Energy Savings Opportunity Scheme (ESOS) – a burden or an opportunity?

Regulatory reporting can often feel a burden, and in areas which are more specialist, such as energy and carbon reporting, it can be a daunting experience.

Energy and carbon reporting regulations have principally been introduced to highlight the materiality of the impacts and provide visibility of the opportunities to deliver both energy and cost savings.

The reality is that many organisations only want to be compliant and it is only the few who see the opportunity to push forward opportunities and create a competitive advantage.

A good example of this is the Energy Savings Opportunity Scheme (ESOS).


ESOS (Article 8 in Europe) is upon us again in the guise of Phase 2 and will impact large undertakings both in the UK and Europe, requiring them, in simple terms, to measure 12 months of energy across their organisation and identify energy efficiency initiatives through energy audits. For more information on meeting compliance read our ESOS compliance guide.

ESOS has been developed to help organisations understand their total energy use and identify opportunities to deliver energy and cost savings, which is presented to senior management. It is hoped by the government that ‘low hanging fruit’ with pay backs of less than a year will be a no brainer to organisations to implement.

Although the deadline is the 5thDecember 2019, there are advantages in kicking off early with the energy audits, firstly to have a project plan in place to ensure you meet the deadline and secondly to identify cost-effective energy efficiency opportunities, which could provide immediate benefit to the financial bottom line. In Phase One, EVORA identified £2.8M of low cost energy savings for its clients.

Do you see ESOS as a cost to your business or an investment?

ESOS only requires you to identify the opportunities and ironically many organisations did not implement the initiatives found in Phase One. This turns ESOS regulation into a cost rather than an investment – a significant missed opportunity.

An example of the quick win opportunities is highlighted by work EVORA delivered in collaboration with a property management company to deliver an energy efficiency programme utilising EVORA’s energy management software, SIERA. The graph below displays the weekly energy profile at the office building (110 Queen Street in Glasgow) before (light blue line) and after interventions (dark blue line) were brought about by the improvement programme.

Significant improvements in the energy profile can be seen, especially at the weekend, which has delivered savings of 30% (greater than £30,000 actual savings in the year) without any capital expenditure. This was achieved despite increased occupancy at the property throughout the year and payback was less than three months.

For more information on how we delivered these savings read the full case study here.

This is certainly not the exception and we have worked with an array of sectors including power generation, real estate, retail and hotel & leisure to optimise energy efficiency, often achieving surprising results.

If you’d to learn more about how we can support you with your ESOS regulation and turn a compliance cost into a long term investment, contact us.

GRESB Survey: We answer your questions

With many of us currently knee-deep in spreadsheets for this year’s GRESB submissions, we took some time out to speak with one of our Consultants and ask your questions about the GRESB survey.

About the survey

GRESB is an investor-driven assessment of sustainability performance, that gives Real Estate and Infrastructure funds of all shapes and sizes the opportunity to measure and showcase their performance on a range of environmental, social, and governance issues, and compare themselves to similar entities in the industry.

Real Estate and Infrastructure funds participate in two separate GRESB Surveys which, whilst having a different set of questions, have a similar structure and cover many of the same core ESG issues. At EVORA we have in-house experts on both surveys, so if you’re looking for assistance with your submission or just want some more information, then give this blog a read to get the basics and feel free get in touch if you want to know more.


Q.  How long is the overall submission process to the GRESB portal? Is there a timeline for the submission process?

The final GRESB deadline is July 1st, but a submission doesn’t come together over night! I would say that, to allow time for careful completion of the portal and a proper review, you generally need to have started collating data and evidence in March and you want the pieces in place by early June.

GRESB also offer a ‘Response Check’, where a GRESB employee will evaluate your response and help ensure you’re not going to miss out on points through mis-completion or insufficient evidence. The deadline for this is June 8thso, whilst you don’t have to be finished at this juncture, you want to be most of the way there to get the maximum benefit from the Check.

Q. What kind of evidence do I need to prepare before the GRESB portal opens?

To uphold the credibility of GRESB, a large amount of supporting evidence is required throughout the Survey, and rightly so. Certain indicators are entity specific, such as tenant surveys, risk assessments and completion of technical building audits, whereas others do allow responses from the Organisation / investment manager, such as employee and governance issues.

The key thing here is to make sure people on all levels are well-informed of what GRESB entails for them and that, linking back to the previous question, you start getting organised early!

