The GRESB Standards part 2: How they evolve and what’s in store for 2025 | The Pulse by GRESB

In this episode of The Pulse by GRESB, find part two of our two-part series on the GRESB Standards for 2025 and beyond. This part dives into key information regarding score impacts for infrastructure participants as well as how the standards are evolving beyond 2025. Listen to the episode featuring:

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

Sarah: Hi, I’m Sarah Welton, the Director of the GRESB Foundation. This conversation is a continuation of a two part discussion. The first part was about the 2025 Standards Changes, which I encourage you to check out. As some of you know, the Foundation is the non profit that owns and manages the GRESB standards. The Foundation is governed by the Foundation Board, which also sets the strategic direction for the standards. I am here again with a couple of my colleagues who manage the standards development process for real estate and infrastructure, Charles van Thiel and Joss Blamire. I want to hear from both of y’all, to sort of start looking past 2025. The year is coming to a close, for better or for worse in about a month. What should we look forward to future standard changes, you know, beyond 2025? Charles, how about you first?

Charles: That’s a really good question. Maybe I want to start saying that today it’s very clear that we observe the industry is evolving very fast. We have new, emerging trends and tools almost on a daily basis. Industry participants are becoming more and more sophisticated over time and they have increasing expectations as well.

And looking ahead, it’s very clear that the standards have to keep up with the pace to make sure that they continue adding value to the wider industry, and this is really top of mind when it comes to our prioritization efforts with the GRESB Foundation. And looking ahead, in terms of future direction, the GRESB Foundation really intends to double down its efforts on a couple key strategic priorities. The first one is really to continue transitioning towards a performance based scoring approach of the standards.

In the short term, we know that in 2025, that’s exciting. We’ll be officially rewarding highly energy efficient portfolios. And the GRESB Foundation is taking a very robust and mindful approach here, considering all the factors deemed necessary to define what’s energy efficient. In the mid long term, we can expect this trend to apply to other issues as well. You can expect the same area of work to start addressing green house gas and at a later stage, water and waste. Another key kind of strategic, priority is to become more segmented and more specific over time. In the short term, in 2025, we are introducing more sector specificity through new residential specific indicators, addressing topics deemed particularly relevant for the residential sector. In the mid and long term, you certainly can expect that when this method has been validated now with residential, we’ll start applying it to other sectors such as industrial, hospitality, really to meet the needs from the industry to become more specific to their sector. And echoing some of the words that Joss mentioned earlier, reduce reporting burden a maximum over time. In the short term, as just mentioned also on the infrastructure side, we are starting to retire indicators that you know, really no longer differentiate participants with each other.

But in the mid long term, we will have to significantly accelerate the pace to reduce reporting burden to make sure that ESG reporting remains feasible. And that will include not only just the retirement of new indicators, but also promote more alignment with other frameworks to maximize crossover and to streamline the reporting process by participants. So that’s really what we can expect in the future, Sarah.

Sarah: Thanks, Charles. I appreciate it. Joss, what do you foresee will be the future sort of expectations for the Infrastructure Standards?

Joss: Yeah, many, many similar themes to what Charles has just outlined along for real estate. I think one important difference, which I would mention, next year is actually impact on score. So we know we have taken the choice to look at stability for the real estate assessment next year for a number of reasons. And we had similar discussions and reflections recently at both the Infrastructure Standards Committee and the GRESB Foundation Board around how we should view stability for the infrastructure standards. And actually one of the key strategic objectives in developing our updates for 2025 was to increase score differentiation.

So we do have a slightly different approach, but that’s driven by the need to evolve the infrastructure standards from where they are currently. In 2024, we reward the ability, for example, to report data. In 2025, we’re going to reward the ability to disclose as high a level of data as possible. So there are going to be changes next year, which do impact score. These changes, however, are all agreed at the industry level as being sensible, pragmatic steps to take for the GRESB standards. And so I think when members are able to digest those changes, they’ll see that any scoring impact is underpinned by a sensible change in the standards. And there’s a behavior change that we’re trying to encourage, which goes alongside a change in score.

So we’re keen to hear feedback from members. I think critically on score for infrastructure, any changes for 2025 in the updates document will also be able to be digested and understood so that members can begin to see what the impact on score might be next year already. So you should be able to review the updates document, understand what’s material to you as an entity. And understand very clearly what the impact on your score might be next year. And we have a lot of support available around our helpdesk and around pre assessment services as well that will allow you to understand that further should you wish to. And we’re always happy to hear from members who have been reporting for a long time and want to digest the new updates or from new members as well who are keen to get involved with GRESB for the first time. I think what these changes represent next year will be the ability for an entity who’s advanced in their ESG journey to understand and see the evolution in their ESG practices reflected in their score. Versus others in the benchmark who are starting out for the first time.
We still very much want the standards to be open and available to those at the start of their ESG journey. And we think the updates strike that balance well. So that can all be already understood for 2025. And then we are also looking further ahead into other topics. We’re still focusing on Net Zero next year. There will be a lot more to come, particularly on Net Zero alignment and target setting, again. And also some other nascent topics, things like physical climate risk and biodiversity we will be looking at again. So we look forward to those discussions with the sector.

