Investors are putting ever-increasing weight on a company’s ESG (environmental, social and governance) profile [link to ESG blog]. While we’re still grappling with just which benchmarks should be considered in overall ESG reporting (the World Economic Forum released a white paper last fall in the hopes of creating some universal cohesiveness), there’s already an industry gold standard for commercial real estate.
Meet GRESB. It’s an annual assessment, with standardized benchmarks, that evaluates the ESG of real property, including real estate. Administered by the Global Real Estate Sustainability Benchmark, it’s growing massively in popularity. More than 100 investors, representing $22 trillion in assets under management ask their managers to report, and that reporting represents more than $4.5 trillion in real asset value.
How it works. Each year, participants complete assessments on GRESB’s portal; this process is open from April 1 to July 1. After that, GRESB validates, scores and benchmarks the data. Results are available in the fall. GRESB scores are represented as a percentage; the average score is 70%. GRESB also assigns a rating, based on a score’s relative placement to all others. The best rating is 5 stars, awarded to 1/5th of the year’s participants.
The results are not public; the participant and GRESB members that are investors in that participant’s fund or organization can access the benchmark results. Scores and ratings, however, can be released by the participant. GRESB does list five-star recipients and other notable achievers without revealing their score. It also publishes an annual report looking at cumulative trends.
Indicators, explained. What can you expect during assessment? Anticipate questions about your company’s structure and holdings, leadership, policy and what you’re doing to measure and improve ESG. In terms of environment, indicators include energy and water efficiency, waste management, and green building standards. GRESB also looks at how well you treat employees, so indicators may include satisfaction, training and development, safety, and diversity. Indicators are continually evolved and improved to adapt with an ever-advancing world – and what investors find most helpful.
Interested? There’s a low-risk way to get your feet wet with GRESB assessment. New participants are offered a grace period, and can choose to complete the assessment without anyone else seeing the resulting scorecard or benchmark. You can see how the process works, and where you need to improve, no pressure involved.
What’s to lose? Honestly, a lot. An increasing number of sector investors, lenders and others value – and even require GRESB results. So much so that GRESB reported that participation in 2020 leapt up 22% because of increasing demand. That figure alone shows that sustainability, ethics and responsible management are best practices – not only because they are what’s right, but because they are smart business decisions.