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Changes to GRESB 2018 Real Estate Survey Part 2 – The Detail

Last week, my colleague Paul Sutcliffe penned a blog briefly setting out the headline changes to the GRESB 2018 Real Estate Survey.  Having had a bit more time to digest these updates, below I provide a detailed look at how the survey has changed this year. I also outline some key practical considerations.

Unlike Paul’s blog, this one is very much aimed at those working closely with the GRESB RE survey. For those that fit this bill (btw, lucky you/us!), please do read on and don’t hesitate to get in touch if you would like to discuss any of these changes further.


Entity and reporting characteristics – Composition of the entity’s standing investments during the reporting period (RC5.1)

Change: It will no longer be possible to report in units. Rather all property types will need to report in sq. ft. or m2.  

EVORA comment: This may present a challenge to many respondents as for certain property types, floor area surveys are often not available (e.g. hotels, student accommodation and car parks). In some instances, there may be other sources of information that can be used. For buildings (i.e. not car parks), this can include the EPC certificate. In most cases an area is also likely to be stated on insurance documents. Where necessary, entities may need to make assumptions to convert units into areas. For this, we suggest looking to country-specific planning regulations, which may have minimum space requirements – e.g. for car parks.


Management – Inclusion of ESG factors in annual performance targets of employees (2017: Q6)

Change: An additional sub-question has been added to this indicator, asking whether performance against these targets have ‘financial’ and or ‘non-financial consequences’. The list of possible ‘employee’ types has also been reduced from nine down to four (remaining options: ‘All employees’; ’Board of Directors’; ‘Senior Management Team’; and, ‘Other’). A requirement for a supporting evidence upload has been added.

EVORA comment: According to the pre-release, the scoring of this question has not changed, suggesting that the new ‘financial’ / ‘non-financial consequences’ differentiation is for information only. Therefore, we do not anticipate this question causing additional stress for respondents compared with last year. However, this change does hint at a wider trend seen across the ESG industry towards favouring a link between sustainability performance and financial incentives. Perhaps this is something we will see GRESB adopt in future versions of the survey.


Policy and Disclosure – Policies in place that address governance issues (2017: Q9)

Change: The list of governance issues that could be covered by an entity’s policies has been expanded; new options include data protection & privacy, fiduciary duty, fraud, political contributions, and whistleblower protection. The number of points awarded to this question has increased, from 1 to 2 points.

EVORA comment: Our expectation is that for larger reporting organisations few if any of these options will present a significant challenge. However, for smaller investment houses we wonder if for one or more of these new selections it may be difficult to provide the necessary documentary evidence to demonstrate that such issues are covered by a formal policy. We note that the full question includes an extensive list of options and it is not necessary to select all in order to obtain full marks. For anyone with particular concerns, we suggest doing a gap analysis against the full question.


Policy and Disclosure – *NEW INDICATOR* – Monitoring diversity (i.e. C-suite, Board, Management Committee)

Change: A new indicator has been added that asks if and how respondents monitor diversity amongst its governance bodies. The indicator will not be scored and will be for reporting purposes only in 2018.

EVORA comment: As with the previous indicator, we anticipate that larger (particularly listed) respondents will already be doing some or all of this – e.g. for certain countries / organisations this may already be a legislative requirement (e.g. EU non-financial reporting directive). For other, likely smaller, entities this indicator may require additional work and raise questions around the sensitivity of this information. We recommend engaging the relevant stakeholders (e.g. C-suite, HR department) as early as possible to work through any sensitivities and, if determined appropriate, a strategy for collecting this information. It is worth noting that for GRESB the pattern is often that new questions are introduced as ‘optional’ or for ‘reporting purposes only’ in year one, but from year two or three, they often become scored.


Policy and Disclosure – *NEW INDICATOR* – Commitments to ESG leadership initiatives

Change: A new indicator has been added that asks which third-party standards or groups respondents are members of / signatories to (e.g. IIGCC, PRI, RE 100, science based targets, TCFD, UNGC). The indicator will not be scored and will be for reporting purposes only in 2018.

EVORA comment: We have mixed feelings about this indicator because as worthy as these initiatives are, we feel that many are more appropriate for larger organisations that typically have more resources available to manage membership/alignment to these schemes. As mentioned above, ‘reporting purposes only’ questions often become scored in subsequent years.

