/-/media/images/community-photos/california/northern-california/avalon-hayes-valley/green-living-label/greenliving-hayesvalley.pdf?rev=e1e0fc60d88f4841a51f026c18b3b8c9
9 AvalonBay Communities. (2021 August 20). “Green Bond Framework”. Available at: https://www.avaloncommunities.com/about-us/affordable-housing/-/media/Files/CorporateResponsibility/AvalonBay-Green-Bond-Framework-Aug-202-1.pdf
10 World Resources Institute. (2022). Making cities work better for everyone. Available at: https://www.wri.org/cities
11 Science-Based Targets Initiative. “Companies Taking Action”. Available at: https://sciencebasedtargets.org/companies-taking-action?sector=Real%20Estate#table
12 MSCI. (2022). ESG ratings & climate search Tool—AvalonBay. Retrieved from https://www.msci.com/research-and-insights/esg-ratings-corporate-search-tool/issuer/avalonbay-communities-inc/IID000000002140645
Please refer to the Prospectus for full risk disclosures. All data as of December 31, 2021 and subject to change daily.