Raising the standards: Building certifications and the GRESB Real Estate Standards | The Pulse by GRESB

For this episode of The Pulse by GRESB, we are bringing you a conversation about building certifications at GRESB. In the context of the ongoing public consultation on building certifications at GRESB, our experts chat about why building certifications play an important role in the GRESB Real Estate Assessment and why they have been deemed a priority. Watch the episode below, featuring:

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

Charles: Welcome to The Pulse by GRESB, where we discuss the newest and most topical issues in sustainable real assets from GRESB and ESG to the wider industry. My name is Charles Van Thiel. I am Real Estate Director at GRESB and have the pleasure to be your host today. In this episode, we’re going to talk about a pretty important topic when it comes to ESG in real estate, which is building certifications.

It’s actually a very timely topic in the sense that GRESB is currently undergoing a public consultation process on building certifications. During this episode, we’ll do our best to provide a bit of history on this topic at GRESB, what development efforts are currently happening as we speak, and what the audience can expect from GRESB in the future on that topic as well.

Who better than my colleague Alodie McLaren to dive into this topic. Hey Alodie, how are you doing today?

Alodie: Hi Charles, thanks for having me.

Charles: Alodie, you’ve had a really hands on experience with building certifications throughout your career. What is your role today at GRESB regarding this topic? How are you involved in it?

Alodie: So I’m a Senior Associate in the Real Estate team and I’m leading the development effort on Building Certification at GRESB.

Charles: Great. Thanks for the intro. Why don’t we start with a historical context on this topic. If I look back in history, since the inception of the GRESB Real Estate Assessment, you know, somewhere in 2010, what has been the main role of building certifications in the assessment? Do you mind, do you mind elaborating a little bit on that?

Alodie: So building certification have and have always been valued as proxy for management and performance. They have been considered very important as they offer a layer of transparency to investors. Therefore it is reflected in terms of scoring as it has always contributed to significant portion of points in the assessment.

Nowadays, they represent close to 10 percent of the performance components scores.

Charles: Well, 10 percent, that’s pretty high. I can imagine that it must be something quite material and relevant in the grand scheme of things when it comes to real estate assessments. Thanks for describing that kind of a context. Now, has the landscape of building certification evolved at all in the last years?

Is there any interesting trend that we can observe that you’d like to share with the audience? Has the landscape always been the same or has it, has it evolved?

Alodie: So the landscape of building certification is very interesting because it is very dynamic. It is constantly evolving, as there is always on the market an ever growing number of new schemes emerging. Also, we saw trends appearing for the past few years, such as thematic schemes, considering a focused number of topics.

It can be related to social or to health, and therefore, in the assessment, we observed the same trends where we saw the number of schemes that are recognized in the assessment growing to a very high number of schemes that are recognized nowadays in the standard.

Charles: Right, so a real proliferation of schemes over the last few years in the industry, along with the emergence of new type of schemes, such as thematic schemes, as you mentioned. It sounds like a great thing in my view. So I’m wondering what this kind of a recent development have triggered from a standard development perspective. So what kind of issues are we, are we witnessing, are we observing today in the industry?

Alodie: Yes, uh, as it is a very complex topic the first feeling of the industry is very often confusion. There is a lack of harmony between different schemes. People are starting to wonder what is relevant today, what is not relevant anymore. How is it evolving?

How can I prepare for the future? What will remain also relevant over time? And most importantly, how do they compare between each other? How do I know that this scheme is better than the other scheme? And every situation is very different, but we need to find a common approach and global way to organize things between certifications.

So, the conclusions at the assessment level are very similar. The same issues are observed.

Charles: Great. So thanks for that insight. So I understand that obviously there’s been a great evolution that has led to, potentially, a bit of confusion in the market today. Now, if I’m actually going back into what the GRESB Foundation is — the body responsible for maintaining and developing the GRESB Standards over time.

How is the GRESB Foundation looking at this issue? Is this something that they’re doing to try to provide more clarity on the market to try to make, information, uh, provided by GRESB more relevant. What, what is it that they’re doing on that front? Do you mind elaborating a bit on that front, please?