Q. What is the most efficient way of collating and submitting to the GRESB portal if I have an international portfolio? 

At 25.6%, the Performance Indicators section carries the greatest weight of all the Aspects. Therefore, whilst it is often a challenge to organise, the hard work is heavily rewarded by GRESB. I would highly recommend that you get some purpose-built environmental data management software such as ours, SIERA, which is designed with GRESB in mind and can produce an import sheet which can be uploaded straight onto the GRESB Portal. Data collection programmes can be at all levels of temporal granularity, from a one-off annual request ahead of GRESB, to half-hourly data imports into our M&T module.

Q.  How can I improve my GRESB scores?

Each entity is a little bit different and will be stronger and weaker in different areas, however these are some general areas that you can target:

  • Get an EMS – Having an Environmental Management System in place not only scores points directly on the GRESB Survey, but has the indirect effect of planning and guiding your ESG strategies to be as effective as possible.
  • Sort your data – As outlined above, PI data is a huge part of the Survey so it’s worth the effort of organising it. EVORA’s bespoke environmental data management software, SIERA, is perfect for minimising effort and maximising performance in these elements of GRESB.
  • Green Building Certifications – with a global average of just 46 out of 100 last year, the Certifications aspect is a common weakness for participants. At EVORA, we have in-house BREEAM, WELL, LEED and Fitwel Assessors, so get in touch if you’re interested in certification to bolster your GRESB score and reap the wider benefits of certification.

Read more about our research and how to improve your score in this blog.

Q.  Can you make a submission without disclosing the results?

A cornerstone of GRESB, as an investor-driven sustainability assessment, is that the results can be made visible to investors. However, there is a “Grace Period” for first time participants allowing them to opt-out of sharing  result whilst they get to grips with the Survey.

Q.  Can I only submit my evidence and responses in English?

Responses do have to be made in English, however, GRESB will allow you to submit foreign language documents as evidence. In these circumstances, be sure to clearly indicate in the open text boxes provided exactly where in the document the relevant information is held, along with a thorough summary of content. This will help ensure nothing is missed or misinterpreted.

Q. What happens after I make my submission?

GRESB’s response validation process takes place in July and August, with the official results released at a series of events across the world in September. You will also receive your Benchmark Report at this point, which gives you the full breakdown of how you did on each Dimension, Aspect, and Indicator. Off the back of this, EVORA offers a “GRESB Gap Analysis” to new and existing clients, where one of our in-house experts will evaluate your performance and pick out key opportunities for improvement, and can then help implement them. In truth, for top GRESB performers, the process never really stops! The Survey really rewards comprehensive, sustained sustainability programmes.


Year-on-year the GRESB survey is becoming increasingly comprehensive. This year increased scrutiny has been placed on some existing questions, such as asking that Green Building Certification ratings be provided, some new questions have been added, and every participant will be subject to at least a low-level of validation. Furthermore, the currently optional Health & Wellbeing and Resilience modules are set to be built into the main Survey next year and in three years respectively. I expect this trend of increasing complexity and moving goalposts to continue as investor demands expand and change, so having an experienced GRESB consultant to provide support will become increasingly important.

Here at EVORA, we are entering our seventh year assisting with GRESB submissions, and have acquired a great knowledge base in this time to help maximise your GRESB performance. We have experience of delivering more than 150 submissions, including a number of 5 Star submissions and Sector Leader status.

In conclusion, I think the key takeaways for a successful GRESB submission is to: make sure everyone on all level is well informed and knows their role, start your submission early, use SIERA, and get an experienced consultant on board to help out.

If you have anymore questions about the content of this blog or GRESB in general, get in touch and our team of experts will be happy to help.


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.

Do your buildings meet the Minimum Energy Efficiency Standards (MEES)?

Are your assets at risk as a result of the Minimum Energy Efficiency Standards (MEES) regulations which came into force on the 1st of April 2018?

In a previous blog post titled “MEES regulations: How they will impact flexible workspace from April 2018” written by my colleague Russ Avery, he gave a 10-point strategy on how you can manage MEES risks.


The regulation means that landlords cannot let, extend or renew a lease for F and G rated properties unless an exemption applies. One such (temporary) exemption is that the EPC rating cannot be improved through measures that pay for themselves within a 7-year period.

E rated properties may still be at risk from MEES regulations!

Landlords and their professional advisors should also be aware that there was a fundamental change to the EPC calculation methodology effective April 2011.

This means that assets which had their EPCs prepared prior to this date could be at risk even if they were E ratedClick To Tweet

This means that assets which had their EPCs prepared prior to this date could be at risk even if they were E rated. We can identify these assets after reviewing your existing EPC’s and help establish improvement programmes to improve your rating.


