Sustainability is a hot button issue for most large-scale commercial operations, but many don’t know where to begin. With the evolving environmental legislation and increased focus on eco-friendly practices, not to mention the allure of going carbon neutral, investors are ready for change, but they often don’t have any real solutions.
As a result, ESG reporting and consulting has evolved into a massive business that fuels the adoption of sustainable practices across the industry. From individuals that guide funds through the process to scoring systems offering actionable analysis, there’s no shortage of support.
Many see benchmarking as a good first step, often turning to established leaders for analysis. Of those scoring options, GRESB is the industry-standard benchmark for ESG performance in the commercial real estate world. But, what really is GRESB, and why should commercial property owners trust their process?
What is GRESB reporting?
GRESB reporting is the process of submitting portfolio-level ESG information to GRESB, an independent benchmarking organization. Using this information, they measure performance within an established framework and provide a rating for property companies, REITs, real estate funds, and developers.
Initially known as the Global Real Estate Sustainability Benchmark, they’ve grown to also cover real assets, including infrastructure. As a result, the organization simply goes by GRESB rather than the longer acronym.
The primary goal of GRESB reporting is to help real estate investors better understand the global impact of their commercial real estate portfolios. Once they have a benchmark, they can take steps to improve their performance in a number of categories regardless of location, size , or industry.
To report to GRESB, participants submit portfolio information on everything from energy consumption to leadership using an assessment portal. The data is then scored using an automated system that awards a total of up to 100 points based on performance. Once completed, they provide a scorecard only to approved entities, keeping details private.
Along with their benchmark report, GRESB provides participants with a roadmap to improve their ESG performance and a plan to communicate results with investors. From there, groups can work on ESG action items and report again in the coming year to continue to improve their score.
In 2023, GRESB provided benchmarks to over 1,800 real estate groups, 800 infrastructure funds and assets, and 170 institutional investors. In total, GRESB offered actionable ESG guidance to portfolios worth up a combined $8.6 trillion in real asset value.
What are the components of GRESB reporting?
GRESB reporting is split into 3 categories: management, performance, and development. Scores for real estate consists of only ratings in management and performance, while the benchmark for construction consists of only management and development.
As a category, management looks at how portfolios are run, how leadership makes decisions, and how they ensure accountability. It measures strategy, policies, reporting, risk management, and stakeholder engagement.
Performance evaluates the operation and daily execution of real estate or infrastructure.Its scope spans across risk assessment, energy, greenhouse gasses, water, waste, and more.
Development measures efforts to address ESG-issues during the design, construction, and renovation of buildings. This category applies to new construction or major renovation projects. It also spans a variety of indicators like materials, building certifications, energy, water, and more.
Depending on property type, the performance and development categories cover mostly environmental concerns of ESG, while management bridges both social and governance. That being said, each category touches multiple ESG dimensions in scope.
When is the GRESB Reporting deadline?
GRESB usually opens the submission window for reporting in April and closes in July. During those three months, participants can submit their ESG information to the group using the assessment portal. From there, GRESB manually validates the submissions and begins an automated analysis.
GRESB then opens a review window for participants in early September, giving them early access to the preliminary findings and results from the data. This provides an opportunity for participants to check their inputs for errors or flag potential discrepancies made during validation.
They make final results available to participants and their investors in early October. No other third parties have access to the data, and additional stakeholders must request access to see results and scores.
Why do commercial property owners need to report to GRESB?
As the industry standard for sustainability benchmarking, reporting to GRESB is practically a prerequisite for property companies, REITs, real estate funds, and developers. With its rich data, the report can improve many facets of investments and boost the financial, operational, and reputational performance of commercial portfolios. Common benefits of GRESB reporting are:
Stakeholder engagement
Commercial investors are increasingly using ESG criteria to inform their decisions regarding budget and capital. GRESB scores allow property owners and managers to align their expectations with investors and make their portfolio more attractive.
Risk management
Receiving and understanding a GRESB report is also an important part of managing risk for larger organizations. With scores across a broad rank of categories, portfolios can identify ESG concerns and prepare to meet increasingly rigorous regulations from local or federal agencies.
Competitive analytics
GRESB also uniquely compares their ESG performance against their peers, offering business intelligence on where they stand against competing entities. While their names stay private, this allows fund managers to understand their results in the context of their investment strategies and communicate them to their investors.
Resource optimization
Positive ESG performance also offers financial benefits for commercial properties. Using the action items provided by GRESB, portfolios can create efficiencies that ultimately save money for both buildings and their tenants.
Global recognition
GRESB reporting, regardless of score, is also a great way to increase the optics of your building and increase reputation in the real estate industry. The benchmark is globally recognized and attaining a score demonstrates a commitment to sustainability to the larger market.
The impact of solar on GRESB reporting scores
While GRESB reporting is composed of a variety of different categories that spans ESG, a commercial solar system can have a large impact on a portfolio’s benchmark score.
Within the performance and development categories (depending on building type), the “Energy” category makes up 14 points of the overall score. It’s the single largest line item within the assessment, which makes sense considering that energy consumption accounts for a large share of a portfolio’s environmental footprint.
Within the performance and development categories (depending on building type), the “Energy” category makes up 14 points of the overall score. It’s the single largest line item within the assessment, which makes sense considering that energy consumption accounts for a large share of a portfolio’s environmental footprint.
Solar also can have a rippling effect across other categories, notably greenhouse gasses (7 points). On their assessment submission, participants have the ability to report renewable energy certifications (RECs) that they have procured or have been retired on their behalf. Solar systems generate these certifications for every one megawatt-hour of electricity generated from a renewable energy source, making them a valuable piece of overall ESG strategy.
Solar systems can also qualify buildings for building certifications, which make up 10.5 points of the performance category. Renewable energy systems are an important part of qualifying for a certification like LEED certification or Energy Star, and make qualification much easier.
How King Energy can help implement solar across your portfolio
That being said, adding a solar system can be an incredibly complicated endeavor–especially for a commercial portfolio. They often come with red tape like complicated agreements, technical challenges, or logistical problems with tenants. It can also be difficult and expensive to manage and service solar systems across an entire portfolio.
King Energy makes solar simple for property companies, REITs, real estate funds, and investors. Whether you’re looking for a single system for a commercial site or renewable energy infrastructure across your entire portfolio, we can implement solar at any scale.
King Energy can implement solar at any scale.
We handle the planning, permitting, and installation of the solar system, paying all costs associated. Once the system is live and generating RECs, we also service and maintain the program for its 20+ year lifespan without any action from managers. Plus, property owners are paid monthly rent for their roof space, increasing their rent roll and property value in the process.
If your investment group is looking to start reporting to GRESB or hoping to improve upon scores from the previous year, focusing on the “Energy” category is the right place to start. With King Energy as a partner on your team, it’s incredibly easy to implement solar across your sites, bringing renewable energy to your portfolio and improved benchmarks to your boardroom.
Contact sales for a proposal for your commercial real estate portfolio.
Source: https://documents.gresb.com/generated_files/real_estate/2023/real_estate/assessment/complete.html