A Global ESG Benchmark for Real Estate
In an era where sustainability is a cornerstone of responsible business practices, organisations worldwide are increasingly recognising the importance of incorporating environmental, social, and governance (ESG) considerations into their operations.
As industries evolve to embrace a more sustainable future, the Global ESG Benchmark for Real Assets (GRESB) has emerged as a crucial player in assessing and benchmarking the sustainability performance of real estate and infrastructure portfolios.
In this article, we delve into the intricacies of GRESB, exploring its significance in the global landscape of sustainable investing and development.
From its inception to its current role as a leading benchmark for ESG performance in the real assets sector, we unravel the key components of GRESB and its impact on the pursuit of a more environmentally conscious and socially responsible built environment.
Join us on a journey through the core principles of GRESB, understanding how it evaluates the environmental and social impact of real estate and infrastructure investments.
We will explore the methodologies, key performance indicators (KPIs), and reporting frameworks that GRESB utilises to assess the sustainability practices of organisations, providing investors and stakeholders with valuable insights into the long-term viability and resilience of these assets.
As we navigate through the landscape of GRESB, we aim to empower you with the knowledge and tools necessary to navigate the ever-changing terrain of sustainable investing.
Whether you are an investor, developer, or industry professional, this comprehensive guide will equip you with a nuanced understanding of GRESB and its pivotal role in fostering a sustainable future for real assets worldwide.
What is GRESB?
GRESB (Global Real Estate Sustainability Benchmark) is an international sustainability assessment organisation that is transforming the way that the real estate and infrastructure sectors evaluate, compare and improve the environmental, social and governance (ESG) performance of their investments - regardless of the property type.
It's perhaps the most popular of all ESG rating systems among infrastructure companies, infrastructure funds, real estate funds, and private property funds that want to invest in sustainable buildings. It is closely aligned with other reporting frameworks - for example, SASB.
GRESB provides a comprehensive framework for assessing and measuring the ESG performance of real estate and infrastructure portfolios and provides investors with the data and benchmarking tools they need to make better-informed investment decisions.
Why is GRESB important?
GRESB is significant because it offers a thorough and uniform global standard for evaluating and monitoring the sustainability performance of real estate assets.
It makes it possible for owners, managers, and investors to gauge, comprehend, and enhance their portfolios' sustainability performance.
With more than 1,000 investors and $5 trillion in assets under management, GRESB is acknowledged as the most popular sustainability benchmark for the real estate industry.
The benefits of having GRESB are numerous. GRESB helps investors assess the ESG strategy and environmental performance of their portfolios and infrastructure and identify areas of improvement.
Through the GRESB assessment, investors can identify risks, opportunities and areas of improvement, and can compare their performance to peers.
What are the GRESB?
Real estate investors and asset managers, as well as real estate developers, can compare the environmental, social, and governance (ESG) performance of their portfolio assets using the GRESB, which are sustainability performance measures and benchmarking tools.
The benchmarks offer an open and comparable evaluation of ESG performance across various real estate asset classes and geographical regions.
Who is GRESB applicable to?
GRESB is relevant to commercial real estate and infrastructure portfolios, including listed and non-listed funds, real estate investment trusts, private equity, and direct investments that want to have net zero buildings.
GRESB assessment is the most widely used sustainability reporting and assessment tool in the real estate and infrastructure industry.
It is used by more than 900 institutional investors representing over $22 trillion in assets to better understand the energy efficiency and environmental impact of each part of the property sector.
The GRESB Real Estate Evaluation
The assessment consists of two parts:
1. The GRESB Real Estate Assessment
The GRESB Real Estate Assessment is a survey-based assessment designed to measure the sustainability performance of a real estate company or portfolio.
The survey covers the ESG topics that are most relevant to the real estate sector such as energy consumption, water consumption, waste management, occupational health and safety, and general stakeholder engagement e.g. tenant engagement.
The survey, completed by the portfolio or company, collects asset-level data which is then evaluated by GRESB.
The Assessment Process
The GRESB assessment requires the following steps to be completed:
- Express your interest: sign up on the official GRESB website to register your interest to participate in the GRESB assessment.
- Gather relevant data: identify the relevant data and information required for the assessment, such as energy usage, carbon emissions, water consumption, certifications, and engagement efforts with tenants. We strongly suggest digitising your systems at this stage of the assessment process by using an energy management software like CoolPlanetOS.
- Fill out the questionnaire: log into the GRESB online platform to access and complete the evaluation form. The assessment should be completed online between April 1st and July 1st.
- Verify data: review and validate the data provided in the questionnaire alongside GRESB. This step can be easy or almost impossible depending on the quality and dependability of the energy management software you're using to collect that data.
2. GRESB Real Estate Benchmark
This is a comprehensive benchmarking tool that allows real estate investors to compare their performance against the real estate industry, region, and peers.
The Benchmark is based on the results from the GRESB Real Estate Assessment and provides investors with an overview of their sustainability efforts and performance, and insights into areas for improvement.
From there, real estate companies can identify opportunities for improvement and set measurable goals for improvement.
When is the GRESB Evaluation Performed?
This is an annual assessment. The real estate assessment cycle for GRESB runs from 1 April to 1 July. Assessment submissions outside of these dates won't be allowed because this cycle is fixed.
On September 1, preliminary results are made accessible to participants. There is subsequently a month-long review period during which participants can ask GRESB for a review. On October 1st, the final results are released.
What is a GRESB Green Star?
Property companies that receive a score of more than 50% on the pertinent assessment criteria from three categories are awarded a GRESB green star.
The three components are the management component, the performance component, and the development component.
The management component
This component reviews the leadership practices, sustainability initiatives, policies, risk management, and stakeholder engagement activities undertaken.
The performance component
The performance component measures the ESG performance from asset-level data.
Analytical tools, such as CoolPlanetOS, can assist investment managers in creating benchmark reports, setting measurable goals, and providing an accurate report of both the environmental and financial performance of decarbonisation projects in buildings.
The development component
This component is focused on the design and renovation of buildings undertaken by the real estate company to lower GHG emissions (i.e. greenhouse gas emissions).
Green building certifications are based on absolute performance and are only available to real estate participants—not infrastructure.
Looking for ways to increase your GRESB rating, decarbonize buildings and generally lower your carbon emissions? Watch our masterclass to learn how.
Conclusion
Our exploration of GRESB's meticulous evaluation criteria and robust reporting mechanisms highlights its transformative role in steering organisations towards environmentally conscious and socially responsible practices.
As stakeholders increasingly recognise the importance of aligning investments with sustainability goals, GRESB stands as a beacon, offering invaluable insights into the long-term resilience and adaptability of assets.
As we navigate the evolving landscape of responsible investing, let GRESB inspire us to contribute to a greener and more equitable world.
For a deeper dive into the realm of real estate sustainability challenges and solutions, download our comprehensive report about how to address real estate sustainability challenges.
