GRESB assesses and benchmarks the Environmental, Social and Governance (ESG) performance of real assets, providing standardized and validated data to capital markets. We were established in 2009 by a group of large pension funds who wanted to have access to reliable data on the ESG performance of their investments. In the intervening years, we have grown to become the leading ESG benchmark for real estate and infrastructure investments across the world.
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Our efforts over the last 10 years have focussed on collaborating with the industry to define a common approach to ESG measurement and reporting and building a high-quality data ecosystem to support it. With this foundation in place, we are now entering a new phase of work where we will focus further on performance data accessibility and reliability in the Assessments and benchmarks. The restructuring of our 2020 Assessments into separate Management and Performance Components is an important step in enabling us to support this new phase of work.
The annual Assessment development process is informed by in-house data analysis, market research, detailed gap analysis alignment work, feedback from Assessment users and strong participation from our governance groups. This approach ensures that our Assessments and benchmarks are shaped and driven by the stakeholders we serve and helps move the entire industry closer to our shared vision of sustainable real assets.
2020 Assessments Structure
An important outcome of the 2020 Assessment development process has been a reconfirmation that the Assessments address material ESG topics for the real estate and infrastructure industry. As a result, the 2020 development process was limited to making structural changes to the Assessments rather than introducing new indicators or making extensive content changes with an impact on scoring.
The structural changes arise from the introduction of the separate Management, Performance and Development Components. On the content side, the number of indicators in the Assessments has been reduced and several indicators have been simplified. This is particularly apparent in the Performance Component, where the introduction of asset-level reporting has allowed the removal of several indicators measuring data availability and coverage.
With the introduction of the GRESB Development Benchmark, participants with development activities will have a better understanding of their ESG performance and how this compares to their peers. Previously, this benchmark only included developers, but now managers with both standing investments and development projects will be included in both the GRESB Developer Benchmark and GRESB Real Estate Benchmark and will receive two Benchmark Reports to reflect their performance in each category.
Overall, the 2020 Assessments provide more consistency between real estate and infrastructure and an improved alignment with other responding standards and frameworks. The Assessments also lay the groundwork for us to provide new data and analytical tools in the Portal and support a further evolution in data quality.
The starting point for the Assessment development process was the 2019 Assessments. The 2019 indicators have been allocated to the new Management, Performance and Development components, on the basis that:
- The Management Component measures the entity’s strategy and leadership management, policies and processes, risk management and stakeholder engagement approaches, comprising of information collected at the organizational level.
- The Performance Component measures the entity’s asset portfolio performance, comprising of information collected at the asset and at the portfolio level. It is suitable for any real estate company or fund with operational assets.
- The Development Component measures the entity’s efforts to address ESG issues during the design, construction, and renovation of buildings. This component is suitable for entities involved innew construction (building design, site selection and/or construction) and/or major renovation projects, with on-going projects or completed projects during the reporting period.
Management Component
Development process:
April – September 2019: Internal review and gap analysis between the most important industry standards and the Assessments. This involved mapping ESG topics covered by other frameworks relevant to our stakeholders and identifying areas of potential alignment and improvement in our Assessments. This allows us to work towards market convergence on the main ESG topics, increase reporting efficiencies and ensure our Assessments continue to reflect the most commonly used indicators and metrics. Based on this exercise, we extended the scope of our indicators to capture data and information that was not previously tracked.
- We performed a detailed alignment exercise between the GRESB Real Estate and Infrastructure Assessments
- We identified indicators and sections that could/should be removed because:
- They have little or no analytical value
- They have reached a maturity level that makes them redundant for an ESG benchmark
- We aligned the aspects for Real Estate and Infrastructure and connected them better with the new set of indicators
Key outcomes:
Following engagement with the Benchmark Committees, the Management Component does not introduce new topics or scored indicators. The developments are largely structural and are limited to:
- Restructuring into five aspects: Leadership, Policies, Reporting, Risk management, Stakeholder engagement
- New answer options to strengthen alignment across all Assessments
- New answer options to strengthen alignment with other external frameworks (e.g. PRI, RobecoSAM, CDP, etc.)
- All indicators are formulated at the entity level (i.e. “Does the entity…..”?)
