How has the scope of GRESB changed over time?
Since 2009, GRESB has expanded its real estate coverage beyond private equity firms to include many U.S.-based REITs and a growing group of listed property companies globally. We continue to experience a strong uptick in REIT participation as the industry seeks to benchmark ESG best practices against its peers.
I’m excited about two areas of growing interest. First, the GRESB Infrastructure Assessment launched in 2016, which broadened our ESG coverage to include all real asset classes. Secondly, the GRESB Debt Assessment covers the full real estate capital stack. This ESG engagement framework is relevant to the Mortgage REITs that are part of NAREIT.
For the first time, GRESB has set participation targets for 2017. Why is now the right time to set such goals?
During GRESB’s early years, our focus was to improve the GRESB assessments, invest in technology and streamline the annual data collection process. The GRESB portal is now state of the art, industry engagement is strong at nearly 60 percent of global REITs by market capitalization and our data validation process is robust.
GRESB has become the global standard with $2.8 trillion of real estate companies and funds benchmarked using the GRESB Real Estate Assessment in 2016. We anticipate our first Canadian REIT participants in 2017 and see additional interest in Latin America.
What are some of the other initiatives we can expect to see from GRESB in the near future?
The GRESB team is working on three near-term initiatives. This year, we are releasing the GRESB Public Disclosure Level, a new feature providing investors with insights not captured in the real estate assessment data.
Importantly, the level includes companies participating in the GRESB real estate assessment as well as the roughly 200 listed property companies yet to report.
We are also moving towards a GRESB assessment process that is less year-specific, removing pressure for participants to report during a three-month time window. We will introduce this new streamlined functionality in the second half of 2017, allowing REITs to update their information anytime throughout the year.
North American companies and funds continue to lag their global counterparts. Do you see this changing anytime soon?
It’s clear from the five-year trend that the U.S. market continues to improve its ESG performance. On a regional basis, U.S. REITs outperform U.S. private equity funds in terms of ESG performance by a significant margin.
By comparison, Australia receives accolades for its sustainability leadership, as they should. ESG permeates their financial sector, and being centralized in Sydney provides certain synergies and knowledge-sharing advantages. But, the U.S. has certain structural advantages, including a very strong economy with competent and equally competitive professionals.
With NAREIT Leader in the Light Award winners leading the way, one can look toward the GRESB 2020 results as a time when certain property subsectors of North America could overtake their Australian counterparts.
Sander Paul van Tongeren is managing director and co-founder of Amsterdam-based GRESB, an investor-driven organization committed to assessing the environmental, social and governance (ESG) performance of real assets globally, including real estate portfolios, real estate debt and infrastructure.