GRESB’s energy efficiency playbook: Key updates for 2025 | The Pulse by GRESB

In the newest episode of The Pulse, we bring you a conversation on energy efficiency. Our speakers break down the latest updates to the GRESB Standards and discuss key themes including what is an energy efficient asset and how the GRESB framework now recognizes both high-performance assets and those on the path to improvement. Listen to the full episode below, featuring expert insights from:

Can’t listen? Read the full transcript below. Please note that edits have been made for readability.

Charles: Welcome to The Pulse by GRESB, our interview series where we discuss important topics in sustainable real assets, from GRESB, to the wider industry. My name is Charles van Thiel. I am Director of the Real Estate Standard at GRESB, and I’ll be your host today. And we are gonna talk about energy efficiency. To support this conversation and bring you all insights into this topic, I’m joined by two very important people. First, Ben Thomas, who is a member of the GRESB Foundation Real Estate Standard Committee, or RESC. And Parag Cameron Rastogi, who is Director of Real Asset Analytics at GRESB. Ben and Parag, hey. How are you guys doing?

Ben: Doing well, how are you doing Charles?

Parag: Doing well. Hi.

Charles: Very well, thanks. Can I ask each of you to spend just a couple words on who you are before we get into the details of the topic? Ben, why don’t you start?

Ben: Thanks. It’s great to be here with GRESB. It’s great to follow The Pulse and get the insights of where the Standards are going and how they are helping to address the big global challenges through our industry. Ben Thomas here. As you noted, I am a member of the RESC. I have worked for over 15 years in commercial property, predominantly in the Australian market, most recently for the GPT group.

Charles: Thanks Ben. Over to you, Parag.

Parag: Right. So as Charles mentioned, I am Director of Real Asset Analytics at GRESB, which means I get to do a lot of fun stuff with GRESB data. Usually the objective of this is to provide insights to the standards committees, to the foundation board on the evolution of the standards, including, how we make sure that the standards stay relevant and meaningful to the industry in the next 5 to 10 years.

Charles: Thank you both for the introduction. I really look forward to getting your thoughts, considering your background and expertise in this topic. A bit of background first, Ben, I’d love to hear from you as a member of the GRESB Foundation, RESC, why is it that we’re talking about energy efficiency today, in the context of the GRESB Standards? Why does it matter, in your perspective?

Ben: Yeah, so a couple years ago, the GRESB Foundation did some strategic work, really looked at, how do we listen to all the stakeholders across the value chain and understand: what do we need to be focusing on and prioritizing? And the really standout, key, thing that came out from everyone was decarbonization. And the first place to start with that, you use a risk-based approach to how you’re looking at the performance of an asset or a portfolio. You have to start with energy efficiency. It’s absolutely essential. Once you actually deal with those location based emissions from the amount of energy being used in a building, then you can actually begin broadening that. But you have to get the foundation right first. And you really need to look at how are you incentivizing managers to actually go and deliver really great energy efficiency.

Energy efficiency. It’s well understood. A lot of work has gone into it over many years, across the industry, globally, that we can leverage. The Net Zero Working Group did a whole lot of work in this a couple of years ago. And those recommendations were brought into the foundation committees, the standards committee, to then look at how we can develop the standards in such a way to really focus us towards those big global goals.

Charles: That’s inspiring. Thank you, Ben. So the foundation set up a vision for the GRESB Standards a few years ago, whereby decarb was obviously one of the key priorities, if not the highest priority, in that vision, within which one of the key pillars of decarb is energy, leading to a lot of work done in energy efficiency. I understand that this has led to a very tangible development affecting the GRESB membership and participation. Parag, I understand that you’ve been involved in the technical detail for this standard update. Do you mind summarizing for the audience what is it that has changed recently in the standards when it comes to energy efficiency?

Parag: Absolutely. So in the Standard, for the Standard geeks out there, if you look into indicator EN 1, which is energy, you’ll find that the energy indicator actually consists of certain parts, right? One of those parts has conventionally been Like-for-Like change. Year on year, if you show a decrease in energy use intensity, you get points. And this is two and a half out of 14 points for the energy indicator in total. And out of a hundred points, of course, for the entire assessment. So, these Like-for-Like points have been around for a few years, and it was felt that while they do serve a purpose in terms of rewarding actions, and an actual reduction over time, they are not fit for purpose for assets that have already achieved a very high level of energy efficiency. When you are at a middle or poor level of energy efficiency, in other words, high intensity to medium intensity, then when you make changes like switching out boilers, insolation, windows, you should see a substantial step change in energy efficiency, and we will reward you for that because that’s desirable behavior.

However, when you become efficient, then the scoring logic unintentionally penalizes you because you can no longer make substantial reductions ’cause you’re already very efficient. So we decided that what makes sense in this context is to actually introduce a threshold and say, well, if you cross this threshold of energy use intensity, as in you go lower than this threshold, then you’re efficient enough. We don’t need you to demonstrate year on year improvements because you’ve become an energy efficient building. That’s what’s being implemented this year. And we hope to continue defining it.

Charles: That’s interesting. You’re saying that the Standard is essentially moving from recognizing year on year improvement only, through the concept of Like-for-Like, to recognizing also high level of energy efficiency. And then the standards essentially recognize either scenarios. Ben, from your perspective, on the receiving end of this development as part of the GRESB Foundation, how has been the discussion around recognizing one or the other, or both, please?