Sarah: Thanks. Yeah, you said a lot of great things there. And I think that, you know, engagement with the market. We do want to hear your feedback, so take a look, as I said, at the changes and at the the Foundation’s roadmap. Give us your feedback. You know, this is a process that is industry driven, and we want to help demonstrate leadership, but at the same time, we want to invite new participants to come in because there’s no better day to start your sustainability reporting journey than today. Because you can only make progress once you start going. Speaking of progress and, you know, emerging issues, the Foundation will begin to form a working group around data centers imminently, which we’re very excited about. I’d like to hear from both of y’all on what are the exciting emerging issues that you guys want to see the Foundation explore in the coming years. Charles, I’ll give it to you first.

Charles: So, None of the working group, at least for next year have been confirmed at this stage. But I can already tell you all that there will be plenty of opportunities to engage and to participate in topic specific working groups because that’s something that we do every year.

We can expect a lot more work first of all, on residential, simply because that’s something that we’ve actively started doing in 2023, 2024, but that’s just the beginning. We have a lot more engagement with industry with regards to how to further develop what we’ve done in 2024 on the residential fronts. You can also expect a lot more work on other sectors. As I mentioned earlier, we’re looking to other sectors on top of data centers, such as industrial or hospitality. Some of these industry groups have already kind of reached out to us and express interest to replicate some of the work we did on residential for them.

So that’s something that certainly will happen, when exactly it’s hard to say now, but we can certainly expect that to happen. But also, I think, separately to new sectors, something that we’re actively looking at as well is new type of investment strategies. I think it’s been acknowledged that the GRESB real estate standard has always been a really good fit for purpose when it comes to core investment style. We’re seeing the proportion of value add and opportunistic fund increase, you know, quite significantly, year on year, which really raises the question, what is it that we need to amend in the assessment methodology to be a better fit for purpose for those different investment styles? And we are currently informally gathering some initial feedback from the industry on that, and we’d like to formalize those efforts a little bit more through the GRESB Foundation over the next months or years. So we’d welcome the direct participation and input from you on this topic, since we know a lot of the impact of the next 10 to 15 years will come from retrofit and renovation. So this is absolutely part of the equation as well.

Sarah: Thanks. Yeah, it’s a good, call to action. You know, we do host roundtables around the world. We’ve had some specifically targeted for investors. We call them master classes, but we’ve also had Value Add roundtables, most recently up in Toronto during PRI, and we will continue to host those. So, please keep your ears open. And, we invite you to literally come to the table you know, to have these conversations with us, and of course, reach out if you are curious to learn more when we’re having those. Joss, could you talk about the emerging issues on the infrastructure side that are important to you?

Joss: Yeah, absolutely. I think the first thing to say is this time of year is when we are really working hard to prioritize what our work plan will be in 2025 for the updates to the 2026 standards. So I would take the opportunity now to put out a call to action for anyone listening to this who has a topic that means something to them and their business or wants to see something change in the standards. We would love to hear from you. Your feedback will be listened to and will go into our process for forming the work plan that we take forward and formalize with the GRESB Foundation early next year. So that’s a live discussion at the moment. I think on the infrastructure side, the priorities remain quite similar to what they were last year, but we are doubling down on them and we are going further. So Net Zero, again, will be a huge focus for the infrastructure standards committee next year.

We are looking at increasing the quality around our target setting information. And also this year, I think more than ever, looking at Net Zero alignment in general. There are many frameworks out there with regards to Net Zero Alignment, there is no real standardization in the market at the moment. And this is a massive opportunity for the GRESB Foundation to show leadership for the industry sector and really understand what Net Zero Alignment means. And that’s something we’re going to be diving into as a committee. Similar to what Charles has already mentioned, we will continue to look at moving towards performance in the infrastructure standards. It’s a slightly different discussion, but very interesting nonetheless, and how we compare the performance of different corporate entities, which is generally the level at which infrastructure entities report to GRESB, so at the company level, and that’s a different challenge we have on the infrastructure side.

We’re going to be diving into that topic in the next year. And certainly top of mind still is practically speaking for members, how can we make the process easier? We know it’s a crowded environment out there in terms of demands on ESG teams. So how can we make, for example, data that we have in the GRESB standards more practically usable for members? How can we reduce reporting burden? And how can we look at things alongside the actual ESG content of the standards just to make people’s lives easier in ESG teams in the infrastructure sector. So we will always keep that top of mind as well.

Sarah: I think that is a great way to end it. How can we make your life easier on the ESG side of things? That is what we set out to do. Please, please don’t think otherwise. Well, it was really awesome to talk to both of y’all today. And thank you all for joining us. Again, please look out for the Real Estate and Infrastructure Standards Updates that were recently published, and please do get in touch, your input, the market’s input, is critical to our work to create a more sustainable real asset industry. Thank you all again for joining us and we will talk soon.