Investors increasingly view ESG as a core part of their investment analysis as its link to CFP in terms of reducing risks, improving performance and building reputation is becoming evident. Thus, there is a clear need for companies to embed ESG considerations in their strategy and business practice, as well as communicating this to the investor community in a clear and substantive manner. The GRESB assessment is one of the key tools real estate companies can use to identify gaps in their approach that they need to address and communicate this continuously evolving process to investors.
The value of assets is vulnerable to factors such as environmental challenges, changing resource landscapes, technological innovation, changes in regulations and liability and evolving social norms. Such changes can result in the devaluation or non-performance of assets, thus making them ‘stranded’. This concept of ‘stranded assets’ has been prominently used to discuss the impact of climate change, such as the increased risk of natural disasters, carbon pricing and increasing affordability of renewables on large assets such as coal power stations. For instance, the Sustainable Finance Programme at the University of Oxford has produced extensive research focusing on this topic. 2016saw a record number of oil and gas companies becoming insolvent due to competition from renewables, highlighting the economic impacts of this dynamic. At the same time investors are demanding data on such risks and how companies address them to inform their investment decisions, such as the recent Transition Pathway Initiative launched by asset owners and managers to assess how oil, gas and electricity companies are preparing for the transition to a low-carbon economy.