REAL Benchmarks: Eastnine Client Story

If you missed our recent webinar GRESB Inside ESG: REAL Solutions – Unlocking Real Value from Asset Level Data, don’t worry! Here’s a highlight of REAL Benchmarks from our chat with Eastnine. In this conversation, Christina Djambazca, Product Manager, REAL, speaks with Lilia Kouzmina, Head of Sustainability at Eastnine. Want to know more? Watch the full on-demand webinar here.

Christina: So currently do you use any reference values from the industry to be able to gauge where exactly do you land in terms of performance or do you know how you perform against your peers?

Lilia: Yes, that’s why I got so excited when I’ve seen this new product, because that normally has been a gap we have in the market. We have been present for a while. We have kind of anecdotal evidence. Of course, we talk to the peers, we talk to the consultants who do certifications for us, so we have a feeling and understanding.

And then, of course, we look at the annual reports of our peers and that’s how we collect the data. But there’s no systemic follow up of kind of a comparable performance where we could dynamically compare and track our asset-level performance with those of our market.

And in our particular case, actually, the reason why I was so quick to react and do the pilot for this product is that we acquired a property last year in a new market, Poland. And, still at this point, I have not been able to find any dataset on real energy performance for that market. And, in the team, we were very interested to compare performance of this property with some kind of market average.

So, when I contacted the GRESB team and Kevin let me know that there is actually a specific Poland benchmark with 30 assets on that, I was quite excited to get hold of that data and see our standing with that benchmark. But even for the markets where we have much better knowledge, we were quite happy to see that the opportunity to compare our assets to the Nordic benchmark as well.

Christina: That’s great. And I’m very happy to hear that because that’s exactly the problem that we’ve been trying to solve, is understand and find the need for comparable and robust benchmarking at the asset level. Now that you have that information, you mentioned a couple of times that what you want to do with that is ultimately understand the performance of your assets better. Is there any other goal or any other purpose behind understanding that information that goes beyond just an analysis for your internal teams, let’s say? What other use cases do you have for those benchmarks and how do you intend to use them to inform your strategy in the future?

Lilia: Well, I think, there is a general lack of this type of data in the market, at least based on my experience. If we look, for example, within the EU taxonomy, one of the criteria for defining a building as a green asset is being within this 15 percent top performing assets. And how do you define those 15 top performing assets? It has been a challenge. I know for some of the markets still EPC data is used in order to define this 15 percent top performance.

And as we all know, EPC data is not really a good proxy for the real asset performance because it can overstate energy intensity for assets above A grade, as it’s very many countries, it’s based on energy models rather than, of course, actual performance. And for those assets that are kind of bad performance below maybe C grade, it can understate the performance as you do not account for your energy optimization journey, which might have been significant since the time that this EPC certificate has been issued. So, using some kind of real life data for defining this criteria for 15 percent top performing assets would be, of course, a better approach than still relying on EPC rankings data.

Christina: Definitely. Something else that you touched upon is the need to compare performance against the local building stock. And something that we’ve heard quite a lot is the buildings that you report to GRESB, they already undergo a certain filter of, okay, these are already investment grade real estate, they are ESG conscious, so at least the management is set in place to ensure that those assets do perform better than the average building stock.

The benchmarks that REAL Benchmarks is based off of do come up from the GRESB dataset, so you can imagine that there is a natural tweak in the data on, you are actually being compared against probably better buildings than the general building stock. How would you integrate that into your use of REAL benchmarks? And is that something that you see as a benefit, or is that something that you might want to consider in a different way going forward?

Lilia: Well, that’s something that, of course, we are aware of and we take into account, but this provides additional confidence. And I was just thinking that another factor where I think this information would be relevant and useful is, again, when you are looking at the new market as a buyer, we’re buying new
assets.

And, as I mentioned already, last year we acquired the property in Poland. And within that context, when you do your ESG analysis, of course, you’re looking at energy efficiency, and even though you might have some understanding of where the gold standard is within your home market, it’s still difficult to understand where this particular specific market is heading to, and what is the gold standard there.

So these kind of benchmarks, of course, help to achieve better understanding for the buyers of real estate assets and provide better transparency in general. And of course, with better transparency for energy performance data comes better accountability. And that’s what we are all striving for. Since energy transition, that’s the process that really needs to be accelerated. And the more data is there, the more comparability in the data, maybe the more meaningful will be this conversation about how do we achieve those decarbonization goals.

Christina: Definitely. So you mentioned already the use of REAL benchmarks and benchmarking information in general for portfolio management and inside analytics to identify the assets where you need to put more effort in. You also mentioned how there might be an interesting use case there around transactions or when you look to buy a building in the market that you’re not that familiar with the building stock, so you need additional support to understand the performance. Is there any other future use case that you can see for benchmarking information maybe to address a different type of stakeholder or to basically put the information in front of different eyes or in a different context?

Lilia: Yeah, absolutely. Stakeholders like the banking industry or even government organizations would be particularly interested to see this data in case we want to argue for EU Taxonomy alignment because, as I said at the moment, it’s mostly EPC data that steers decision making when it comes to EU Taxonomy alignment, at least in our markets.

So I would definitely think about that application for building valuations. At the moment, already now we are providing CRREM data to our field evaluators. Hopefully, we’ll be using the inputs from this product to support this process.

Christina: Great. Thank you so much, Lilia, for sharing with us how you intend on using real benchmarks.