Evolution towards performance | The Pulse by GRESB

Introducing The Pulse by GRESB

The Pulse by GRESB is a new content series featuring the GRESB team, partners, GRESB Foundation members, and other experts. Each episode features a host from GRESB and at least one interviewee, focusing on an important topic related to either GRESB, ESG issues within real assets industry, decarbonization efforts, or the wider market.

Evolution towards performance

For the second episode of The Pulse by GRESB, we are bringing you a conversation about the rising importance of performance, how the GRESB Benchmark is evolving, why performance is a critical tenet of this evolution, the direction of travel of the GRESB Standards, and much more. Watch the episode below, featuring:

Chris Pyke (host)
Chief Innovation Officer
Roxana Isaiu
Roxana Isaiu
Chief Product Officer

Transcript

Can’t listen? Read the full transcript below. Please note that edits have been made for readability.


Chris Pyke: Welcome to The Pulse, a new audio series from GRESB. We are going to talk about the rising importance of performance in the evolution of the GRESB Benchmark, and I am going to be joined by my friend and colleague, Roxana Isaiu.

Roxana Isaiu: Hi, Chris! Hello, everyone. My name is Roxana Isaiu. I am the Chief Product Officer at GRESB, responsible for our overall strategy and product development, but also part of the GRESB Secretariat, the GRESB Foundation, and part of the GRESB team for more than ten years. So, I have been exposed and involved in a lot of our current processes and the evolution of both our Standards, our analytics, our reports, and basically everything that we bring to our members.

Chris Pyke: I will brag on Rox for just a half second, saying there literally is no one on the planet who has done more or knows more about the evolution of the GRESB Real Estate Standard than Roxana. So, we could not have a better person to tell us about the evolution of performance.
And so, Roxana, this is a big year for GRESB. We announced that performance scoring would be demonstrated for the first time in 2024 with an eye toward making it an integral part of the Real Estate Standard in 2025. Can you explain to participants and our stakeholders why this is a big deal and a bit about how we got here?

Roxana Isaiu: Well, most people would say that it is long overdue because GRESB has been encouraging the standardization of ESG data for a very long time. But, we are now at the point where we have enough data available and with the critical mass of organizations that are ready to start competing at the performance level.

So, not just in terms of data availability, program strategies, and transparency of their ESG practices, but literally on ESG performance. We are now at the point where we are developing a methodology for measuring energy efficiency together with the Real Estate Standards Committee, with the Foundation Board, and preparing to introduce that into this year’s Assessment process as a supplemental insight next to the formal GRESB Score.

So, it will not be part of the official GRESB Score that everybody sees at the top of the report this year. It will be something on the side that everybody can comment on, review, and provide feedback on because that is key to iterating it into a perfect methodology or as perfect as it could be because there will always be things to improve.

Chris Pyke: So Roxana, this is a significant change, and as you said, some would say this is overdue. Some would say that we are now at the point where we can fully support this. Why is it necessary, in your view? Who is asking for it? How will GRESB be better with this change going down the road?

Roxana Isaiu: I would dare to say that everybody is asking for it to a certain extent. And, well, GRESB is a global framework. With a one-size-fits-all approach, it is difficult to capture or satisfy all parts of the market, starting from emerging markets or markets where ESG is making an entry all the way to the very advanced markets where ESG is so embedded into the normal processes that it is no longer a new topic or something that is dealt with on the side.

However, the key group that is requesting bolder movements toward evaluating performance is institutional investors. And that is, again, because they rely on GRESB to be able to engage and compare their investments on ESG in general.

Chris Pyke: Awesome. So, let’s talk about expectations. So let’s go around the calendar a little bit and ask: what is going to be different for a GRESB Participant? Is something going to change in April, July, October, or the following year? What should people expect in terms of the consequences and implications of this, whether they are an LP or a GP participating in the GRESB process?

