As CEO and Founder of Measurabl, the world’s fastest growing sustainability software for the built environment, Matt Ellis understands the need for commercial real estate leaders to understand and disclose ESG (environmental, social, governance) performance. GRESB is one of the leading ESG benchmarking standards for commercial real estate and one to which Measurabl makes it easy to report. This blog has been updated to reflect changes in the GRESB Real Estate Assessment as of March 11, 2020.
If you’ve been following the world of sustainability and ESG reporting, you’ve probably come across the mysterious acronym “GRESB.” Unless you’re immersed in the world of commercial real estate, chances are you read it as just another piece of forgettable jargon. But don’t dismiss it so quickly!
GRESB, formerly the Global Real Estate Sustainability Benchmark, is one of the many organizations issuing standards for ESG performance disclosure. In the case of GRESB, real estate owners, asset managers, and developers are the intended responders. So if that’s you, pay close attention: we’re going to take a brief walk through what you need to know about the good folks at GRESB and their survey.
What is GRESB?
GRESB, founded in the Netherlands in 2009, helps real estate investors assess the sustainability performance of commercial real estate portfolios around the globe. How do they go about it? They ask! Every year, GRESB issues a survey asking about things like energy and water usage as well as waste and carbon output. They’re also interested in things like how well you treat and train your employees, if you’ve been sued for corruption, and dozens of other “material indicators.”
What’s in it for me?
Money! Endowments, pension funds, as well as private and public institutional investors of all stripes look to GRESB’s annual survey as the barometer of your sustainability performance. Don’t want to participate? Think again: you may be putting your company at risk of losing capital because you’re not managing to the highest possible standards.
This logic is increasingly compelling. In 2019, over 1,000 property companies, REITS, funds and developers, representing over 100,000 assets and more than $4.5 trillion assets under management (AUM) participated in GRESB. In every year since its inception, GRESB participants have grown and shown an increase in their level of sustainability disclosure and performance.
In other words, more companies are disclosing ESG performance and the competition is increasingly advanced. Upon completion of the survey, there is an added benefit of the ability to evaluate, understand, and improve the performance of your portfolio.
How does it work?
GRESB issues its survey in April of each year. The survey itself has changed year-to-year, sometimes substantially as GRESB gets better at asking meaningful questions. Companies then have a three-month window (from April 1 to June 30) to respond to the survey, after which the response period closes and GRESB starts digests the data. The information then goes through an extensive vetting process (so don’t lie on your report!) and the results are published in September.
What does the actual survey look like?
Think of the GRESB Real Estate Assessment like a test: a series of questions, tables, and sometimes confusing industry jargon. Let’s start at the top.
There are three “Components” (Performance, Management, Development) that can be thought of as three different parts of the test – they focus on different areas like quantitative and qualitative performance, and not every part applies to every company. For example, if your real estate company only manages existing buildings, the Development component is not applicable to you; you are not actively developing buildings and therefore have no data to disclose.
In each component are a series of “Aspects”, which are like categories within a test. Each aspect covers a specific topic such as water reuse or diversity & inclusion policies. Then within each aspect are a series of indicators – questions that are meant to learn more about your business practices that come in the form of multiple choice, fill in the blank, and essays. Your responses across these questions will be used to create your score.
GRESB’s scoring methodology can be found online, which provides the scoring of each question and weighting of each aspect. You’re assigned a score as a percentage out of 100. Greater value is placed on quantitative data such as the Performance Component, which comprises around 70% of your total score. So if you’re not tracking your performance data yet, better start!
What does the future look like?
GRESB has made quick progress from a small European phenomenon to an internationally recognized standard. Its laser-focus on commercial real estate has allowed GRESB to seize ground not well addressed by other larger, older organizations. As a result, it has done an excellent job of understanding the real estate ESG niche and providing meaningful performance data to members.
That said, the sustainability reporting landscape is rapidly maturing. GRESB faces competition from other players in standardization of sustainability disclosures like GRI (The Global Reporting Initiative), CDP (formerly the Carbon Disclosure Project), and DJSI (Dow Jones Sustainability Indices). These organizations are eager to get their say about what’s important for the real estate sector to disclose. There are also organizations like SASB (the Sustainability Accounting Standards Board) and TCFD (Task Force on Climate-related Financial Disclosures) that are simplifying and standardizing disclosure requirements with the backing of major stakeholders.
Most of these standards and frameworks cooperate to some extent by aligning with other standards, but they can also compete fiercely for the affection of the industries they seek to support and benefactors from whom they need resources. This can lead to some reporters feeling pulled in too many directions – so they decline to participate in any disclosure.
Regardless of the amount of frameworks and reporting structure, what is clear is the need for transparency is overflowing with investors, consumers, and regulators who continue to see disclosure as a way to reap rewards, not bear a burden.