Starting an ESG program can be a daunting task. There is an alphabet soup of acronyms to learn and a wide array of topics under the ESG umbrella to consider. From energy consumption and waste diversion to diversity, equity, and inclusion, it can be challenging to know where to start and how to identify, prioritize, and tackle the issues that are “material” to your business.
Luckily for the commercial real estate industry, GRESB (formerly the Global Real Estate Sustainability Benchmark) has done some of the heavy lifting. GRESB is the primary commercial real estate-specific ESG benchmark that CRE organizations can use to publicly disclose their ESG performance. In this capacity, it has already identified many of the most material ESG issues for commercial real estate, and can therefore serve as an excellent starting point for launching or enhancing your ESG program.
As the most prominent and industry-specific Real Assets ESG framework, GRESB ranks commercial real estate companies’ performance across specific KPIs, including portfolio-wide building greenhouse gas emissions, energy consumption, water consumption, and waste diversion. Real estate organizations participate annually by completing an extensive questionnaire that involves gathering portfolio ESG data and reporting against a range of criteria (including but not limited to the KPIs listed above). Respondents must submit their reports by July 1, making late spring and early summer a notorious grind for many ESG practitioners. (If you’re one such practitioner and have just finished submitting your 2021 GRESB report – congratulations!)
GRESB then evaluates the responses, generating an absolute score for each (represented as a percentage with a maximum score of 100) and benchmarking scores across the cohort of respondents. More than 100 institutional and financial investors use GRESB scores to inform their investment decisions, making GRESB a logical choice for real estate organizations looking to showcase their ESG performance to drive investor confidence and raise capital.
Not only is GRESB a highly requested and utilized ESG framework by investors, but it can also be used as an internal navigational tool to help your company kickstart or enhance its ESG program. Don’t know where to start when it comes to ESG? GRESB can serve as your roadmap.
While you recover from this year’s reporting season, you may (quite understandably) not feel like thinking about next year just yet. But when it comes to GRESB, the old adages hold true: slow and steady really does win the race, and a little bit of effort now can go a long way later. Don’t worry – we’re here to help you simplify and reorient your efforts so that when next spring rolls around, there’s no need to panic.
Whether you will be new to GRESB in 2022 or are a seasoned veteran aiming for an even higher score, there are a few actions you can take right now that will help you prepare for next year – and hopefully achieve your highest score yet.
When prepping for GRESB, it’s important to know the reporting timeframe and the populations of buildings you will be required to report on. These two key pieces of information will help inform your reporting boundaries and ensure that the data you submit next year is accurate.
Timeframe: Since GRESB evaluates past performance, the reporting year for GRESB 2022 will be 2021. However, GRESB also scores companies on relative performance (percent change) year-over-year for all buildings in operation. This metric and population of buildings are known as a “like-for-like” comparison, and you are required to have two full years of consumption data prior to the reporting year. For GRESB 2022, the like-for-like reporting period is January 1, 2020 to December 31, 2021.
One key thing to note: buildings only qualify for inclusion in your like-for-like comparison if they are “standing investments” or “operating buildings,” defined by GRESB as “properties where construction work has been completed...and which are owned for the purpose of leasing and producing rental income.” Accordingly, plan to exclude any buildings that have recently undergone major renovations when running your like-for-like calculations.
Building Populations: GRESB requires commercial real estate companies to report on their entire portfolios, including landlord-controlled and tenant-controlled areas and joint ventures. Landlords have more control over the spaces they have access to and therefore GRESB weighs the energy performance of these spaces more heavily.
When evaluating efficiency, GRESB also bases many of its performance metrics on three primary populations of buildings: 1. Development Projects, 2. Operating Buildings (the group of buildings considered in the “like-for-like” comparison defined above), and 3. Total Portfolio. GRESB evaluates each of these populations on their GHG, energy, water, and waste performance, and will ask you to report these metrics for each.
The bottom line: Make sure you account for all three building populations and can divide up your portfolio accordingly. Don’t forget to add any buildings you may have recently acquired, and identify any major renovations that would exclude a building from falling into your like-for-like population. It only takes a few miscategorized buildings to skew your reporting and create headaches down the road.
GRESB’s main performance indicators for the 3 building populations listed above are whole-building, landlord-controlled, and tenant-controlled monthly energy (kWh) and water consumption (gallons); carbon emissions (mTons CO2); and diverted waste (tons). Depending on the technologies implemented across your portfolio, your various lease structures, your utility providers, the size and makeup of your portfolio, and whether or not you work with operating partners, gathering and analyzing historical utility data might be easy or challenging. Thinking ahead and having a plan in place to get the data (and maintain it) will go a long way.
Since having regular access to data typically leads to better outcomes, GRESB also scores on overall “data coverage,” i.e. the percentage of consumption data you are able to obtain relative to how much could be obtained based on total floor area.
The bottom line: The more frequently and readily you can get utility data across your portfolio, the more accurately you will be able to represent the performance of your portfolio, and the higher you will score on data coverage for GRESB.
Utility data collection can get unwieldy fast, so if you find yourself constantly running into hurdles, consider enlisting a technology partner (like Aquicore) to automate the process and ensure direct access to the data you need.
Last but certainly not least, the final dataset we recommend starting to compile in advance is a complete record of the efficiency measures executed in each building. Efficiency measures can include everything from onsite renewable energy projects to LED lighting upgrades to the implementation of smart building technologies (like Aquicore). GRESB requires you to report efficiency measures across the general categories of energy, water, and waste completed at each building on a TRUE/FALSE basis. Tracking efficiency measures across your portfolio as they are planned and executed in a central, accessible location can expedite the process significantly.
The bottom line: The more efficiency measures you can report across energy, water, and waste, the higher you will score. Having a system in place to keep track of planned and completed efficiency measures can save you time come annual reporting season.
Did you know: installing Aquicore across your portfolio can get you complete points for energy efficiency measures and help with project tracking and management on an ongoing basis.
Launching and managing an ESG program takes time and can often feel like herding cats. You may also find that your tactical approach to acquiring data and executing ESG initiatives varies depending on a given building and its lease structure and operating team. The best way to stay sane? Stay organized. Not only will gathering data in advance set you up for success come GRESB time, but you'll get a clearer picture of your portfolio's performance and the measures you've taken to date to enhance efficiency. Know your deadlines, be sure to build in plenty of extra time to get everything done – by reading this article, you’re already thinking ahead! – and aim to create standard processes that can easily be repeated in the years to follow. Your ESG program – and your public-facing scores – will thank you.
**Note: GRESB survey questions may change year to year, so it’s important to check back in March when the 2022 survey is released!**