The GRESB 2016 Real Estate survey was released on 1st April and with it came the detailed (231 page) reference guide. GRESB has always been transparent about the categorisation and scoring of their indicators, which is useful if you have the time and inclination to go through those 231 pages. In this first blog of two, I have set out my thoughts on the more notable changes.
Increased focus on performance
GRESB’s goal is to “provide investors with the ESG information they need to make more informed investment decisions“. You can’t knock this goal, but there are questions as to how GRESB portfolio level assessments can provide investors with sufficient information at the asset level. That said, GRESB scores clearly indicate how sustainability has been incorporated into participant business strategies.
GRESB results can be analysed and broken down in a number of ways. However, fundamentally GRESB assesses sustainability across two broad levels (or dimensions as GRESB calls them):
- Management and Policy – a measure of the intent of your ESG programme
- Implementation and Measurement – a measure of the impact and performance the intent is delivering.
The GRESB quadrant is shown in the Figure 1 below.
Figure 1: GRESB Quadrant Scoring Model and Global Average Scores 2011 – 2015
Participants scoring more than 50% in both dimensions are placed within the Green Star quadrant. Lower than 50% in both dimensions places you within the Green Starter quadrant. A strong Management and Policy score but weak Implementation and Measurement score results in a Green Talk score (i.e. you have good intent but it is not backed up by performance). Conversely, a strong Implementation and Measurement score but weak Management and Policy score results in a Green Walk score (i.e. you have good performance but seemingly no co-ordinated management structure behind it).
In general, participants score better in Management and Policy (2015 global average 63%) compared to Implementation and Measurement (2015 global average 52%). This is to be expected – it is relatively easy to develop plans and policies, the biggest challenge lies in achieving the results.
The global average result in 2015 for all participates was Green Star (the best rating). To put it another way, more than half of participants achieved this GRESB rating. This has led to criticism of the GRESB scoring mechanism, as it was seen as too easy to achieve a Green Star, without performance being sufficiently scrutinised. In the 2016 survey, the overall weighting for Implementation and Management (or performance) has increased by 2 percentage points from 70% to 72%. The goal posts have shifted.
The increased focus on performance may well be significant, particularly noting the 2015 global average Implementation and Measurement score was 52% in 2015. The 2% weighted increase for Implementation and Measurement could see a large group of borderline participants shift from the Green Star quadrant to the Green Talk quadrant,
Participants should expect a greater scoring emphasis on Implementation and Measurement to continue in the future. Current participants will need to maintain forward thinking ESG strategies that deliver results to keep pace. New participants may find themselves significantly behind the curve on first submission (fortunately a grace period provides anonymity in the first year’s submission). Wherever you are in your sustainability journey, it is clear that neither complacency nor inactivity is an option.
In the second part of this blog, I will highlight the key changes to the Real Estate assessment and also introduce new GRESB assessments and modules.
Regardless of the changes introduced by GRESB, our message to achieving an impact driven Environmental, Social and Governance strategy remains the same:
- Plan your strategy based on current and future risks and opportunities.
- Prioritise delivery according to the value proposition.
- Measure and report the ongoing impact.
- Review new risks and opportunities and repeat from step 1.
To read Part 2 of this blog, click here.
As 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.