ESG reporting becomes standard practice in real estate investments

Source: GRESB, 4 September 2014

The Global Real Estate Sustainability Benchmark (GRESB) today announced the release of the 2014 GRESB results. A leading global source of portfolio-level sustainability data for the real estate industry, the dynamic benchmark provides more than 40 institutional investors, representing USD 5.5 trillion in assets under management, with timely, actionable information about the sustainability performance of property portfolios.
The 2014 GRESB results not only demonstrate that sustainability reporting has improved, both in coverage and in quality of the data submitted, but also show significant development in the overall sustainability performance of benchmark participants.
• 637 listed property companies and private equity real estate funds submitted data, covering 56,000 buildings with an aggregate value of USD 2.1 trillion;
• GRESB covers 52 percent of the FTSE EPRA/NAREIT Developed Index, with 38 percent in Asia Pacific, 76 percent in Europe, and 51 percent in North America;
• The overall GRESB score increased by 9 points and is now 47 (out of 100), mainly driven by an increase in the Implementation & Measurement score (+23 percent);
• Listed property companies obtain on average a 7 points higher score compared to private funds. The overall score for listed companies is 52;
• Collectively, in 2013, the commercial real estate sector reduced its energy consumption by about 0.8 percent, carbon emissions fell by 0.3 percent, and water consumption fell by 2.3 percent;
• Regionally, the overall performance of property companies and funds in Asia increased most significantly, by 23 percent to 46 points, while Australia/NZ still lead in overall sustainability performance, with a score of 61. The average score in North America is 44 and the average score in Europe is 47.
Five years after the launch of the benchmark in 2009, GRESB participation has become standard practice for most of the world’s fund managers and listed property companies. There has been a more than 220 percent increase in response rate since 2009. Sustainability and its broad spectrum of aspects are annually assessed by GRESB, focusing on: executive decisions, plans and policies; performance measurement; and stakeholder engagement. In consultation with the real estate industry, GRESB has further developed the set of metrics that constitute the most important sustainability issues for its more than 130 members. ”The need for reliable, investment grade data continues to increase with the advent of capital market interest in the topic of energy efficiency and sustainability in real estate, and GRESB will be at the forefront of providing increasingly granular, high-quality data to the industry,” says Nils Kok, GRESB’s Executive Director.
The data provided by GRESB offers transparency, allowing pension funds and other institutional investors and lenders to incorporate responsible investment principles into their decision-making. “We believe that there is sufficient data available to show that sustainability, and especially environmental matters are increasing their impact when forecasting investment returns. Being part of GRESB helps build our knowledge of these matters amongst like-minded investors that share that view,” says Phil Clark, Head of Property Investment for AEGON Group’s Kames Capital.
For the global real estate industry, accurate benchmarking at the portfolio level will increase competition and the speed with which sustainability best practices diffuse into the market. “TIAA-CREF is committed to the principles of socially responsible investing, and its demonstrated leadership in sustainable operations has generated measurable improvements in energy efficiency, cost savings, and reductions in greenhouse gas emissions. GRESB enables us to quantify our relative performance for our investors and other stakeholders,” says Nicholas E. Stolatis, Sr. Director of Global Sustainability & Enterprise Initiatives of Global Real Estate at TIAA-CREF Financial Services.