- Each indicator is assigned a title, to facilitate easy referencing in various documents and data download tools
Performance Component
Development process:
April – December 2019: Internal review and gap analysis between the most important industry standards and the Assessments with a few primary changes in mind:
- Adapting all Performance Indicators and Building Certifications indicators for required asset level reporting
- Improving data quality of the reported data by increasing the simplicity of the reporting structure and improving data granularity to enable better data checks by the GRESB Portal, participant users, and validators
- Improving data standardization by ensuring that data can be reported using the same format for multiple years, facilitating easier data exchange between systems. Additionally, enhanced energy data granularity enables the calculation of comparable GHG data
Key outcomes:
Following engagement with the Benchmark Committees and Advisory Board, the Performance Component includes a combination of portfolio-level and asset-level indicators. The scope of the Component is reduced and enables performance measurement at the asset level:
- No new indicators were introduced
- Restructured into 10 aspects:
- Portfolio-level aspects: Risks Assessment, Data Review, Targets, Tenants and Community
- Asset-level aspects: Energy, GHG Emissions, Water, Waste, Efficiency Measures, Building Certifications
- Mandatory asset level reporting for all aspects/indicators marked “Asset level”
- The concept of ”managed/indirectly managed assets” replaced by a distinction between landlord controlled and tenant controlled areas, in line with other industry frameworks
- Reduced complexity and reporting burden through the removal of several indicators:
- ME2: Data management systems
- ME3, ME 4, ME 5: Energy consumption, Water consumption, Waste management monitoring methods
- PI1.2, PI2.2, PI3.2: Energy, GHG emissions, Water use intensity rates
- RO4, RO5, RO6, RO7: Technical building assessments and implementation of energy, water, waste efficiency measures are simplified and measured at asset level
- GRESB will introduce new Energy and Water use intensity calculations, using information reported at the asset level. The methodology will evolve over time, in collaboration with our governance groups and will not be used for scoring in 2020.
- Standardized reporting of Scope 2 GHG emissions data using a location-based approach. In addition, participants can also report the market-based calculated values on a voluntary basis.
Development Component
Development process:
November 2018 – November 2019: The Assessment development process began at the end of 2018, with a survey of all 300+ GRESB participants with new construction and major renovations activities (either as part of pure developer portfolios, or as part of mixed portfolios with both standing investments and development projects). We received 91 responses, representing approx. 150 entities.
Key feedback from the survey included:
- Participating entities need separate scores for standing investment and development projects
- Involvement in NC&MR should not impact peer group allocation
- NC&MR share similar material ESG issues and should continue being analysed together. Further segmentation would make results difficult to compare
- Building certifications is a critical topic for new developments
We incorporated this feedback into our 2020 Assessment proposal in discussions with the Benchmark Committees.
Key outcomes:
- The introduction of the GRESB Development Benchmark which will include both pure developers who previously completed the Developer Assessment, and managers who have both standing investments and development projects. Standing investments will be captured in the Performance Components and development projects in the Development Component
- With the combination of both the Management Component and Development Component, 400+ entities will now be able to understand and benchmark their ESG performance of development activities. In 2019, 41 entities participated in the Developer Assessment and these entities made up the 2019 Developer Benchmark. 379 Real Estate entities also engaged in development activities in 2019, but their NC&MR aspect score was not included in the benchmark
- Peer grouping will follow the Real Estate methodology, using property type of development projects, region and portfolio nature of ownership (i.e. listed, non-listed, etc.)
- Building certifications will continue to be an important aspect of the Development Component and subject-specific indicators are aligned with building certification best practices.
Following engagement with the Benchmark Committees, the Development Component has seen largely a structural change with the introduction of aspects. These aspects include both policy/strategy indicators specifically relating to development activities, as well as the performance-related indicators:
- Restructured into seven aspects: ESG Requirements, Materials, Building Certifications, Energy, Water, Waste, and Stakeholder Engagement
- Introduced new topics specific to development activities, through indicators on life-cycle assessments, disclosure of embodied carbon, and community engagement
- New answer options to strengthen alignment across all assessments and other external frameworks (e.g. PRI, RobecoSAM, CDP, etc.)
- New answer options based on commonly provided, accepted other answers
The 2020 Management, Performance (including the Asset Level Spreadsheet) and Development components are available in pre-release versions here. While we do not anticipate making any material changes, we reserve the right to make modifications prior to the official start of the 2020 reporting period on April 1 and the official release of the 2020 Real Estate Assessment. We will publicly announce any such modifications.
