GRESB Performance Indicators – Why, How, What?

Tuesday, May 26, 2015

Ever since GRESB was started, performance indicator data from real estate portfolios has been part of its assessment. Due to the importance of this Aspect in the GRESB Survey and the impact it has on participants’ organizations in how they structure their data collection processes in order to be able to report the requested data, it’s a frequently discussed topic amongst GRESB participants, their consultants, property managers, data providers, as well as their investors.

Globally, there are many differences in definitions, legislation, and reporting tools specifically focusing on performance indicators. In addition, there is a wide variety in the way organizations and portfolios are structured within the real estate market. Altogether, this results in a challenging starting point for sustainability reporting standards and assessments within the global real estate industry. So, why does the GRESB benchmark include Performance Indicators Aspect and why does it collect this data at all and in the current format? Why and how is it different from other ESG reporting guidelines and tools? How does the performance indicators format work and what is the rationale for its approach? How is this complicated in certain situations and could this be improved? What insights does GRESB provide to its Investor Members and participants? And, what could be done to further improve this? To get a better understanding of all of these questions I will explain the why, how and what (a methodology introduced by Simon Sinek) of the Performance Indicators Aspect in the GRESB Survey in a series of blog posts. To provide context to the GRESB approach I’ve asked Matthew Tippett, Director in JLL’s Upstream Sustainability Services, for his input and the market perspective of reporting on performance indicators. He will share his thoughts in a separate blog post coming up.

Reduction of global energy use and GHG emissions

As the United Nations Environment Programme (UNEP) Sustainable Buildings & Climate Initiative report states, buildings are responsible for more than 40 percent of global energy use and over one third of global greenhouse gas (GHG) emissions. Reducing GHG emissions in the built environment is widely recognized as the least expensive way to mitigate climate change. Several sustainability reporting standards and tools, like GRI G4 Construction and Real Estate Sector Disclosure, CDP, the EPRA Sustainability Best Practices Recommendations (sBPR), but also green building certification schemes like LEED, BREEAM, Green Stars, BEAM and many more share GRESB’s focus on reduction of energy consumption, GHG emissions, but also water consumption and waste generation.

The GRESB approach in terms of efficiency

GRESB addresses several different sustainability topics by including Survey questions mapped according to ISO’s Plan-Do-Check-Act Model. Obviously, environmental protection and therefore efficiency comes down, in large part, to the global reduction of energy consumption, GHG emissions, water consumption and waste generation. To know the potential improvement and define the relevant approach (PLAN) within your real estate portfolio and, to be able to see the impact of measures taken (DO) within your portfolio you need to measure (CHECK). Based on the outcome of that you can build your strategy (ACT) to further improve the efficiency of your portfolio and reduce energy consumption, GHG emissions, water consumption and waste generation.

If you can’t measure it, you cannot improve it

So, why does GRESB include a separate Aspect on performance indicators in its assessment? It covers the ‘Check’ part of the efficiency assessment. As Lord Kelvin said over a century ago: “If you can’t measure it, you cannot improve it.” In 2011, the GRESB results showed that only 19 percent of the 198 participating real estate companies and funds had some information on energy consumption. And, although in 2015 79 percent of the 637 participants measured energy consumption in their buildings, data coverage still varies widely within these portfolios. To date, there is still not full transparency and therefore not full control of consumption data. But the industry, motivated by its institutional investors, regional/local governments and direct peers, and supported by different reporting frameworks and assessments, has definitely stepped up and become more focused and has made significant improvements, both in their measurement and their performance.

Performance Indicators are an essential element of sustainability performance and therefore of the GRESB assessment. The challenge here lies in the benchmarking itself, especially since that is done at portfolio level. The structure of the tables in this Survey Aspect is built on the wide variety of ways that real estate portfolios are structured globally, as well as the many differences in terms of definitions and legislation. The overarching approach GRESB has taken stems from the starting point of transparency, measure to improve and focus on reduction. Assessment of the Performance Indicators is threefold: (1) report absolute data, (2) benchmark data coverage per property type and (3) benchmark like-for-like change per property type. In addition to the latter, GRESB has started to include intensities since 2014, to enhance opportunities to benchmark reductions.

The details of reporting performance indicator data using GRESB will be further explained in blogs on the ‘how’ and ‘what’, coming soon…