Green Capital For Greener Buildings: GRESB Green Bond Guidelines for the Real Estate Sector

The property sector has recently received significant attention related to climate change and sustainability efforts, and rightfully so. Contributing one-third of global carbon emissions and consuming 40% of global energy and resources, 25% of water and 60% of electricity (in Europe and the US, this is even over 80%), the real estate sector constitutes one of the greatest potential opportunities to address environmental issues including climate change, while also creating economic opportunity for investors and asset owners. Market transformation to a more efficient, more sustainable real estate sector will require an astounding amount of capital, and green bonds have emerged as a potential and promising financing source.
GRESB released Green Bond Guidelines for the Real Estate Sector last week. These Guidelines are intended to complement the seminal Green Bond Principles through refinement and specification of its four pillars – Use of Proceeds, Process of Project Evaluation and Selection, Management, and Reporting – for the real estate sector. Property company issuers, green bond underwriters and investors can use the Guidelines to identify Eligible Green Projects and specify metrics and reporting constructs that are most appropriate for their particular objectives.
Here’s the why, how, and who on green bonds and the GRESB Guidelines.


In 2014, global corporate bond issuance totaled $3.35 trillion while green bond issuance totaled $36.6 billion; about 1% of total market volume. While there is certainly significant talk about green bonds, actual transactions to date have been relatively few, particularly within the property sector. Notable green bonds issued by property companies include Vasakronan and Unibail-Rodamco in Europe; Regency Centers and Vornado in the United States; and Stockland in Australia. If we consider the 303 companies included in the FTSE/EPRA NAREIT Global Real Estate Index as representative of the potential property company universe, only 1.7% have issued green bonds to date with only two issuing multiple green bonds.
So what’s the hold-up?  Why aren’t more property companies tapping into the green bond marketplace? The consistent feedback provided to GRESB by key stakeholders, including institutional real estate investors, the most active banks in green bond underwriting, and property companies, is the need for sector-specific guidance detailing 1) how the Green Bond Principles may be applied and fulfilled in property investment, and 2) metrics that can be used to identify eligible green projects and report outcomes to investors.
Broad-based issuer and investor uptake requires simple, standardized, streamlined metrics and processes setting the stage for scaling the green property bond market. Unlocking this capital drives further real estate market transformation and the massive potential for positive environmental outcomes hidden in plain sight.


The 2015 Green Bond Principles are explicit in encouraging flexible frameworks allowing property sector practitioners latitude to implement practical strategies that result in increasing both energy and water efficiency, reducing Scope I and Scope II carbon emissions, maintaining biodiversity, and providing resiliency for the future. The 2015 Green Bond Principles address eight categories of environmental impact:

  • Renewable energy
  • Energy efficiency (including efficient buildings)
  • Sustainable waste management
  • Sustainable land use (including sustainable forestry and agriculture)
  • Biodiversity conservation
  • Clean transportation
  • Sustainable water management (including clean and/or drinking water)
  • Climate change adaptation

Each of these eight important environmental categories is present within the framework of every rigorous green building rating system in existence worldwide – BREEAMDGNBGreen StarHK-BEAMLEED, and Living Building Challenge to name a few. The real estate industry has a long history of addressing environmental impacts through the use of rating systems certified by independent third parties. Green building certification systems provide well-established frameworks that define fundamental terms and concepts, address multiple environmental impacts, and measure outcomes across all asset lifecycle phases. Certified buildings are widely recognized as “green” by real estate industry practitioners, within government policies, and among the general public.
The leading green building rating systems worldwide have issued over 82,000 ratings related to green building projects:

Rating System Certified Projects
  BREEAM 24,000
  DGNB 1,165
  ENERGY STAR 26,800
  Green Star 865
  HK-BEAM 665
  LEED 26,550
  NABERS 2,035
Total 82,080

There is ample evidence that certified green buildings are more efficient on average than standard code-compliant buildings resulting in environmental benefits and economic payoffs important to a green bond’s risk profile.

  1. Market-based studies by the US National Academies of ScienceNew Buildings InstituteCoStarUC San DiegoCBREGreen Star AustraliaUniversity of ArizonaRocky Mountain InstituteRoyal Institute of Chartered SurveyorsDeloitte, and Jones Lang LaSalle consistently and repeatedly attest to the advantages delivered by certified green buildings.
  2. Individual case studies published by BREEAMAustralia’s Green StarWorld Green Building CouncilUS General Service AgencyJohnson ControlsBuildingGreenHarvard UniversityMcGraw Hill and the Canadian Green Building Council further showcase the environmental and economic benefits for certified green buildings.
  3. Recent research from Harvard Business School and the University of Oxford demonstrates that companies engaged in ESG-based business practices deliver superior economic outcomes.

Indicators and Assurances
The GRESB Green Bond Guidelines for the Real Estate Sector leverage the wide adoption of green building schemes by focusing on green building certification frameworks and energy ratings as foundational metrics that signal “green” to investors in line with government regulations and accepted industry norms.
Rigorous green building certification systems require performance-based measurements along multiple environmental categories and are backed up by comprehensive documentation. Energy ratings such as Energy Star and NABERS demonstrate operational efficiencies through peer-based ranks. Implicit within these certifications is the independent verification that provides the backbone for green bond assurance.
Certified green buildings are applicable for both verifying the selection of Eligible Green Bond Projects and reporting outcomes to investors. Using well-established industry metrics results in a streamlined approach for underwriters and lower costs for bond issuers.
The GRESB Green Bond Guidelines go further by suggesting optional metrics for reporting more granular environmental impacts on asset level GHG emissions, renewable energy, water consumption, waste management and stakeholder engagement, alongside the issuer’s overall ESG profile or rating. This ESG profile provides additional context useful when validating the issuer’s prior track record of engagement, selecting Eligible Green Projects, and providing assurance and ongoing investor reporting.
Combined with independent verification underlying rigorous green building certifications and benchmarked energy ratings, a corporate ESG profile may even serve as an alternative to second party opinions which assess and verify the project selection process of the issuer.


Close ties to capital market participants and real estate industry stakeholders motivated and informed the development of the GRESB Real Estate Sector Guidelines. Drawn from recommendations by experienced green property bond originators, underwriters, and investors, these Guidelines provide sector guidance for the full spectrum of real estate investors. Engagement pathways exist for the most environmentally progressive portfolio owners and for those just beginning to consider transitioning their assets to higher levels of sustainability and efficiency.
GRESB is a global, industry driven organization with more than 150 members, comprised of institutional real estate investors, property companies and funds, real estate solution providers and advisors in 59 countries worldwide.  In 2014, 637 listed property companies and funds participated in the global GRESB benchmark, reporting sustainability data on over 56,000 properties covering $2.1 trillion in asset value. Green bonds as a source of financing linked to disclosure of improved environmental outcomes is aligned with GRESB’s mission to create transparency regarding the sustainability performance of the global real estate sector.
Going forward, GRESB will provide industry stakeholders a dynamic Green Bond Working Group designed to bring together potential issuers, underwriters and investors capable of further catalyzing green property bond transactions through information sharing and evolving best practices.


The Green Bond Guidelines for the Real Estate Sector are publicly available:
ICMA Green Bonds Resources:
This article is written by Sara Anzinger.