What implications will this regulation have on your assets?

MEES regulations will need to be factored into the day-to-day asset management of commercial real estate. We consider below some implications of the regulations.

Transactional value: We have first-hand evidence as a company that poor EPC ratings affect transactional values. We know of transactions where hundreds of thousands of pounds have been ‘chipped’ off the agreed purchase price once the due diligence processes established incorrect EPC certificates were in place.

Valuation: Both yields estimated rental values (ERVs) are ‘at risk’ because of MEES. Research indicates that the effect of disregards at a rent review and under a 1954 Act lease renewal on ERVs could impact capital values by more than the cost of relevant improvements.

There is an assumption by some professionals in the market that MEES will hit secondary and tertiary assets more than prime real estate. This may be incorrect due to the way in which commercial property is typically valued. In its simplest form, capital values are determined largely by the rental value of the premises, either actual or potential. A valuer looks at this income and applies an appropriate ‘all risks yield’ to reflect the security and term of income, and any potential for future growth. This is represented by the simple formula: NI x YP = CV, where NI in net income, YP is years purchase, and CV is capital value.

The cost of the installation (or disregard) of building services is reasonably uniform subject to locational adjustment factors. Technologically speaking, a heat pump installed in London will be the same as a heat pump installed in Hull, and cost is affected by labour rather than the technology itself. A prime yield might be 5%, where as a secondary yield might be 10%. A £1.00 reduction in rental value as a result of MEES will therefore affect capital values by £20.00 on the prime investment (100/5 = 20 YP) and by £10.00 on the secondary investment (100/10 = 10 YP).

Dilapidations: The effect of Section 18 Valuations and supersession generally have the potential to render tenant repairs useless because of MEES. If precedent is established for this, then the dilapidations market could be significantly impacted by MEES. We see this as a potentially market disruptive issue for property. Read more about dilapidations here.


How to manage MEES (our previous 10 step guide)

  1. Review how you store your data
  2. Identify any gaps in the data and any assets at risk
  3. Consider the use of software, such as SIERA
  4. Use CIBSE accredited assessors
  5. Ask your assessor to review the existing EPC for accuracy
  6. If you need a new EPC, ask for an indicative certificate
  7. Review point 6 in the context of the lease
  8. Consider ways to recapture capital costs through energy savings
  9. Retain future access to the energy model used to prepare the EPC
  10. Review how operational performance can be monitored – and even linked to the EPC model

EVORA EDGE can support you in all cases as we employ competent CIBSE qualified level 5 EPC assessors.


Our expertise

EVORA can identify and manage MEES derived risk by developing an asset management strategy at the fund and portfolio levels.

Our technical engineering division EVORA EDGE is experienced in using our revolutionary BIM:SAM– Building information modelling for Strategic asset management to manage MEES risks, engineering and energy efficiency, resource efficiency and capital cost planning.

Building Information modelling (BIM) can be used for high-level MEES risk assessments and act as a ‘digital passport’ for your building, recording data and information of the building and its services.

The BIM can be integrated into our SIERA software to create a powerful monitoring and targeting (M&T) toolset.

BIM: SAM merges real intelligence and innovation with strategic asset management.

“By using a dynamic BIM model, alongside monitoring and targeting through our SIERA software, we can bring real intelligence and innovation within the strategic asset management approach.”

Neil Dady, Director, EVORA EDGE


To ensure your buildings remain lettable after the 1st of April 2018. Please don’t hesitate to get in touch with our experts.

Download our BIM: SAM brochure for all the information in a handy PDF and see our BIM:SAM approach in action.

GRESB Support 2018

GRESB reporting season for real estate and infrastructure participants is here again, and as a GRESB Premier Partner, EVORA is recognised as a leader in the provision of GRESB support, including training and strategic insight.

We have provided GRESB support for the last six years, and in 2017 we directly supported over 50 submissions from organisations that represent a cross section of the European property industry. We have helped clients get on the GRESB ladder and have equally supported clients to be market leaders.

We sit on a number of GRESB benchmark committees and our close working relationship with GRESB ensures that we are prepared and aware of future changes.

With our experience and expertise in this ever-emerging market sector, we ran a webinar last week with participants across Europe on our end to end service Titled “How to overcome GRESB challenges and achieve your best score”.

In this session we shared valuable insights and tips in a 5-point GRESB strategy, to increase awareness on how to get the best out of the reporting process and how you can align GRESB ratings with your long-term sustainability strategy.