Roxana Isaiu: So, I will start with the good news, which is that nothing will change in April. So, if you are a GRESB Participant or a returning GRESB Participant, you will log in on April 1, and you will start filling in the Assessment in the same way that you have until now. There is no additional data request that supports or that needs to inform this exercise at the moment. This was a very conscious decision made by the GRESB Foundation, also relative to the bigger consideration of reporting burden. Moreover, the reality is that we already have enough data on the most critical elements that would have to go into developing the methodology for energy efficiency evaluation.

And so in terms of data input, nothing will change. You do not have to worry about reporting new data points. You do not have to worry about reporting data in a different way. The change will come into the output. So, in September, when GRESB Participants will have a look at their preliminary results, and in October, when the final results will be available, the Benchmark reports will include an additional supplemental insight into the operational performance of the reporting assets. So, an additional energy efficiency score will be displayed as a side, as part of the final output, but not counting towards the formal score. And, if you are familiar with GRESB, you know that that is typically the process that we follow — every new change comes with a bit of leeway, a bit of a grace period, where, at first, it does not contribute towards the overall GRESB Score, in order to avoid very big shifts into the final scores.

Chris Pyke: Got it. And so, Roxana, who makes the final decision? So, we go through 2024. We demonstrate this. We refine the scoring methodology. And then, who makes the final decision about what happens in 2025 and beyond?

Roxana Isaiu: The same people who made the decisions about 2024. And, in the end, it boils down to the Foundation Board. The Foundation Board has the final responsibility for approving all changes to the Standards, including big scoring changes that inform the scoring weights. The Foundation Board is a group of institutional investors, as well as fund managers that define the strategic development of the Standards.

And, their decision-making process is heavily influenced and heavily informed by the recommendations of the Real Estate Standards Committee. The Real Estate Standards Committee, in turn, is a group of global representatives of, again, institutional investors, fund managers, and listed companies. So, they are individuals that understand and know the GRESB Assessment inside out and are able to represent different investment strategies, different regional specificities, different edge cases, and agree on the general direction of what the Standards should reflect and how they should evolve. And if you are curious to see who these individuals are, please have a look at the website. You will see the full list of all constituents of the Foundation Board as well as the Standards Committees. And with this, we would also like to express our gratitude for their help and support and the time spent on all of these conversations because I can tell you it is not an easy exercise, and the amount of time and commitment to making these decisions is impressive.

Chris Pyke: Awesome. That is very impressive. And it is so exciting to see the Foundation be so integral to the decision-making process. So, we are going to bring this to a close Roxana. What is the bottom line for GRESB stakeholders? When they think about energy scoring, and maybe they think about the bigger picture, what does this tell us about the evolution of the GRESB Assessment and the GRESB Standard? And, as they look to the future, how do you bottom line it for them?

Roxana Isaiu: There are a few things that I would like to leave everybody with. This is exciting. This is the first year when we see, effectively, a new way of evaluating, ESG performance. We talked about ESG data collection, the effort of collecting all of this information about the data quality, and the need to improve data quality.

And now, we are finally turning our attention to how we measure performance and what that means. And, it is important to understand that this is going to be a very iterative process. No matter how much time a group of people spends together to try to come up with the perfect methodology, it will only get better if it is used, if it is put in front of as many people as possible, and if it generates the kind of conversations that will help define the future criteria. So, I would urge everyone to think of this as a very iterative process that needs and invites your opinions as managers, investors, data partners, and organizations that deal with data that understand what real estate energy efficiency means.

And generally speaking, we need to be open to imperfections. It is unlikely that we will be able to come up with something that is going to be perfect for everyone. And that is fine. We need to start from somewhere. And, we cannot let ‘best’ get in the way of ‘good.’ And we recognize that. And we perfectly recognize that the GRESB Standards need to evolve to recognize and address some of their current limitations. And this is what we are working towards. It is imperative that we do not stand still. It is imperative that we start from somewhere. And we are doing our best with your input to take into account as many local specificities, sector specificities, and limitations that exist on the ground.

Chris Pyke: Great. Roxana, thank you so much for your insights today and thanks again for your leadership of the GRESB Standards over the last decade. As you said, this is a team sport, but you have played an outsized role. So, thank you again for your comments today, and we appreciate your time.

Roxana Isaiu: Thank you.