Please note: We have experience support client’s alignment to various such initiatives and would be very happy to provide you with a complementary briefing on the opportunities and challenges presented by each of these initiatives. Contact us.


Policy and Disclosure – *NEW INDICATOR* – Process for communicating ESG-related misconduct, penalties, incidents or accidents

Change: A new indicator has been added that asks if respondents have a process for communicating ESG-related misconduct, penalties, incidents or accidents and if so, which stakeholders are included in the process. The indicator will not be scored and will be for reporting purposes only in 2018. However, according to GRESB this information may be used “as criteria for the recognition of 2018 Sector Leaders”.

EVORA comment: We anticipate that this indicator will be acceptable to most respondents.


Risk and Opportunities – Asset-level environmental and/or social risk assessments of standing investments during the last three years (2017: Q15.2)

Change: This indicator now requires reporting of ‘percentage (%) portfolio covered’ for each type of risk assessment. This indicator also now requires reporting of the third-party standard to which risk assessments are aligned (e.g. ISO 31000). Responses will be scored according to the issues selected and their respective % portfolio coverage. The open text box will no longer be scored and alignment to a third-party standard will not be scored (only required for reporting purposes).

EVORA comment: We can understand the rationale for this change, however, we have concerns over the additional reporting burden this will present for entities with larger portfolios. We note that some options are likely to be easy to determine a % coverage e.g. ‘GHG emissions’ and ‘regulatory risk’. Conversely, other options may require asset-by-asset consideration, such as ‘contamination’ and ‘flood risk’.


Risk and Opportunities –  Implementation of measures during the last four years to improve waste management (2017: Q19)

Change: This indicator remains the same as last year, however, it will be scored (whereas last year it was for reporting purposes only). This indicator will attract a maximum of one point.

EVORA comment: We agree with the principle behind this update, which increases the importance of and therefore focus on implementation of waste management improvement measures. This brings waste and resource management in line with the energy and water versions of this question and further shifts the overall balance of GRESB towards measuring / incentivising green ‘walk’, as well as ‘talk’.


Stakeholder Engagement – Employee and tenant satisfaction surveys (2017: Q34.1 & Q37.1)

Change: An additional sub-question has been added to this indicator, asking if and what ‘quantitative metrics’ were included in the surveys (e.g. overall satisfaction score). This new sub-question will not be scored and will be for reporting purposes only in 2018.

EVORA comment: This is a logical evolution to this question and should be borne in mind by anyone designing a satisfaction survey. Ultimately, it should improve quantification of what has historically been a largely qualitative issue.


Stakeholder Engagement – Monitoring of compliance with sustainability-specific requirements in lease contracts (2017: Q39.2)

Change: An open text box has been added to enable GRESB to further validate the approach taken by respondents to monitoring compliance with green lease clauses. Last year, this question was for reporting purposes only; however, this year it will attract a maximum of one point.

EVORA comment: In our view, this is another logical evolution to the survey. However, we do note that the process behind tracking green leases may not provide sufficient information on the number, depth and strength of green clauses in place.


Stakeholder Engagement – *NEW INDICATOR* – Engaging with supply chains to ensure ESG requirements are met

Change: A new indicator has been added that asks if respondents engage with supply chains to ensure ESG requirements are met. If ‘yes’ is selected, respondents are asked to describe the process in an open text box. The indicator will not be scored and will be for reporting purposes only in 2018.

EVORA comment: We anticipate that this indicator will be acceptable to most respondents and note an overlap with a subsequent question on monitoring supply chain compliance with ESG requirements.


Stakeholder Engagement – *NEW INDICATOR* – Stakeholder grievance mechanism

Change: A new indicator has been added that asks if respondents have a formal process for stakeholders to communicate grievances. If ‘yes’ is selected, respondents are asked to select from a list of ‘characteristics’ of the grievance process (e.g. rights compatible, transparent) and stakeholders that the process applies to (e.g. community, contractors). The indicator will not be scored and will be for reporting purposes only in 2018.

