A proven blueprint: From ESG 1.0 to 2.0


Our industry is engaged in an important dialogue to improve sustainability through ESG transparency and industry collaboration. This article is a contribution to this larger conversation and does not necessarily reflect GRESB’s position.

ESG 1.0

In the context of this article, ESG 1.0 is benchmarking at the portfolio scale.

Many US cities, like New York, Boston and Los Angeles, have required utility benchmarking submissions for years. While there are industry leaders, many organizations are doing what’s required in each locality, but not at the portfolio level.

The value of ESG 1.0 is two-fold:

  • “Checking the box” for institutional investors that will not provide capital to firms that do not have reporting in place
  • Allowing non-technical stakeholders to leverage a benchmark to inform allocation of resources

That’s where reporting frameworks come in. While there are dozens of different standards, when starting out, the first step should be to get whole-building utility data into Energy Star Portfolio Manager. 

While an arduous process to do manually, this is very straightforward with technology. In most cases, technology providers can integrate directly with utilities to pull this data into a central platform and then push it on a regular basis to Energy Star Portfolio Manager.

When it comes to rounding out the “Social” and the “Governance” reporting requirements, the most common framework for commercial real estate is GRESB.

Submitting to GRESB is not required, but many investors are looking to it as the easiest way to compare different portfolios across every aspect of ESG.

ESG 2.0

For many US-based portfolios, benchmarking has become a bit of a dirty word. Something that is extra work forced by a law or government agency.

But there’s real value in it. Without really lifting a finger (remember, technology can automate the data collection and submission process), you now have a precise understanding of which properties are your lowest performers.

Now, with your limited resources (both time and money), you’re homing in on the areas that will produce the biggest results and return on investment.

That’s what ESG 2.0 is all about: capturing property-level data to drive low and no-cost efficiencies.

The specifics here will differ. 

For example, some properties will have building management systems (which control and automate how equipment operates). These systems are like your keyboard: they will execute exactly what you type into them, but they won’t tell you if it’s a good sentence or not.

That’s where technology comes in. Analytics solutions are like Grammarly, keeping 24/7 vigilance over each setting on each piece of equipment to make sure it is optimal.

Other properties will not have building management systems, or have older models that cannot be integrated with. In these cases, equipment monitoring can be deployed to fill the gaps, capturing real-time energy data that can be translated into the same energy efficiency (and maintenance) insights.

Finally, the last part of ESG 2.0 is the tenant consumption data. Again, the specifics will differ, but many properties are already capturing this data, albeit on paper and in spreadsheets, for the purposes of utility bill backs to tenants.

Again, like Energy Star submission, technology can fully automate this process by pulling in utility data automatically, gathering meter reads through an app or digital meters, and generating tenant invoices immediately. 

Remember, commercial tenants increasingly have their own ESG reporting and goals, they simply lack the transparency to know whether their behaviors and decisions are having any effect.

When combined, there’s suddenly a full picture of base building consumption, tenant consumption and vacant consumption. Combine this with powerful analytics and engaged tenants, and you’ll see energy reductions of 10, 20, 30 or even 40%. 

Taking it a step further

Of course, optimizing how equipment is operated and partnering with tenants will only take you so far.

Many organizations have set out goals to be carbon free by 2050. Usually, this plan involves a combination of buying clean energy credits, procurement strategies and deploying renewables.

These are important levers, but there’s no getting around making significant investments to the infrastructure of properties.

Fortunately, ESG 2.0 has set up the property to make data-driven decisions about capital investments.

That’s because, as a byproduct of optimizing the building operations, we have collected new sources of data that will become critical when making large capital decisions.

Specifically, we have captured the runtime hours of individual pieces of equipment. This helps us move from depending entirely on the manufacturer’s suggested useful life; instead, we can make decisions based on how much the equipment has actually been used.

This often delays capital expenditures, freeing up budget for retrofits and upgrades to more efficient models of equipment.

That’s where the other critical data stream comes in. Equipment monitoring calculates the minutely energy consumption of individual pieces of equipment. That means, instead of basing replacement decisions off the expected savings quoted by vendors, they can be made empirically based on the data.

Moreover, every decision can be infused with the knowledge of whether or not the new piece of equipment fits into the overall carbon reduction plan. With critical systems having expected useful lives of 20+ years, the decisions of next few years will have a lasting impact on a portfolio’s ability to hit its long-term goals.

A high-efficiency boiler may be the most efficient purchase available, but it is committing the property to higher emissions in the long term.

In addition, by bringing this process into software, it breaks down the barriers that usually exist between property management, engineering, asset management and sustainability. It may even increase the asset value of the property by removing the risk of an unexpected capital outlay for property buyers. 

Read Enertiv’s latest white paper “Driving Action: The ESG 2.0 Playbook” to learn more.

This article was written by Comly Wilson, Director of Digital Marketing, Enertiv.

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