2016 is shaping up to be a year of surprises: GRESB has promised to overhaul 20% of its forthcoming Survey versus 2015, while CDP introduced major changes to both its methodology and its business model. Here’s a deeper dive into the changes and what they mean for you.
To understand the upcoming changes to GRESB, you’ll have to think in three dimensions:
- Questions In 2015 GRESB had 50 different lead-in or “Parent” questions. Your answer to a Parent question often unlocked follow-on “Child” questions. This dynamic, lead-led question structure meant GRESB actually contained over a hundred question permutations. Applying GRESB’s stated 20% face lift, we can assume 8-10 new/altered Parent-level questions in the 2016 Survey, potentially impacting dozens of total points. This is no small change. If questions favorable to you are dropped, or adverse questions added, you may be in for a sizable score shift.
- Scoring The vast majority of GRESB is qualitative in nature (though the quantitative pieces will take well over half your time). A mixture of automated and human grading awards/denies points using a rubric. Changes to this rubric are not captured in the 20% change to GRESB’s question structure. But, if any changes are made to weightings, point totals, or the criteria for awarding points, the impact could be far more consequential in determining your score than changes to the Survey questions alone.
- Interpretation What’s an “asset”? Is it a single building, or multiple buildings combined into one campus? If a campus is reported to GRESB as one “asset”, does the LEED certification of one constituent building apply across the whole “asset”? How will you report an 80-20 office-retail asset? Is it 100% office, or will you break it out proportionally between both retail and office components? If the minority type is less than 25% of the asset, GRESB permits either approach. Will you report or exclude a joint ventured asset of which you own 24%? GRESB permits either approach. So if it’s a high performer, you’re better off including it. If it’s a poor performer, well… Does a single tenant have the greatest authority to introduce operational or environmental policies at an asset? Since there’s no objective test for this, particularly in a multi-tenant asset, you might categorize the asset as direct or indirectly managed. Your choice will fundamentally alter your peer group comparison. As you can see, the litany of judgement calls inherent in GRESB reporting has the compounding effect of reshaping your report, your peer group and, ultimately, your score. Multiply these interpretations across the entire GRESB cohort and you can see how one small Survey change can be like tugging on a thread…
The bottom line is this: approximately 20% of GRESB’s 2016 Survey will be different from 2015. Unaccounted for in that number are any changes to GRESB’s scoring rubric. Also unaccounted for are any revisions to the critical Guidance Document that accompanies GRESB. The sum result is that you need to be prepared for swings in your peer group and/or absolute score in 2016, even if little about your portfolio changed.
Survey methodology overhauls create a domino effect on scores. The result is a reshuffling of winners and losers on annual sustainability benchmarks.
Perhaps anticipating an elevated level of rigor in carbon accounting coming out of the UN Climate Convention in Paris, CDP is enforcing a new, “market-based” accounting methodology in its 2016 Survey. It’s a brain twister. Here’s the actual text from CDP’s new guidance:
The GHG Protocol Scope 2 Guidance introduces “dual reporting” duties for companies that operate in markets where contractual instruments are available. These companies will now have to report Scope 2 figures in two ways and label each result according to the method: one based on the location-based method (reflecting grid emissions factors), and one based on the market-based method (using emissions factors from contractual instruments).
In short, CDP is saying you will have to report your emissions twice. Once on the utility grid source, and again based upon the underlying utility contract. The latter is only necessary if your company operates in deregulated electricity markets. If you are in a de-regulated market, the onus is on you to know it and, even if you don’t purchase power on contract from a third party provider (i.e. not the actual power generator), report using the market-based approach in an additional section within CDP.
Still confused? Here’s a cheat sheet.
|Case||What to do on CDP 2016|
|Not in a deregulated market.||Report scope 2 once using the old ‘location-based’ method i.e. grid emissions factors.|
|In a deregulated market, but not using contracts.||Report two scope 2 totals: one location-based and one market-based.|
|In a deregulated market and using contracts.|
The practical impact of market-based reporting requirements is more headache for reporters. It’s lost on the Measurabl team exactly how CDP could enforce this new rule, since companies themselves may not be aware of all the jurisdictions in which deregulated options are available. Nonetheless, it’s an example of the heightened attention energy markets are getting when it comes to carbon accounting.
Be prepared to spend more time with whomever handles energy procurement – often your operations team, real estate service provider, or energy broker.
Paying the Price for transparency
A backdrop to the changes in reporting standards is the evolving business of the standards themselves. For example, the simplest change of all to CDP may be the biggest: a $975 USD filing fee for voluntary and second time “requested” responders. Until now, submission to CDP was free. Fees were only charged for Reporter Services – a chance to get custom feedback on your report from CDP before you submit. This was elective. But the not-for-profit benchmarking standard has struggled for years with a tight budget. Asking reporters to foot at least part of the bill was a necessary step in sustaining the quality and comprehensiveness of CDP’s mission.
GRESB, by contrast, is a for-profit organization purchased in mid-2015 by the not-for-profit Green Business Certification Institute (GBCI). GRESB gives their Survey, benchmark reports, and Reporter Services aka “Response Checks” away for free, making money by selling investors access to respondents’ (re)structured data.
The difference between these organizations’ business objectives, or lack thereof, reflects a shift in the purpose of disclosure of non-financial data itself.
The old guard, like GRI and CDP, are mission-driven not-for-profits, with no interest in monetizing the data entrusted to them by reporters. DJSI and GRESB represent a new breed of standard which monetizes respondent data for the purposes of creating markets in increasingly valuable non-financial data. What the future holds for these different orientations remains to be seen, but for now, if you report through Measurabl, your filing fees are included in your Report Pro subscription!