EVORA comment: As with most of the other new indicators, we anticipate that larger respondents will already be doing some or all of this. For other, likely smaller, entities these processes are less likely to be formalised and therefore demonstrating compliance may require additional work.


Performance indicators – Landlord versus tenant data collection and coverage (2017: Q25.1 & 27.1)

Change: Although tenant energy/water consumption data is still requested, GRESB have committed to reducing the weighting it receives within the scoring and benchmarking of the ‘data coverage’ element of responses. Correspondingly, they will shift the emphasis onto data coverage of the landlord-controlled energy and water supplies.

EVORA comment: We fully support this update and have been lobbying GRESB on the issue for a while. For us it makes complete sense to focus scoring on what the landlord has control over, rather than their tenant activities, which they often have little ability to influence (particularly for certain property/portfolio types – e.g. industrial/logistics, FRIs).


Performance indicators – Like for like data coverage area (2017: Q25.1 & 27.1)

Change: Respondents will now have to report on the size of the ‘like for like’ portfolio reported within the energy and water consumption data tables.

EVORA comment: We support this update and note that this should not add additional reporting burden for those using a good asset-level data collection and validation software tool, such as SIERA.


Performance indicators – Like for like consumption trends (2017: Q25.1 & 27.1)

Change: The scoring of reported energy and water consumption trends for the ‘like for like’ portfolio has changed. Last year all three points available for this indicator were attributed to the direction and scale of the consumption trends. From this year, one point will be awarded for data availability and only two points attributed to the consumption trend.

EVORA comment: This change should provide investors with greater clarity on the proportion of the portfolio that is driving change. However, as the like-for-like consumption trend is the only truly ‘performance based’ indicator, in our view, stealing points from the consumption trend aspect and giving them to data coverage is not entirely progressive.


Performance indicators – Scope 3 emissions (2017: Q26.1)

Change: Reporting of Scope 3 greenhouse gas (GHG) emissions has become mandatory. In the context of GRESB, Scope 3 emissions include those associated with energy consumption in tenant areas and/or indirectly managed assets. From this year, Scope 3 emissions will be included in the scoring and benchmarking of responses, both in terms of data coverage and the ‘like for like’ consumption trend.

EVORA comment: We understand the principle behind this update, however we question the intention to score the Scope 3 like for like consumption trend, as well as data coverage. This is because, as mentioned above, generally tenant energy consumption and therefore GHG footprint is beyond the landlord’s control. As above, we note that this should not add additional reporting burden for those using a good asset-level data collection and validation software tool, such as SIERA.


Building Certifications – Green building certificates during design/construction/renovation or operation (2017: Q30.1 & 30.2)

Change: There is an expansion to the scope of these questions to include a requirement to provide certification levels/scores achieved (in addition to the overall schemes applied). This element will not be scored in 2018; it will be for reporting purposes only.

EVORA comment: We are supportive of this update and again, note that this should not add additional reporting burden for anyone using a good asset-level data collection and validation software tool, such as SIERA.


To find out how EVORA can help you to navigate GRESB, whether you are a first timer or an experienced respondent, then please get in touch.

 


GRESB Premier PartnerAs a GRESB Real Estate Premier Partner, we are perfectly positioned to provide GRESB support. View our official Premier Partner profile.

We can work with you to complete the submission and understand your scoring, as well as develop a sustainability plan that will improve your future GRESB performance and align with your organisation’s key environmental objectives.

 

BEIS framework consultation: Streamlined Energy & Carbon Reporting

Last month, the Department for Business, Energy & Industrial Strategy (BEIS) opened a consultation on their new proposed framework for energy and carbon reporting. This process has the potential to bring environmental data smoothly into the mainstream, but could also just create further tangles in the knot that is the current energy reporting landscape.

Between the CRC, ESOS, climate change agreements (CCAs), and mandatory greenhouse gas reporting (MGHG), there’s a lot of existing legislation that either encourages or coerces companies into monitoring, reporting, and acting upon energy and carbon data. It must be easy for companies to get lost in this complex legislative landscape so, with this in mind, the basic premise outlined in the BEIS framework consultation document of streamlining the reporting process makes a lot of sense.

The million-dollar question, however, is how exactly should this new framework be designed? In particular: who should report and what should be reported?