Ben: So the standard really needs to be focused on performance, right? We know that. Looking at the year on year improvement, you get into a law of diminishing returns. Until there’s a major technological change that comes, like new tech that comes out that we can install into buildings. Like LED lights were, for example. It’s difficult to continue driving those year on year improvements. And what ends up happening as a result of that, when we’re trying to have positive conversations between investors and managers about the actions that we’re taking, you can get bogged down and focusing on score differentials. And we wanted to get around that. We wanted to recognize where managers are really delivering high performance assets and they’re really getting to those goals where they might start seeing laws of diminishing returns, in terms of their annualized year over year improvement. But it’s because the building is already performing at a spectacular standard. And there’s some specific markets across the world where the business case for sustainability has been so clear for so long that some of those real early leaders were being disadvantaged, in a way, by this. And so it was important to come up with an appropriate global method for benchmarking and understanding, how can we recognize that upper performance level for specific assets?

Charles: That’s really great to hear. So, something I’ve been hearing a lot from the industry at times is that GRESB generally favors very sophisticated portfolios. But if I understand your point properly, it seems like the scoring model rewards either assets that are already highly efficient or the assets that are on their trajectory to become energy efficient. The Standards aim to essentially incentivize two types of behavior, either, the ownership or the management of highly efficient assets, or, in the lack of, highly energy efficient asset already, the asset would be demonstrating year on year improvement. Which sounds like demystifying a misconception that I’ve been hearing, personally, from the industry, a couple times in the past. So that’s really, really good to clarify to the audience today.

Ben: Spot on, Charles.

Charles: Parag, you mentioned that, as part of your earlier description of the methodology, assets considered highly efficient are now rewarded with full credit by GRESB. How do you define highly efficient?

Parag: You know, it was an interesting journey, doing this exercise. Because, both in my career, as well as just in my experience of the industry, when these sorts of exercises have been undertaken, in terms of how to define an energy efficient asset, very rarely, if at all, has the exercise been done at a global scale and with the number of assets that we deal with at GRESB. You know, we’re looking at 200,000+ assets every year. And, of course, we needed to make sure that we found a framework that was global in application. Still aspirational, but technically feasible. Right? And these are criteria that we set ourselves because as you were just saying, if we set the bar too high, it becomes unachievable for all but the most sophisticated of assets and asset owners, which is not the point of GRESB. The point of GRESB is to move everybody, move the whole market, forward.

First we looked at our own data set in GRESB to build the benchmark. While the GRESB data set is huge, we have lots of data on annual energy use over the years that we’ve been doing this. It is still incomplete in the sense that, when you actually go down to things, like, what constitutes an energy efficient asset, you have to start considering aspects of the asset like it’s building type, it’s location, the climate, the number of hours it operates and so on. So we looked at technical societies and bodies that have been doing this for a long time, that are specialists in building engineering. There are a few around the world, prominent among them is ASHRAE, which is based out of Atlanta in the USA, it’s a global organization, it has hundreds and hundreds and thousands of members around the world, and it is one of the best resources for engineering standards around the world. They also follow a very rigorous approach to standard governance, which we liked. And so we looked at a whole bunch of standards worldwide.

Eventually we settled on a standard from ASHRAE called ASHRAE 100. Specifically the 2024 version. We like this because it is systematic. It has an enormous number of building types. In fact, we were able to map most GRESB building types to an ASHRAE building type. We were able to cover about 95% of the assets, based on last year’s data. We also were able to introduce the concept of climate zone, because that’s what the ASHRAE Standards are based on. And climate zone is a global concept, right? So we no longer have to think country by country because obviously countries are tricky business here because, you know, you then put the Netherlands, the UK, the US, and China all in the same bucket. And the size of these countries, the variability, and the construction type is so different, that it almost becomes meaningless to divide by country. Climate zone is a more universal concept.

Charles: Thank you so much Parag for that explanation. Very obvious benefits that you’ve mentioned in your explanation. My understanding is also that GRESB for the first time since its inception, really, starts relying on external data sets to inform its scoring model. This is something that, as far as I know, is quite innovative in its own way because GRESB, historically, has been relying mostly on its own data set for scoring purposes. If you think about data coverage or Like-for-Like change in general, the threshold use for scoring are relative. In the sense they depend on other participants’ data. This is really triggering new questions. Is this approach of relying on external data sets something that the foundation intends to adopt more into the future? Is this something that is going to become more generalized as we continue progressing towards performance-based scoring, or is this more of a one-off and that we can reconsider this approach every time we address a new topic?

Ben: You know, it’s 2025, we don’t have much time, really, to be addressing these big global challenges that we have. You know, climate change, biodiversity loss. And it’s really essential that we are really focused on keeping our engagement, looking at how we’re directing capital, managing capital, to really help: how are we going in getting to those goals? And so I see this change for energy efficiency, it’s really great to see that effort and that’s then replicable. So we absolutely can look at this in other material areas so that we can continue this trajectory, all playing on the same team trying to actually address these challenges.

Charles: Thanks Ben. Setting the bar at a meaningful level is really something that we’ve started initiating via our work on energy efficiency, where we can certainly expect doing this across many more topics in the future. With that. That’s about all the time we have for today’s episode of The Pulse. So thank you so much Ben and Parag for your time, insight, and expertise. I’m sure the audience will appreciate. It’s been a pleasure. See you next time on The Pulse by GRESB.