Five point GRESB strategy

Our GRESB strategy covered an action plan for a seamless GRESB submission process. A quick recap is set out below.

  1. Plan your next GRESB submission in advance. Map out a plan on who to talk to, what to ask and which evidence you need to provide.
  2. Reduce the complexity of reporting by engaging in a streamlined process with your property managers. At EVORA, our consultants provide asset-level templates to property managers, to help in the collation of asset-based questions such as technical assessments, tenant engagement and efficiency measures.
  3. Improve scoring, where appropriate. Don’t miss out on easy points, discounting your reporting efforts by not meeting validation requirements. Read more here on our GRESB verification blog on how to ensure your response is accurate and acceptable by GRESB.
  4. Focus on data integrity and performance. Our proprietary software SIERA ensures that the process of data management is transparent, accurate and robust.
  5. Finally set actions for future success. GRESB addresses several key areas of an EMS within their survey such as management responsibilities, communication, training, objectives and, importantly, the results they are delivering. Developing an EMS therefore seems an appropriate approach to score well in GRESB. Find out here how a Plan-Do-Check-Act (EMS) approach can impact your GRESB score.

Final thoughts for GRESB success in 2018;

  • Start early / now!
  • Engage with internal colleagues and external stakeholders
  • Understand indicator intent and scoring requirements
  • Gather evidence and identify alignment to requirements
  • To make it easy on yourself and others – get in touch and our team of experts will be happy to help.

Request the webinar recording


GRESB Premier PartnerWe 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.

GRESB Infrastructure Survey: What is it?

EVORA is now entering its seventh year of helping entities produce GRESB Real Estate Survey submissions, and with each passing cycle we have accrued more expertise, expanded our client base, and become leaders in the field. Last year we provided comprehensive support to 26 funds and general support to many others, and this year the figure is set to get even higher as we gain greater recognition for our expertise.

But GRESB offers more than just the Real Estate Survey, and for 2018 we have expanded our scope of services to include the GRESB Infrastructure Survey.


What is the GRESB Infrastructure Survey?

Much like its real estate equivalent, the GRESB Infrastructure Survey is an investor-driven assessment of ESG (Environmental-Social-Governance) performance for entities.

Much of the content is also very similar, however the setup of the Infrastructure Survey is quite different from that of GRESB Real Estate, as it is broken down into two sub-surveys: 1) the Fund Assessment and 2) the Asset Assessment.

The Fund Assessment is a relatively small element of the overall survey, and focuses on ESG policies and principles, persons responsible for ESG issues, and the monitoring and mitigation of ESG risks, at the entity level.

Meanwhile, it is the Asset Assessment that is broken down into the familiar Management, Policy & Disclosure, Risks & Opportunities, Monitoring & EMS, Stakeholder Engagement, Performance Indicators, and Certification & Awards modules, albeit with differences in the questions themselves and the distribution of points compared to GRESB Real Estate. Additional content includes questions relating specifically to biodiversity and air pollutants in the Performance Indicators section, whilst there is for example less focus on certification.

An optional Resilience module has also been introduced for GRESB Real Estate and GRESB Infrastructure in 2018 – you can read more about it here.


Asset Assessments – Weighted Asset Average

You are free to submit a standalone Fund Assessment without asset-level evaluation if you wish. However, to get an overall GRESB Infrastructure score you must also complete the Asset Assessment for at least 25% of your portfolio (usually weighted by GAV). Furthermore, there is an advantage to completing Asset Assessments for as many assets as possible, as your scores are collated into a Weighted Asset Average (WAA) where assets that did not complete an Asset Assessment score zero.

Your WAA is worth 70% of the final GRESB score, with the Fund Assessment making up the other 30%. A simple example calculation is provided below:

GRESB Infrastructure Survey - WAA table

Combined with an example Fund Assessment score of 76, the overall GRESB score would be:

(56   x  70%)   +   (76  x   30%)   =   62

Which represents:

(WAA Score x Asset Assessment Weighting) + (Fund Score x Fund Assessment Weighting) = Overall Score

The GRESB Infrastructure Survey is comprehensive in its coverage of ESG content, whilst also allowing a wide range of infrastructure assets, from airports to schools to toll roads to windfarms, to be compared. ESG issues matter for all forms of built infrastructure, and GRESB provides an ideal platform to meet investor and public demand for improved sustainable performance.


If you think GRESB Infrastructure might be for you, then get in touch and our team of experts will be happy to help.

 


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.

GRESB Resilience Module: will you survive and thrive in the face of systems disruption?