Firstly, who? There are different ways to scope the policy that fit into three broad categories: employee numbers, financial turnover, and energy consumption. Any one or a combination of these could be used to define what counts as a ‘large’ company and hence who will be required to report under the proposed scheme(s).

The consultation also asks whether Limited Liability Partnerships, which are not subject to the Companies Act (meaning they are not covered by the framework in its current form), should be made to report too. This would increase the burden of implementation, but would also greatly expand the coverage of the scheme and the volume of data being reported.

There are different ways to scope the policy that fit into three broad categories: employee numbers, financial turnover, and energy consumption. Click To Tweet

Secondly, what? There are also different things that companies could be made to report. Centrally, there is total energy use, which can be broken down into electricity, gas, transport, and potentially some other categories, and emissions, which can be broken down into scope I, II and III. There are also additional options such as intensity metrics, or listing opportunities identified in audits and whether they have been acted upon. This last one could be a channel to formally tie ESOS requirements into the framework.

This last one could be a channel to formally tie ESOS requirements into the framework.

Finally, another question that should be given more attention is: how? Specifically, how will these large companies manage the data collection process, and how will its quality and accuracy be assured. The presence of good data is integral for pursuing the far-reaching energy reduction goals of the UK Climate Change Act and the Paris Climate Agreement, but the consultation document only asks for recommendations of the guidance that might ease reporting burdens for companies towards the end, and offers even less on how the Government intends to ensure the quality of data.


At EVORA, we recognise the frustrations and resourcing it can take to collate, analyse and report energy data on a national and international scale. It is why we developed SIERA to seamlessly collate, verify and report data to enable decisions to be made on portfolio and building optimisation programmes. Our clients are seeing the positive impact of SIERA, which has helped one portfolio achieve a 3% like for like reduction in one year and individual buildings save up to 26% through operational improvements.

Our clients are seeing the positive impact of SIERA, which has helped one portfolio achieve a 3% like for like reduction in one year and individual buildings save up to 26% through operational improvements.

The consultation also asks for recommendations on possible complementary policies that might help drive further emissions reductions. Currently, there is no additional incentive proposed to help reduce consumption beyond the fact that the published report will be available to third parties and therefore be subject to investor and public scrutiny.

Personally, the outcome I would like to see is a framework that requires large quoted companies & LLPs to report global energy use, total emissions and intensity, whilst requiring large unquoted companies & LLPs to report UK energy use, total emissions and intensity, with all of the above required to undertake ESOS-style audits every four years and then report the opportunities identified and whether they have acted upon them each year. I would align the definition of ‘large’ with the UK Companies Act definition to minimise confusion, and give it a stand-alone bespoke report in the annual report portfolio to exemplify its importance. Such a design would streamline the CRC, ESOS, and MGHG schemes all into one package, greatly simplifying the reporting landscape.

Such a design would streamline the CRC, ESOS, and MGHG schemes all into one package, greatly simplifying the reporting landscape.Click To Tweet

But the important takeaway here isn’t my opinion, it is that this consultation has the potential to radically change the environmental reporting landscape. Therefore, businesses need to make sure they are aware of the proposals and what it could mean for them. We here at EVORA are in the process of producing a company response to the consultation, and if you wish to do the same then the full consultation document as well as information on how to respond is available on the BEIS website.


This blog has done its best to summarise a 40-page document in a few hundred words, but if you need any additional information or assistance regarding the consultation, or any of the other policies mentioned in this blog, feel free to get in touch and our team of experts will be happy to help.

2017 GRESB Results: Future developments for enhanced portfolio sustainability performance

I, like many others, will be excited to receive the 2017 GRESB results when they are released tomorrow, 6th September. The rating approach, often simplified by how many Green Stars have been achieved, veils the trials, tribulations and efforts undertaken over the past year (or longer in many cases) to prepare for and complete the survey.

Visit our GRESB support service page.


Whilst I eagerly await gratifying news on how our clients fared for their past efforts, I am certainly more enthusiastic about collaborating on future programmes that will deliver value to their portfolios through making buildings productive, profitable and resilient to change.

In a previous blog, I introduced how the framework of an Environmental Management System (EMS) structured according to ISO’s Plan-Do-Check-Act methodology, is central to implementing successful real estate sustainability strategies that also result in better than peer average GRESB results.

