The GRESB Real Estate Standard Evolves in 2024

The GRESB Real Estate Standard evolved in 2024, incorporating new data and adjusting methods to reflect priorities from the governing GRESB Foundation. Investors can most effectively use the 2024 results by:

1. Unpacking topline GRESB scores and focusing on aspects and indicators

2. Focusing on numeric rankings within countries and peer groups

3. Looking at fundamental sustainability practices, such as data coverage

4. Considering responses to emerging issues, such as transition and climate risk

5. Examining trends in performance indicators, including energy, emissions, and water consumption

These areas of engagement provide information to improve investment performance and inform expectations for risk adjusted returns.

The 2024 GRESB Real Estate Standard included changes that influence how investors should interpret the results and engage with managers. Below we describe the impact of the changes and provide recommendations for engagement.

The GRESB Real Estate Standard is governed by the independent, non-profit GRESB Foundation. The Foundation believes that the GRESB Standards should evolve to:

1. Raise the bar for sustainability practice and performance and increase differentiation among participants

2. Transition to outcome-based scoring based on reliable and consistent data

3. Continue to provide material, non-financial information to support constructive engagement between investors and managers

The GRESB Foundation will pursue these goals over multiple years in a series of incremental steps. Notable changes in the 2024 Standard included:

1. Enhanced and streamlined reporting. The 2024 Standard provided more relevant information about physical climate risks and resilience, non-operational energy loads (e.g., EV charging), and ESG integration.

2. New building certification criteria. The 2024 Standard recognized that building certifications provide valuable signals about asset quality and introduced an amortization schedule for building certifications to increase the scoring weight of more recent certifications.

3. New asset performance assessment. The 2024 Standard introduced new methods to collect asset performance data and compare it to more granular country-level benchmarks.

More information about the GRESB Foundation 2024 Roadmap and specific changes can be found in the annotated list of 2024 Standards changes.

Changes in the 2024 Real Estate Standard have implications for scores:

• Topline (0-100) scores: Overall, final results for the Real Estate benchmark are similar to 2023. The median score in both 2023 and 2024 was 78 points. However, as the methodology has evolved, scores for individual companies and funds can vary significantly.
• Score changes are driven by a combination of factors. Topline score changes reflect interactions between actions by managers, alignment with Foundation priorities, and methodological changes (e.g., the change from regional to country-level benchmarking).
• Methodological changes were concentrated in certain indicators. The majority of the GRESB Real Estate Standard remained stable in 2024. New data and more granular benchmarking strategies resulted in changes in performance indicators and building certifications.

These circumstances mean that it is important for investors to recognize that score changes for individual entities between 2023 and 2024 resulted from a combination of factors – not only actions taken by managers. Changes in data and analytical methods mean that year-over-year comparisons of topline scores are not recommended. It is important for investors to look beyond topline scores and use more detailed information in Benchmark Reports to evaluate year-over-year progress on sustainability practices and performance.

GRESB recommends the following strategies for effective engagement considering Standard changes and impacts:

1. Scores: Investors should not expect year-over-year score increases as a default.

• Score increases will be harder to achieve and improvements in practice and performance will be required to keep up with more rigorous requirements. Investors should recognize that score decreases may be driven, in part, by methodological changes, despite significant actions by participants.

2. Rankings: Investors can use GRESB numerical rankings to understand relative market position among peers (e.g., rank among US industrial companies).

• Rankings can be a useful starting point to determine strategy and areas for improvement and focus.

3. Metrics: Investors can use information in GRESB Benchmark Reports to track progress on specific issues and gauge relative strengths and weaknesses (e.g., implementation of sustainability plans and practices relative to peers).

• Performance metrics can be used to track year-over-year progress. For example, energy, emissions, water, and waste intensities are comparable.

Taken together, these recommendations provide the basis for constructive engagement between investors and managers with an evolving Real Estate Benchmark.

The GRESB Real Estate Standards evolve to keep up with a dynamic market and stakeholder priorities. This includes annual incremental adjustments in data and methodology. In 2024, the introduction of new building certification criteria and benchmarking strategies means that topline scores cannot be directly compared year-over-year. Investors can use more granular scoring elements, including aspects, indicators, and performance metrics to track year-over-year progress.

GRESB is here to help investors and managers understand and apply the 2024 results. Please review our investor guidance page or contact us at [email protected]

GRESB has organized a set of resources describing score changes and guidance on the use of investor tools. Please explore them here.