GRESB: A key metric for sustainable investing

Investors have become increasingly focused on Environmental, Social, and Governance (ESG) indicators to gauge the long-term viability of their investments.

One of the key tools in this landscape is GRESB (Global Real Estate Sustainability Benchmark). Originally designed for real estate portfolios, GRESB has expanded its reach, influencing investment decisions across various asset classes.

This article examines what GRESB is, how it works, and why a strong GRESB score can boost your company’s attractiveness to investors.

Understanding GRESB

Founded in 2009, GRESB provides standardized data and benchmarks for real estate and infrastructure investments. Essentially, it measures a portfolio’s sustainability performance across multiple domains, including:

• Energy usage: efficiency measures, renewable energy adoption.
• Greenhouse gas emissions: scope 1, Scope 2, and often Scope 3 emissions.
• Water management: conservation and wastewater recycling initiatives.
• Waste handling: reduction, reuse, and recycling protocols.
• Social and governance practices: community engagement, diversity, health and safety, and governance structures.

Through annual assessments, GRESB ranks participants against peers, offering valuable insights for both asset managers and investors.

Why investors pay attention

• Risk mitigation: sustainable properties are more resilient to climate risks, regulatory changes, and shifts in consumer preferences. A strong GRESB score signals lower risk profiles.
• Long-term value: properties and infrastructures aligned with sustainability often have higher occupancy rates, lower operational costs, and better tenant satisfaction.
• Regulatory alignment: many governments now mandate sustainability disclosures. GRESB alignment ensures compliance and preempts further regulatory measures.
• Reputational benefits: investors seeking to meet their own ESG commitments prefer portfolios with verifiable sustainability metrics, and GRESB offers just that.

Components of the GRESB assessment

1. Management and policy: evaluates organizational structure, ESG leadership, and risk management frameworks.
2. Implementation and measurement: looks at specific performance indicators like energy consumption, carbon footprint, and stakeholder engagement.
3. Development and renovation: examines the sustainability aspects of new developments and major renovation projects.
4. Performance measurement and data quality: assesses the reliability and scope of ESG data provided by the entity.

How to improve your GRESB score

1. Set clear ESG goals: align your targets with recognized frameworks like Science Based Targets for emissions or ISO 14001 for environmental management.
2. Data collection and reporting: invest in software tools and expertise to accurately measure energy usage, water consumption, and waste.
3. Stakeholder engagement: collaborate with tenants, suppliers, and local communities to implement sustainability initiatives.
4. Energy efficiency upgrades: retrofitting buildings with LED lighting, smart HVAC systems, or improved insulation often yields immediate performance gains.
5. On-site renewables: solar panels, wind turbines, or geothermal systems can significantly reduce carbon footprints and operational costs.
6. Transparency: publicly disclose ESG metrics in annual reports or sustainability disclosures, enhancing credibility with both GRESB and investors.

The business case for GRESB

A robust GRESB score can lead to tangible benefits for your bottom line:

• Attracting capital: ESG-focused funds and institutional investors are more likely to allocate resources to high-scoring entities.
• Stronger tenant relationships: properties with green certifications and sustainable operations often command higher lease premiums and lower vacancy rates.
• Reduced operational costs: sustainability upgrades frequently lead to significant savings in utilities and maintenance.
• Brand positioning: a commitment to responsible investment and property management can bolster corporate reputation among clients, employees, and the public.

Pitfalls to avoid

• Greenwashing: simply marketing sustainability without real action can backfire. GRESB’s verification process uncovers superficial claims.
• Poor data quality: inaccurate or incomplete data can lead to low scores and erode investor trust.
• Lack of continuous improvement: a one-time sustainability project isn’t enough. GRESB emphasizes year-over-year progress.
• Ignoring social factors: while environmental metrics are critical, social engagement and governance structures also heavily influence GRESB results.

GRESB in the broader ESG landscape

GRESB isn’t the only benchmark out there. Others like CDP (Carbon Disclosure Project) and DJSI (Dow Jones Sustainability Index) also gauge corporate responsibility. However, GRESB’s niche focus on real estate and infrastructure sets it apart as a leading benchmark in those sectors. A high GRESB score often complements strong performance in other ESG ratings, creating a holistic picture of your company’s sustainability profile.

Key takeaways for corporate leaders

• Invest in data management: high-quality data collection is the foundation of a robust GRESB score.
• Adopt a proactive mindset: don’t wait for regulation; embrace sustainability as a competitive advantage.
• Engage your value chain: tenants, suppliers, and contractors all influence your sustainability performance.
• Communicate your progress: transparency fosters investor confidence and can enhance your standing in the next GRESB assessment.

GRESB: A key to corporate sustainability

GRESB has become a critical tool for investors seeking reliable, comparable, and granular data on the sustainability performance of real estate and infrastructure portfolios. For companies, achieving a high GRESB score can unlock investment opportunities, reduce operational costs, and bolster reputation.

Embracing GRESB’s framework today positions your company for long-term success in an investment climate that increasingly values environmental and social responsibility.