In this blog, I introduce how insights into future developments of the GRESB survey will also provide that same win-win result of enhanced portfolio sustainability performance and GRESB ratings.


The Performance Indicator – a three-layer approach

The Performance Indicator (PI) ‘aspect’ is one of seven aspects in the GRESB survey. It holds joint top weighting, at 25%, with the Stakeholder Engagement aspect. Arguably, it is the Performance Indicator aspect that can best portray (to investors) how portfolios are performing and, importantly, contributing towards meeting the ambitious international targets set in the Paris Agreement. The PI aspect allows participants to set out their long-term sustainability targets together with quantitative disclosures on data coverage, like-for-like change and intensity values (KPIs) for energy, water, waste and carbon impacts.

A concern, however, is that the current approach does not provide investors with sufficient comparability of portfolio performance. This concern is underpinned by the fact that the current GRESB scoring approach rewards data coverage more highly than like-for-like change (concerning only year-on-year change, which certainly has limitations), but moreover, that no points are awarded for long-term changes to portfolio intensity values, such as kilowatt hours per metre square of lettable space. Only the methodology used to calculate intensities is scored, rather than the change in intensity values over time. The reason for this is likely due to a lack of data transparency and potential accuracy issues that stem from portfolio level, rather than asset level, reporting.

Current discussions indicate that GRESB is willing to introduce an additional scoring element for participants that can disclosure transparent and accurate asset level data.Click To Tweet

GRESB recognises these issues and has set out to address them through a series of benchmarking committees, which EVORA participants in. Current discussions indicate that GRESB is willing to introduce an additional scoring element for participants that can disclose transparent and accurate asset level data. I expect GRESB to introduce their three-layer approach to Performance Indicator scoring in the 2018 or 2019 survey. This approach is set out below:

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  1. All assets are evaluated on Transparency, based on data availability
  2. Only assets with high transparency levels can be evaluated on data Quality, given the external forms of data assurance or internal capabilities of data analysis (asset level data checks)
  3. Only assets with high data quality can be evaluated on Performance, most likely driven by like-for-like and intensities values.

Enhanced scoring methodology

GRESB is seeking to enhance its scoring methodology with the objective that only assets with high quality data are benchmarked to ensure fairness. This strategic change may assist in providing investors with more certainty on sustainability performance and comparability between portfolios.

GRESB is seeking to enhance their scoring methodology with the objective that only assets with high quality data are benchmarked to ensure fairnessClick To Tweet

Requesting asset level data will undoubtedly increase the reporting burden for a number of participants – most notably those who painstakingly enter portfolio level data directly into the portal.

Data can already be submitted at the asset level, either via an API link or the Asset Level Interface. However, this function is not used by all participants and furthermore, if you do not have the benefit of a sustainability software platform, such as SIERA  (which seamlessly updates the PI sections using the Asset Level Interface), then data collection and analysis will remain a manual, laborious task.


So why bother?

As mentioned above, the reward of additional points will be a sufficient driver for many. However, GRESB aside, let’s not forget that to make any notable impact on the performance of a portfolio, it is essential to have asset level data (or preferably meter level data) available in a format that can be easily accessed, interpreted and communicated to Asset and Property Management Teams in order to effectively manage sustainability impacts across a portfolio.

For more information on using data management systems to enhance portfolio performance see here.

Whilst some may see this change as GRESB introducing additional challenges and reporting burdens, I applaud their ambition in seeking to drive change in the real estate industry through promoting the availability and disclosure of investment grade asset-level data.

I applaud their ambition in seeking to drive change in the real estate industry through promoting the availability and disclosure of investment grade asset-level data.

It is important to reiterate that reporting asset, or even meter level data, doesn’t have to be a burden. Many participants, including all our clients benefitted from using the direct interface provided by SIERA to seamlessly update the required field in the Performance Indicator section and additionally, to review opportunities to make their buildings productive, profitable and resilient to change.


