As host of the 2021 GRESB Infrastructure Results event for North America, Quinn & Partners asked six longstanding investor, corporate, and consultant representatives, to provide their top insights into GRESB. Our panelists from J.P. Morgan, Fiera Infrastructure, Alinda Capital Partners, Oaktree Capital, Grupo SAESA and Pricewaterhouse Coopers responded with their best tips and tricks.
These “Top 10 Learnings” are valuable to new and prospective participants looking to better understand and get the most value from GRESB. As the Infrastructure Assessment enters its seventh year, we thought it would be valuable to share. Consider them as you head into the 2022 reporting cycle.
1. GRESB demystifies ESG
For investment and asset management teams, evaluating a portfolio company or operator’s ESG practices can be challenging. Identifying where to start and evaluating the strength and quality of an organization’s ESG practices often require guidance and support. Similarly, portfolio companies and operators may not be well versed on what a comprehensive ESG management approach should entail. For infrastructure fund managers, portfolio companies and operators, GRESB provides a structure around which to inform good practices, measure progress, and provide a pathway for ESG improvements.
The GRESB Assessment’s standardized reporting mechanism is also valuable for reporting back to investors in simple and comparable terms.
2. GRESB evaluates material ESG risks
GRESB uses a materiality approach to identify specific ESG topics that should be managed based on the asset’s operations, geography and sector. This approach allows for cross-industry benchmarking of assets and helps investors identify and evaluate ESG risk management practices specific to each investment.
Building on GRESB materiality, fund managers use GRESB to identify gaps in portfolio company and operator ESG practices so those gaps can be closed, thereby supporting ESG risk management for the fund.
3. GRESB supports a dialogue about ESG
For seasoned participants, much of the value from GRESB comes from engagement with portfolio companies and operators. The Assessment is used as a springboard for a broader and deeper discussion on ESG. Many long-time participants use the annual GRESB cycle as a central part of their annual ESG engagement process. The Assessment is completed in Q2, opportunities and plans are agreed on in Q3, results are reviewed in Q4 with the goal of continuous improvement.
4. GRESB helps obtain performance data
Capturing ESG data is critical to assess and track accurate ESG performance and outcomes. Investors need ESG data to report to clients and meet regulatory requirements, such as the Sustainable Finance Disclosure Regulation (SFDR) in Europe. GRESB helps standardize and establish a regular cadence for data collection. Some long-time participants supplement GRESB’s data collection with additional metrics, but still use the GRESB reporting process as the means to capture that data.
Since improving ESG outcomes is the ultimate goal, GRESB has expressed that its strategy is to increase the focus of the Assessment and score weighting on the quality and accuracy of ESG data and improvements in ESG performance.
5. GRESB helps you and your assets stay on top of evolving demands
The ESG landscape is changing rapidly. Long-time participants value that the GRESB Assessment also evolves. This helps investors to address new trends and data needs without having to continually update their own tools. One example is climate risk and opportunities, where questions on science-aligned targets, risk and opportunity assessment and management practices in GRESB help investors get a better understanding of what their investments are doing to manage climate-related impacts.
6. Establishing accountability is critical
To be successful, seasoned investor participants told us that establishing clear accountability among senior management at individual portfolio companies and within their own organization is essential. This should be done early, before GRESB starts in Q1. Once responsibility is defined, GRESB fosters natural accountability mechanisms as fund managers, portfolio companies and operators are motivated to score well and improve over time.
7. GRESB requires – and fosters – cross-organization collaboration
Multi-year participants stress that, to be successful, GRESB must be a team effort. It requires many core business functions to be cooperate, such as operations, human resources, asset management, compliance. This reinforces the integration of ESG management across the business and participants share that this has helped them break down silos in their own organizations. Engaging employees to support the preparation of annual GRESB Assessments generates buy-in and a desire to see year-over-year improvement – and teams feel rewarded as their organizations take steps in the right direction.
8. To score well, you need to rally all assets
A fund’s GRESB score depends heavily (70%) on the results of the underlying investments. This methodology reinforces a fund manager’s accountability and stewardship practices to promote good ESG management among its investments. Getting assets on board is critical and can take time. Tips from long-time participants include incorporating GRESB participation in the asset onboarding process, embedding it into ownership agreements, focusing on the largest holdings first, and getting new assets to participate even if they are too new to count towards a fund’s score.
9. GRESB participation is a marathon, not a sprint
Good ESG management is about building awareness, getting buy-in, and enhancing capabilities across the organization. Adopting ESG best practices takes time and should be seen as a journey that funds and assets embark on to improve their processes.
10. It’s okay to get (or give) help
Engaging an ESG specialist to support GRESB submissions and identify specific recommendations to supplement GRESB questions can be very useful, especially for first-time participants. Support helps to translate ESG terms and standards for those who are newer to the subject matter. GRESB’s Partner Organizations include consultants, data partners and solutions providers that can support the process and set participants up for success.
About Quinn & Partners
Quinn & Partners is a leading management consultancy specializing in corporate sustainability, sustainable finance and responsible investment practices. Our clients are public and private companies and institutional investors. We support clients to establish strategies and take action to improve ESG performance, ultimately creating value for all stakeholders.
As a longstanding GRESB Partner, we have seen and helped our clients use the GRESB Infrastructure Assessment as a tool to support them in their ESG journeys. In 2021, we supported over 50 GRESB Infrastructure participants with their submissions.
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