Our industry is engaged in an important dialogue to improve sustainability through ESG transparency and industry collaboration. This article is a contribution to this larger conversation and does not necessarily reflect GRESB’s position.
Almost 60 percent of real estate investment trusts (REITs) already have emission reduction goals, but verifying that progress has been made is another story. Ask any major company’s sustainability director, and they will likely tell you that gathering accurate data about a building portfolio’s energy use is nearly impossible. With properties spread out across the country and utility bills that account for multiple tenants, it can be time-consuming and laborious to collect data on a building’s energy use – and after all that, there is no guarantee the data will be accurate.
This lack of information is hurting investor relations and putting companies at risk of violating new utility usage and emission disclosure requirements. New York City recently passed Local Law 97, which requires most buildings over 25,000 square feet to adhere to stricter energy efficiency and greenhouse gas emissions limits, intending to reach net zero in the city by 2050. 23 states and counting have clean energy goals, including emission reductions requirements. And the U.S. Securities and Exchange Commission (SEC) is expected to make an announcement later this year around new Scope 1, 2, and 3 emissions disclosures for all publicly-owned companies.
Studies show that investors are also paying attention to sustainability and incorporating measurement tools like the GRESB Real Estate Assessment into their decision-making process. In fact, GRESB found in 2022 that over 75 percent of surveyed investors engage with their managers to encourage GRESB participation, with approximately a third of investors making participation mandatory. Data coverage directly impacts 19.5/100 points in the GRESB Real Estate Assessment, based on performance indicators such as energy consumption, waste management, water use, and GHG emissions.
So, how can REITs meet new regulations and appeal to investors without access to crucial utility data? Fortunately, there is a simple solution. By automating data collection through a submetering program, a building owner can monitor energy usage in real-time and be assured that the data is up to ESG, GRESB, or any other sustainability reporting standards.
The key to energy goals: Better data
Submeters, also known as shadow meters in the REIT space, are installed across a building to provide direct access to energy usage. Depending on the smart meter, this data can provide a building-level overview or can track specific pieces of equipment.
Submetering is the best option for building owners in a triple net lease agreement with a building tenant; the owner often does not have access to each tenant’s utility spend and has no way of knowing which tenant is using the most energy, what types of operations they are running, whether specific appliances are malfunctioning, or if equipment could be turned off during peak demand hours.
Without submetering, building owners have few other options. Onsite manual data collection is often quite expensive and time-consuming, with no guarantee of complete accuracy for reporting or identifying cost-saving opportunities. Utility bill scraping can similarly provide top-level results without context and relies on tenant data reporting, which can be time-consuming and, worse, fruitless if tenants decline to share.
In short, relying on the above options means taking a gamble with your ESG reporting and emissions disclosures, both of which are increasingly important to stakeholders.
Why choose submetering?
Once installed and connected, internet-of-things (IoT) submeters can provide real-time data to any connected device, meaning a building manager, such as a REIT, can track the energy usage of multiple properties down to the asset level.
Submeters can show if a certain piece of equipment is underperforming and which tenant’s space it is in. Equipment retrofits identified by the meters provide additional value to your tenants by lowering utility bills.
For instance, WPT Capital Advisors, a REIT focused on the American industrial warehouse space, needed access to its energy consumption data for ongoing sustainability reporting. The company was not yet submitting to GRESB because of a lack of data. Getting energy bills from tenants and manual collection would have taken months and required coordinating with dozens of utilities. Not to mention, the process would need to be repeated annually ad infinitum. WPT partnered with Energy as a Service (EaaS) company Redaptive to install whole-building energy consumption monitoring in 16 locations over the course five months. This allows WPT to track water, gas, and electrical usage across its building portfolio without the need to engage with tenants. The company also reported a 50 percent reduction in monitoring costs, and WPT can continue to earn cost savings by acting on energy efficiency opportunities suggested by the data.
Are submeters worth it?
The future is likely to bring more emissions regulations for REITs. Submetering is the most effective investment to improve your GRESB Score.
A company can now receive sustainability credit for achieved and planned reductions. Assessment tools such as GRESB are now gradually incorporating energy efficiency scoring into their reporting frameworks. Submeters can help companies qualify for these additional points when combined with a data platform by identifying potential savings opportunities within the software platform. Regardless, access to real-time energy usage across a building portfolio can help a company adapt to any present and future energy regulations, investor needs, or market pressures.
Many building owners have found that, in addition to data transparency, submeters provide energy and financial savings as well. Energy savings will depend on a portfolio’s size, asset types, and tenants. A Department of Energy study estimated that metering programs can generate up to 20 percent in energy savings.
Investing in submetering provides access to real-time energy usage across a building portfolio, helping companies adapt to any present and future energy regulations, investor needs, or market pressures.
This article was written by Arvin Vohra, CEO of Redaptive.
References
Leon, Warren, and Anna Ziai. “Table of 100% Clean Energy States.” Clean Energy States Alliance. Clean Energy Group. Accessed February 14, 2024.
“Local Law 97.” NYC Sustinable Buildings. Accessed February 14, 2024.
Nareit. “REIT Industry ESG Report 2022.” Report, Washington, D.c., 2022.
“WPT Capital Advisors gains whole-building insights with Redaptive ONE.” Redaptive. Accessed February 14, 2024.
Zhai, Zhiqiang (John), and Andrea Salazar. “Assessing the Implications of Submetering with Energy Analytics to Building Energy Savings.” Energy and Built Environment 1, no. 1, (2020): 27–35. doi: 10.1016/j.enbenv.2019.08.002.