When you hear the word resilience you might think of an activist like Martin Luther King, an explorer such as Ranulph Fiennes, or an athlete akin to Mo Farah.

In all walks of life it is an admirable and desirable quality, but the meaning it carries in the field of commercial property is perhaps not as well defined or understood as it needs to be given the increasing role it is expected to play in securing long-term success.


GRESB is recognising the importance of resilience in real estate portfolios by introducing a brand new module for the 2018 GRESB survey. Much like the Health & Wellbeing module that came before it, the GRESB Resilience module will standalone and evolve over the next 3 years with the intention of subsequently integrating it into the main GRESB survey.

But what is it that makes real estate resilient?

What is it that makes companies and funds resilient?

And what is it that will make you GRESB resilient?


What is resilience?

The exact definition of resilience in a sustainability context is not yet fully agreed, however the IPCC defines it as:

“The ability of a system and its component parts to anticipate, absorb, accommodate, or recover from the effects of a hazardous event in a timely and efficient manner, including through ensuring the preservation, restoration, or improvement of its essential basic structures and functions”.

Meanwhile, GRESB defines it as:

“The capacity of companies and funds to survive and thrive in the face of social and environmental shocks and stressors”.

In short, how well equipped is your organisation to deal with big events that disrupt systems (floods, fires, earthquakes, terrorist attacks etc.), and the stressors that make you more susceptible to harm when events do occur (poverty, environmental degradation, aging infrastructure etc.)?


The GRESB resilience module

The GRESB Resilience module has been kept fairly simple this year, asking basic-level questions on the involvement of management and stakeholders in resilience-related decisions, on asset and business operational risk reporting, on strategies for the management of risk, and, interestingly, to “describe your response to three illustrative, disruptive, extreme, or catastrophic events or near misses during the reporting period”. I am intrigued to see what kind of responses come in for this last one.

I am confident that the Resilience module will follow the projected path of the Health & Wellbeing and ultimately become a part of the main survey. Firstly, because the probability of these system shocks is indisputably growing for many issues (e.g. climate change, terrorism, I.T. security) and secondly, because of the potentially huge environmental, social, and financial consequences that could result from failing to invest in resilience.

Exactly how the module will look in a few years’ time is hard to say, with GRESB using this year to gauge the current state of play in the industry. I doubt it will progress to any kind of individual asset-level evaluation any time soon given the multitude of uncertainties in resilience modelling and the unique situation every asset is in with regards to external shocks and stresses. Instead, I expect it will likely remain procedural, focussing on how organisations go about identifying, assessing, and mitigating risks in their portfolio, and how they are communicating these risks to different parties. However, we wait with intrigue to see how this new reporting element develops.


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.

Contact us about GRESB support.

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.

 

Changes to GRESB 2018 Real Estate Survey Part 1 – The Headlines

The GRESB pre-survey was published today (15th February).  As expected, a number of changes have been made to both the question-set and the process.

Over the course of the next couple of days we will review these changes in detail, before coming back to you with a more comprehensive summary in a separate blog. For now, please see the headlines below.


Changes to the questions for GRESB 2018

  • Enhanced validation – The three tier validation process (All Participant Check; Validation Plus; and, Validation Interviews) continues, however, from this year the All Participant Check will be extended and will be applied to all responses for a select number of questions (previously only 25% of responses were subject to this level of check).
  • Reduced reporting burden – There are a reduced number of mandatory open text boxes (but with more opportunity to provide context).
  • Green building certificates – There is an expansion to the scope of the Green Building Certificate questions, including a requirement to provide certification levels/scores achieved (in addition to portfolio coverage).
  • Scope 3 – Mandatory reporting of scope 3 emissions is introduced, covering emissions associated with tenant areas and/or indirectly managed assets.
  • Like for like consumption – There is a requirement to define the floor area associated with like-for-like portfolios.
  • Asset level data – GRESB continues its increased focus on data quality, by making additional points available for respondents submitting asset-level energy, carbon, water, waste data.
  • Health and wellbeing – 2018 will be the final year of the Health & Wellbeing module.
  • Resilience – A new resilience module is launched.

Changes to the process

  • Fee – There will be a participation fee introduced for non-members. This will not be applicable to first time participants submitting under the ‘Grace Period’ or participants from non-OECD countries.
  • Scorecards/Benchmark Reports – All participants will receive a Scorecard and Benchmark Report for all of their submissions.
  • Response Check – The Response Check is available on request from April 1 to June 8, 2018 subject to available resources.