What’s next?  Plan-Do-Check-Act

Reverting to the Plan-Do-Check-Act methodology, I recommend that Fund, Asset and/or Property Managers review if they can effectively understand and manage sustainability impacts at asset and meter level using existing programmes. Where there is any doubt, I encourage stakeholders to:

  • Plan – start early and identify what you can meter already and what you would like to meter
  • Do – implement an appropriate metering strategy according to the value proposition of doing so
  • Check – utilise the powerful Monitoring & Targeting, and reporting tools provided by SEIRA
  • Act – use the investment grade data obtained through SIERA to drive improvements across your portfolio(s)

If you’d like to talk to us about your GRESB results, or about SIERA, we will be at the London results launch on 13th September. Please don’t hesitate to get in touch to arrange a meeting or a demo.

 


GRESB Premier PartnerAs a GRESB Real Estate Premier Partner, we are perfectly positioned to provide GRESB support. View our official Premier Partner profile.

We can work with you to complete the submission and understand your scoring, as well as develop a sustainability plan that will improve your future GRESB performance and align with your organisation’s key environmental objectives.

Six weeks in the life of an EVORA Data Analyst

The EVORA team has grown by 108% since May last year. Jenny, our new EVORA Data Analyst tells us what the first six weeks of EVORA life have been like.


Straight into GRESB deadline season

I joined as an EVORA Data Analyst at an extremely busy time of the year, it was the business end of the GRESB window, which resulted in me being plunged into the deep end from my first day. After my initial induction where I learnt more about EVORAs recent expansion I began on my first (of many!) GRESB tasks. GRESB was a completely new concept to me, and the amount of data which needed to be collected and analysed was mind-boggling, but thankfully we had SIERA to take a lot of the pain away. Whilst being given responsibility on the first day can be a little bit daunting it was great for me as the usual first day nerves didn’t have time to take hold. The main problem was the fact that it was the hottest day of the year and everyone in the office was melting!


CRC – allowances, annual reports and data audits

With GRESB behind us just a couple of weeks after joining, the CRC deadline was then looming. At University, I had briefly studied the CRC so I knew the basic principles and the intention of the legislation. However, I wasn’t aware of the amount of data which needed to be collated and the amount of money our clients pay for allowances in order to ensure compliance. Calculating the allowances, compiling annual reports and completing data audits resulted in me taking a lot on board in a short space of time – which was a steep learning curve. I was shocked to discover that following the 2018-19 reporting year the government are scrapping the CRC. Whilst it may be considered overly burdensome with regards to the time taken to collate the data and general administration – it at least keeps energy on the business agenda. Whilst adding extra monies onto electricity and gas bills (after 2019) is going to result in a similar amount of monies going into the government purses it doesn’t exactly have the same impact on business as ordering £200,000 worth of carbon allowances!

I was shocked to discover that following the 2018-19 reporting year the government are scrapping the CRC. Whilst it may be considered overly burdensome with regards to the time taken to collate the data and general administration – it at least keeps energy on the business agenda


SIERA – collate and analyse vast data sets quickly and easily

In addition to the GRESB and CRC deadlines, quarterly performance reporting has become a huge part of my daily life at EVORA. With the assistance of SIERA I collate and analyse vast data sets of electricity, gas and water consumption across various assets for multiple clients. The most rewarding part is when the performance reports we produce directly help to focus the facilities and building managers on the areas which matter. For example, we recently issued a quarterly performance report to a building manager which highlighted poor gas performance. Within an hour, emails had been sent to tenants asking about their heating requirements and the M&E engineer was investigating potential issues with the boilers. Without our reports – none of that would have happened, they might have just noticed that their bill was a bit higher for the quarter. I find this part of my job extremely fulfilling as these reports directly help our clients to discover their inefficiencies, improve the performance of their assets and ultimately save money.

The most rewarding part of this is when the performance reports we produce directly helps to focus the facilities and building managers on the areas which matter.Click To Tweet

When I mentioned at the start of this blog that I joined EVORA at a particularly busy time of the year I was wrong. I don’t think there ever is a quiet time of the year at EVORA! I have joined EVORA at an exciting time; the recent rapid expansion of the company demonstrates just how in demand our services are. I can’t wait to get stuck into the next task sent my way (potentially Environmental Management System work or shadowing an energy audit). Here’s to the next six weeks!


You can keep up to date with vacancies at EVORA on our social media channels: Twitter, LinkedIn and Instagram.