Alodie: Of course, definitely, this is a very important topic for the Foundation. The Foundation has actively acknowledged the list of issues we just discussed and observed our building certifications. The Foundation agreed on a work plan with three main objectives, the first one being to elevate best-in-class certifications to encourage their adoption.

The second one being raising the bar for participants and certifiers while, easing the transition towards these new practices and new consideration around building certifications.

Charles: Wow, that, that seems a very ambitious plan. I was wondering if, uh, if that plan has already, in a way, crystallized into actual changes affecting the GRESB Assessment yet? Or is it something that that hasn’t happened yet and we can only expect in the future? I’m pretty sure that the audience would be interested in knowing if something has actually been implemented in the assessment as of now.

Alodie: Yes, there is already one implementation as for the 2024 assessments. As it was published in the list of changes in last October, the newly introduced change is regarding the expiration date of building certifications. Where the relevance over time of this certification is now considered in the assessment, by taking into consideration the age of the building certification, meaning that a certification awarded a year ago has more relevance than the same one awarded 10, 15 years ago, because now that’s the time horizon that we are looking at when we speak about building certification.

Charles: Great. So, just a quick side note on what you just mentioned, Alodie, can GRESB participants expect any impact on their reporting of that change happening in 2024? What can they be expecting in terms of impact? Do you have any, any comments here?

Alodie: Yes, in terms of reporting, participants are expected now to report on their building certification year, meaning this is a new data that is required for participating into the assessment.

Charles: Any impact they can expect on score as well, on the output?

Alodie: Yes, impact is to be expected depending on, again, the age of building certification and the type of building certification, because the relevance over time varies depending on the type, either if it’s a design construction, interior, or operational certification.

Charles: Awesome, that’s very clear. Thank you very much. As the audience must have seen, GRESB is actually undergoing a public consultation process on the topic of building certifications. I wonder if you could tell us a little bit more about that. Like, what is the link between that public consultation process and what you’ve just mentioned?

What is the main purpose of that process?

Alodie: So the public consultation on building certification is the second step of the work plan agreed by the Foundation. The objective of this public consultation is to revise the list of criteria used to evaluate building certification within the assessment. It’s open to all members and the outcome will be to gather all the feedback in order to revise this list of criteria.

The objectives from the Foundation regarding this newly created list of criteria is to elevate the best in class schemes to refine the list of accepted schemes within the assessment, meaning reducing the number of schemes to recognize the ones that had the greatest impact and credibility in the markets.

And lastly to increase the transparency around certification. After the public consultation, the list will be submitted to the Foundation Board for endorsement. The objective is to publish the new list in October 2024 in an effort to be effective for the 2025 Real Estate Standard.

Charles: Wow, that sounds like a very, very tight timeline. I can definitely relate and feel the amount of work that goes behind the scene. Thank you so much for sharing that insight, Alodie. Maybe my last point that I’d like to address before closing, is this current work stream that you’ve just described, the public consultation process, is this the last thing that we’re expecting on building certification from GRESB or can the audience expect something more into the longer-term future?

Alodie: No, the public consultation is not the end of the work that the Foundation is conducting on building certification. The next step will be to assess how to integrate levels into the assessment and how to differentiate between the different levels within a certification.

Charles: Yeah, I’m sure that’s going to be very useful considering that we all know that various levels underlying building certification can mean something very different, for the industry and for managers and investors. So I’m sure this, this piece of work in the future would be very important as well.

Alodie, thank you so much, for sharing your thoughts. It’s been extremely insightful. Thank you everyone for listening, I really hope you enjoyed the show, and finally always feel free to give this episode a like or leave a comment, we’d love to hear more from you about potential future topics you’d be interested in, so that we can dedicate an appropriate Pulse episode to that topic. So feel free to make your voice heard. My name is Charles Van Thiel and I’ve been your host today.

See you next time on The Pulse by GRESB. Thank you very much.

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