2020 GRESB Results
The GRESB Real Estate Benchmark will consist of participants completing both the Management and Performance Components. The GRESB Development Benchmark will consist of participants completing both the Management and Development Components. While each Component determines an individual score (ie: Management Component Score, Performance Component Score, Development Component Score), the GRESB Scores and GRESB Ratings will only apply to entities completing all relevant Components for their portfolios. The possible combinations are set out below and illustrated in the diagram that follows:
A: Portfolios with only standing investments submit:
- Management and Performance Components to receive a GRESB Standing Investments Benchmark Report including a GRESB Score and a GRESB Rating
- GRESB Score = 30% * Management Component Score + 70% * Performance Component Score
B: Portfolios with only development projects submit:
- Management and Development Components to receive a GRESB Development Benchmark Report including a GRESB Score and a GRESB Rating
- GRESB Score = 30% * Management Component Score + 70% * Development Component Score
C: Portfolios with both standing investments and development projects submit:
- Management, Performance and Development Components to receive two Benchmark Reports:
- Standing Investments Benchmark Report including a GRESB Score and a GRESB Rating; and
- Development Benchmark Report including a GRESB Score and a GRESB Rating
- GRESB Score = 30% * Management Component Score + 70% * Performance Component Score
- GRESB Score = 30% * Management Component Score + 70% * Development Component Score
The Resilience Module will run its third iteration and will continue being offered as an optional supplement to any Component of the Real Estate Assessment. The Module is scored separately and does not influence other scores.
The Assessment reporting period remains the same as in previous years: 1 April – 1 July, 2020.
Scoring implications
The scoring implications of the restructured Assessment are set out below. The analysis uses the 2019 Real Estate Assessment results as baseline.
2020
The 2019 indicators have been allocated to the new Management, Performance and Development Components. As such, some indicators formerly classified under dimension IM (Implementation & Measurement) were moved to Management, while some others were either removed or no longer scored.
The weights of the Assessment components (Management, Performance and Development) are set out below:
Standing investments:
GRESB Score = 30% Management Component Score + 70% Performance Component Score
Development projects:
GRESB Score = 30% Management Component Score + 70% Development Component Score
The Management + Performance; Management + Development Components define the GRESB Standing Investments and Development models, respectively. The Component weights are fixed and apply to the Component scores expressed in percentages. The adjustment to a 30/70 split means that the 2020 GRESB Score will be weighted more towards Performance than in 2019. Additionally, as the weights determine the length of the axes in the GRESB model, there will be an impact on the quintile lines and the GRESB Rating in each benchmark.
The results of this preliminary analysis against the 2019 baseline indicate that the impact on the GRESB Score is limited, but participants can expect an average decrease of a few points, in the Performance Score, assuming a “do nothing” scenario. This is consistent in both the Standing Investments and Development Benchmark. The evolution of scores is attributed to an increased weight to development activities and less weight on the policy/strategy of the Management Component. Overall, the evolution of scores is in line with our transition to a more performance-based Assessment that reflects the activity to improve the performance of the underlying assets in the portfolio.
The road ahead
Looking ahead, we will continue to work with our governance groups and industry stakeholders to further develop the Assessments, the benchmark methodology and the resulting analytics. Key priorities include:
- Continue testing the most material and emerging topics in the industry via voluntary modules.
- Enhance comparability of intensity values by
- Developing models for normalizing energy and water use intensities at the asset-level accounting for material factors such as vacancy rate, degree/cooling days, property type, etc.
- Further refining our scoring model to start benchmarking asset-level intensities for all property-types (reflecting “true performance”) against comparable assets within their region.
- Develop calculation methodologies for location-based carbon footprinting analysis by combining aggregated asset-level energy consumption data with standardized calculations of grid intensity values and emission factors.
- Provide additional insight on climate-related transition risks to participants and investors by applying the Climate Real Estate Risk Monitor (CRREM) model onto existing GRESB data through the Real Estate Assessment.
- Encourage both participants and investor members to share/request access to asset-level data of reporting entities through the GRESB Portal to allow more specific engagement and data analysis. GRESB Investor Members are not able to request access to asset data. Managers must provide their explicit consent for GRESB Investor Members to see their data.
- Review the validation requirements of building certifications to account for the scope and quality of the certification process. Operational schemes and verified energy performance will have an increased weight over design/construction certifications.
For more information about the future development of the GRESB Real Estate Assessments and our priorities to achieve our shared vision of sustainable real assets, click here.