What is GRESB?
GRESB (Global Real Estate Sustainability Benchmark) is an organisation that provides assessments and benchmarks that can be used by businesses to compare their performance against their peers and find actionable advice on how they can improve their ESG performance.
Environmental, social and governance (ESG) has become one of the most critical measures of the performance in commercial real estate. Boards all over the world are looking at ESG as they monitor and report on the performance of the assets they are responsible for. In order to track performance, boards require a set of standards in order to give them a baseline and point of comparison.
As well as making a material difference to the operations of commercial buildings and other large buildings, building owners can report on how well they are performing across a variety of metrics to their investors and other stakeholders. GRESB has a much wider scope than initiatives such as NABERS Ratings (National Australian Built Environment Rating System) and Green Star. GRESB has also expanded its scope from the built environment to include roads, railways, electricity distribution and communication systems.
The GRESB Real Estate Assessment
In 2022, over 1,800 property companies, REITs and developers across the world participated in GRESB’s Real Estate Assessment.
The GRESB Real Estate Assessment is a comprehensive benchmarking tool for real estate companies, funds and portfolios that evaluates ESG across three domains:
Management: This set of measures looks at leadership, strategy, policies, risk management and stakeholder engagement.
Performance: Measures pertaining to ESG performance at the asset level are covered by these metrics.
Development: Recognising that buildings and infrastructure are not static, this set of metrics is concerned with the design, construction and renovation of buildings and how ESG is addressed through these activities.
Assessments are conducted through surveys where participants report on energy, GHG, waste, water and building certification at asset level. All data that is submitted is kept confidential. The data is validated and then used to create industry benchmarks that individual companies can compare themselves against.
Intimidated by the data?
Collecting that data, particularly at the asset level, can be complex and time consuming. Each different piece of equipment produces data in its own proprietary format. That needs to be extracted and then normalised to make reporting easier. For many organisations, this can be very challenging unless they have a building management platform that can extract and normalise that data so it can transform into knowledge. This is where CIM's PEAK Platform can be a powerful ally. Its ability to make that asset level data accessible can greatly simplify the provision of data for GRESB assessments.
The GRESB Real Estate Benchmarks
GRESB real estate assessments powers two ESG industry benchmarks that GRESB releases annually: Real Estate Standing Investments Benchmark and Real Estate Development Benchmark (they also manage two for infrastructure).
The GRESB Real Estate Standing Investments Benchmark is for portfolios which contain buildings that are currently in operation whereas the GRESB Development Benchmark is aimed at portfolios with new constructions that have yet to be completed and significant renovation projects.
These benchmarks are not created and managed in isolation. They are aligned with globally recognised reporting standards including GRI, PRI, SASB, DJSI, TCFD recommendations, the Paris Climate Agreement, United Nations (UN) SDGs, region and country specific disclosure guidelines and regulations.
As well conducting assessments and providing benchmark information, GRESB provides guidance that explains what each indicator means, how to respond to the surveys and the ability to have individual consultations to review responses and discuss any questions.
The assessment process
Completing a GRESB assessment involves several steps. Here is a general outline of the process:
- Register interest: Register your interest to participate in the GRESB assessment through their website.
- Gather and organise data: Identify the relevant data and information required for the assessment, such as energy consumption, greenhouse gas emissions, water usage, certifications and tenant engagement activities.
- Complete the questionnaire: Access the assessment questionnaire through the online portal provided by GRESB.
- Submit the assessment: Submit the questionnaire within the April 1 – July 1 timeline, through the online portal.
- Verify data: Work with GRESB to review and validate the accuracy of the data provided in the questionnaire
- Receive scores and benchmarking reports: Once the assessment is reviewed and verified, GRESB will calculate your GRESB Score, GRESB Rating and provide the benchmarking reports in October of each year. Each component of the assessment (management, performance and development) carries its own score, which is factored into the entity’s GRESB score and GRESB rating.
The GRESB score
Participants in the GRESB assessment receive scores for each category and indicator based on their performance and data provided. These scores are then aggregated to calculate an overall GRESB score, which is an overall measure of ESG performance represented as a percentage (with 100 percent being the maximum).
A higher GRESB score demonstrates a stronger commitment to sustainable practices, effective management of ESG risks and opportunities and alignment with industry best practices. The score allows participants to compare their performance with peers, track progress over time and communicate their sustainability efforts to investors, stakeholders and the market.
The GRESB rating
The GRESB rating is based on the GRESB score and is calculated relative to the global performance of reporting entities. GRESB 5 stars is the highest rating, awarding recipients recognition for being an industry leader in ESG.
The GRESB rating is awarded based on quintile positions relative to all participants in the GRESB assessment, meaning that each year 20% of entities will receive a GRESB 5 star rating. The rating provides investors with differentiation in overall ESG performance of the global property sector. For example, if certain regions systematically perform better, they will have on average higher-rated companies and funds.
Why GRESB is important
Independent assessment and benchmarking for ESG is important. As ESG is a relatively new area of concern for boards - it appeared initially as a UN initiative before becoming a global movement - having a set of verified benchmarks gives boards and other senior leaders in the property industry assurance that the work they are doing is the right work. It also ensures that they are not being overtaken by their competition.
Strong performance against the GRESB benchmarks can also provide property owners with a competitive advantage over their rivals. In an increasingly competitive property market, tenants are concerned with the ESG performance of the properties they access. By undergoing independent assessment, property owners can show clients they take ESG seriously and have an ongoing program to ensure they stay on top of potential issues and are committed to continual improvement.
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