With the environmental impact of real estate now increasingly important to investors, frameworks are evolving to help evaluate and improve the sustainability performance of assets. For example, GRESB (formerly the Global Real Estate Sustainability Benchmark) is an internationally recognised benchmark assessing the Environmental, Social and Governance (ESG) performance of property.
What is GRESB?
The GRESB Real Estate Assessment offers both a real estate and a development benchmark, which include components covering management, portfolio performance and development activities. While the management component assesses strategy and leadership, as well as processes, risk management and stakeholder engagement, the performance and development components look at the asset level ESG data and include topics such as energy consumption, greenhouse gas emissions and tenant and community engagement.
Who is taking part?
In 2020, more than 96,000 assets across 64 countries were submitted, accounting for a real estate value of $4.8 trillion from over 1,200 property companies.
Why is it important?
Essentially GRESB can help to protect shareholder value by evaluating and improving the sustainability performance of real assets. Due to its emphasis on submitting the most relevant industry specific ESG data, which is updated on an annual basis, it allows for continuous review and improvement.
How does it work?
Real estate companies are given a three-month window starting from the 1st April to respond to an online survey, which includes collating entity and asset level information in line with GRESB’s reporting methodology. The entity’s performance is then analysed and assessed against a range of indicators and specific sector and / or regional benchmarks. Once the review is completed, GRESB participants receive an individual score and ranking, alongside a detailed benchmark report.
What is new this year?
The GRESB assessment looks to further enhance its benchmark every year, so there will often be new data or evidence that is required. This year it introduced a more detailed guidance on estimation, with estimates of data only allowed in limited circumstances. New questions were also introduced for assessing how property companies are managing climate-related risks and opportunities. In addition, work is underway to provide a solution for participants to help to meet the requirements of the EU Sustainable Finance Disclosure Regulation (SFDR).
How to make the most of GRESB reporting?
Increasingly growing investor demand for timely, reliable and accurate ESG information and evolving GRESB submission requirements mean that rushing to submit all the data by the GRESB deadline is no longer enough. Ultimately, if GRESB is to be used as an effective tool to truly drive positive sustainability impacts, all participants will need to move away from thinking of it as a once a year event and should instead look at the advantages of quarterly reporting. Doing this regularly will help to identify opportunities for improving asset performance, as well as tracking its progress against specific targets, which is needed if we are to meet our sustainability goals as a sector.
This article was written by Sarune Ringelyte, Associate Director – Sustainability at Savills