The changes have been implemented to improve accuracy of data collection and to push the industry further towards sustainability performance improvement.  EVORA already supports its clients in both of these areas. Our expert sustainability consultants and engineers advise clients across the piece – from strategy through implementation to reporting. Furthermore, we use our proprietary software platform SIERA to collect and validate client data at meter and asset level.


What next? Tips to get you started

If you are involved in the GRESB process, we recommend that you start planning for the submission process now. Some practical tips to get you started:

  • Changes to GRESB – Review the new question set as soon as possible. Consider the changes (there is an overview at the start) and how you will develop your response to address these –  now.  GRESB 2018 includes text boxes to provide additional context to your answers – how and where will you use this option?
  • Changes to your entity – For previous participants consider last year’s results – responses should truly reflect the processes, procedures and performance of the funds and portfolios you manage.  Was anything missed from previous submissions?  Have you changed any processes and procedures relevant to the GRESB survey?
  • Evidence – Identify what evidence is required (including, but not limited to, audits and assessments, implementation of improvements, performance data and building certification). Establish how this can be collected and liaise directly with property management teams.
  • Plan, Do, Deliver – Establish and follow a detailed submission plan.

As mentioned, we are in the process of reviewing the new question set in detail and will publish more information shortly – so keep an eye out for updates.


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.

The full survey can be found here.

 


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.

Real Estate Sustainability: Planning for 2018

The new year heralds new journeys for individuals and organisations as we seek to learn from experiences in 2017 and focus on opportunities that preserve and enhance ‘value’ in the myriad forms that it takes.

It is a tremendously exciting 2018 for EVORA and one that has started incredibly positively. We are looking to forward to working with existing and new clients as we implement best practice solutions that deliver value to their funds, assets and the environment.

Below I identify my predictions for 2018 across five topics. In addition, where risks are identified, I propose solutions, to mitigate and manage.

There are many more areas and topics that could be covered, and this reflects the rapid changes the industry is currently seeing. I’d love to hear your thoughts on my predictions plus any of your own.  I will commit to reviewing these predictions at the end of 2018, to see how things panned out.


GRESB: an evolution

The GRESB survey is in its ninth year and participation shows no sign of waning, particularly in the Real Estate assessments.

GRESB does not suit all fund strategies and our research demonstrates that Core funds, particularly those with a high percentage of directly managed (multi-let) assets, do perform better than those with Opportunistic strategies and / or a high percentage of indirectly managed (single-let) assets. Perhaps this is no surprise. Consequently, GRESB is reviewing the method in which is benchmarks and scores data availability for indirectly managed (single let assets).

Early adopters of GRESB tend to perform better, as investment managers develop (and align) their ESG strategies with GRESB criteria, particularly through the use of structured frameworks such as an Environmental Management System.Click To Tweet

Early adopters of GRESB (with years of experience) also tend to perform better, as investment managers develop (and align) their ESG strategies with GRESB criteria, particularly through the use of structured frameworks such as an Environmental Management System.

To counter the above two points, GRESB has launched a Pre-Assessment module. This survey is designed for:

  • New investment products that are raising capital and / or undergoing initial investor due diligence;
  • Real estate strategies with opportunistic, short-hold or development focus;
  • Real estate vehicles beginning to incorporate ESG into their operations

I expect this ‘toe in the water’ approach will lead on to greater participation in the full survey, despite the fact that GRESB is now charging participants that complete the main and/or pre-assessment survey. This change will have limited impact for participants who are already members or those who pay for the benchmarking reports (which will be issued automatically as part of the service)

The final, encouraging point for 2018, is the increased engagement by GRESB with a wide range of stakeholders as they seek to shape survey components. This is an important facet to ensure that the survey remains relevant to market needs, whilst continuing to push ESG strategies to deliver meaningful performance improvement.

Prediction: Continued growth in the main Real Estate survey, with respondents in North America and Europe leading the field in terms of number of participants. As it is the first year of operation, I expect a small uptake in the Pre-Assessment, which will increase over time as investors and their managers gain awareness of this approach.

I expect the main GRESB survey to incorporate more Health & Wellbeing (H&WB) questions, possibly at the expense of the separate H&WB module. I expect ‘pilot indicators’ for the measurement of social value, H&WB impacts and potentially governance scorecards. Measurement of environmental impacts alone will not be sufficient as the sole indicator of performance for too much longer.

Debbie Hobbs, Head of Sustainability at Legal & General Real Assets will be speaking about measuring social value, alongside Sander Paul Van Tongeren, MD of GRESB, at our industry event on 7th February. Get in touch if you would like to attend.

Resolution: Continue to work proactively with both GRESB and our participant clients.  Last year we supported over 55 submissions.  We expect this to increase significantly in 2018.

Maintain and enhance our clients GRESB ratings through practical and value driven sustainability programmes, as appropriate to their investment strategy. In 2017, our client Hines achieved Sector Leader status and was rated the number 1 non-listed European fund.


Building certifications: more than just a tick-box exercise

Sustainability building certifications have been in operation for around 28 years following the launch of BREEAM in 1990. There are now numerous in-use and design/construction stage standards around the world. Schemes cover individual topics such as water and air quality, to comprehensive multi-themed sustainability / health and wellbeing  standards.

Whilst the use of these standards for new developments is fairly common-place (particularly in the office sector within major cities), the application for existing (in-use) buildings is less so. However, market drivers such as GRESB, who reward participants for holding certification, together with (future) policy standards and incentives for efficient retrofits have, in our experience, increased the interest for in-use schemes such as BREEAM In-Use and Fitwel. It is important that the application of these schemes leads to performance improvement rather than just a tick box exercise.

It is important that the application of these schemes leads to performance improvement rather than just a tick box exercise.Click To Tweet

Prediction: Increased application of certification for standing investments through schemes such as BREEAM In-Use and Fitwel for major refurbishments.

I also predict more, but not many, WELL certifications for new developments. It will be interesting to see if WELL issue a ‘lighter’ certification route that has wider commercial application that the full WELL standard.

Resolution: Grow the number of EVORA employees that are accredited professionals for sustainability building certification schemes.

Support completion of health and wellbeing certifications through the recognised standards (WELL, Fitwel, RESET) that EVORA has expertise in.


MEES: you might feel the pinch come April

I am sure it is well known to most (but probably not all) real estate professionals, that as of 1st April 2018 landlords will no longer able to lease (via new leases and lease renewals) commercial or domestic space in buildings with an EPC lower than an E rating. Unless that is, a five year time-limited exemption applies and is registered on an Exemptions Register.

Previous studies have indicated as much as 20% of the market could be impacted. From our experience, a high proportion of ‘sub-standard’ EPCs (those lower than an E) have improved their ratings when reassessed by a trusted and competent EPC assessor. Many EPCs issued in 2008-09 were completed quickly using default setting for efficiency ratings. Whilst this was acceptable and legally compliant at the time, the resulting EPC typically did not reflect the state of the energy system in place.

That said, there will be a number of F and G rated units that may leave landlords scratching their heads on what to do, when to do it and crucially, IF they have to do anything at all – noting the relative ease that exemptions could be achieved, albeit with some resource implications to administer.

Prediction: Organisations that were slow to respond may feel the bite come April. I expect the regulation to be largely self-policing, via appointed solicitors, as is the case for the availability of an EPCs for lettings (and sales). However, I also expect enforcement (by local authorities) to be weak based on the relative ease of gaining an exemption and the convoluted nature of MEES guidance.

Resolution: Continue to utilise SIERA’s EPC profiling capabilities to assist clients to quantify the risk of MEES against Estimated Rental Value (ERV), lease and EPC expiry dates. We shall look ahead to the hard backstop of 2023 for existing leases.


Blockchain: new ways of working

Beyond cryptocurrencies such as Bitcoin, blockchain has the potential to revolutionise the method in which individuals and organisations digitally transact with one another in a secure and verified environment.

Blockchain came into operation ten years ago. It’s use beyond cryptocurrency is becoming clear (in property and sustainability) through applications such as:

  • Smart contracts – simplifying the retrieval of data through distributed ledgers
  • Governance – transparency is key to blockchain and it could increase the range of publicly available documentation.
  • Intelligent grids – facilitating the buying and selling of renewable energy generated by decentralized systems
  • Data management – countless possibilities for swiftly transferring secure and validated data

One final comment on blockchain (particularly mining of crypto-coins) that needs to be made, is how immensely energy inefficient it is. The process of using individual PCs to mine coins has led to Bitcoin alone having the annual energy footprint equivalent to Hungary, at the time of writing, and this is increasing on a daily basis as more ‘nodes’ are added to the blockchain. Bitcoin transactions require several thousand times the energy of other means, such as Visa transactions (source).

The process of using individual PCs to mine coins has led to Bitcoin alone having the annual energy footprint equivalent to HungaryClick To Tweet

Prediction: An exciting year where I expect Proptech companies to introduce new ways of working (more efficiently) through utilising blockchain applications. It is something that our SIERA team is busily exploring.

Resolution: Continue to track the emerging blockchain market (I will do this on a personal level to ensure I can understand what my software colleagues are talking about!)


Policy Landscape: hopeful for clearer messaging

A continued lack of clarity on future policy measures is one prediction that can (unfortunately) be confidently made for 2018. Through BREXIT and the fragility of global politics, uncertainty on the future of medium term policy instruments shall, I think, remain.

Long term achievements have been ratified by global leaders (minus one), however, specific programmes for achieving this for the building sector will not become clear until 2020. The UK government is yet to confirm the replacement to the CRC or ESOS  (carbon and energy assessment and reporting schemes) beyond 2019, although I do appreciate that consultations are ongoing.

Recent UK government publications such as the Industrial Strategy and 25 Year Environment Plan are welcomed. However, industry needs to understand how the government intends to act on these strategy papers, rather than see recognition that the points covered are important.

Prediction: 2018 is unlikely to herald the launch of forward-thinking and fit for purpose policies that will progress the sustainability agenda.  However, I am hopeful of a clearer message on the future of carbon reporting and disclosure requirements for organisations towards the end of the year.

Resolution: Continue to voice our concerns and aspirations for clear and forward thinking policy through participation in government / industry consultations and working groups.


Join us on 7th February for an industry event that that looks at planning for Real Estate sustainability in 2018 and beyond.

 

£2.8m of energy savings identified by EVORA in ESOS Phase One

ESOS guidance was published by the government on 26th June 2014, with a deadline for ESOS Phase One of 5th December 2015 – 528 days for organisations to achieve compliance – simple, right?

Understandably, with the data for ESOS having to overlap the qualification date of 31st December 2014, a lot of organisations left it until 2015 to arrange compliance approaches. A large proportion of these left it late, with last minute requests rolling in, the last of these, very late requests was received in October 2017 (a mere 22 months after the original deadline)!

Managing large volumes of data for an array of clients is something EVORA is used to as part of our day job, but throw in the need for communication of ESOS findings to top management prior to notification and arranging multiple site visits across the UK at short notice, made for a busy end to 2015.

Read more about ESOS Phase Two here and here.


Our Approach to ESOS Phase One

Each company we worked with had an approach tailored to their requirements to ensure the ESOS assessment fit with their operations. We worked with a range of clients including a ‘Big Six’ energy provider, institutional real estate investors, a tyre manufacturer and a bacon packing firm. This resulted in a large breadth of energy saving opportunities identified across different industries.

Whilst many compliance routes were available to participants, after consideration of the options available, the completion of energy audits was the primary compliance route taken by EVORA. These provided tangible detailed savings across both utility and transport energy use.  However, we believe moving forwards, the uptake of ISO50001 (one of the compliance routes) may increase due to the additional benefits associated with operating a certified energy management system (in place of audits every four years).

Moving forwards, the uptake of ISO50001 may increase due to the additional benefits associated with operating a certified energy management systemClick To Tweet

In October 2017, EVORA was instructed to complete an ESOS assessment which required submission within ten days. Our client had received an enforcement notice from the Environment Agency (which had been passed around departments for over two months prior to our involvement). A tight turnaround to say the least and shows that the Environment Agency are following up with companies they believe to be non-compliant almost two years after the original deadline.


Key Outcomes

28 Companies were supported in total with over 400 assessments (site visits, desktop analysis, transport audits) completed. Over 27,200MWh of energy savings (electricity, gas and transport based) were identified through these ESOS assessments. This equated to potential cost savings of £2m in electricity, £0.2m in gas and £0.6m in transport energy spend. All notifications of ESOS compliance were made to the Environment Agency in line with the defined timescales of the scheme.

Over 27,200MWh of energy savings were identified through ESOS assessments. This equated to £2m in electricity, £0.2m in gas and £0.6m in transport energy spendClick To Tweet

The ESOS assessment request received in October 2017, was submitted to the Environment Agency, inside four days, a full six days in advance of the deadline. A very tight turnaround (which we do not recommend!), but with full data available and buy-in from top management meant it was achievable.

One of the main learning outcomes we found, was that the smaller companies gained more new information through the energy audit process than the larger organisations. The savings identified via the energy audits were the first time a lot of the smaller companies (i.e. those just exceeding the qualification criteria) had been presented energy saving opportunities with clear payback and life cycle costs included. However, the availability of capital to invest in these opportunities was more restricted for the smaller organisations.


Our structured approach supported our success in ESOS phase one and means we enter ESOS phase two confidence of our ability to deliver ESOS compliance to an even wider range of companies.