Navigating ESG Reporting in Real Estate

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.

Navigating ESG Reporting in Real Estate

Environmental, social, and governance (ESG) reporting can be an effective tool to communicate your company’s ESG ambitions and achievements to the public and your investors. It’s often used by investors to learn about your annual achievements and improvements but also to share the business’s strategy, and learn about future targets and aspirations.  

ESG reports in real estate are also known as RPI (responsible property investment) or responsibility/sustainability reports that disclose performance data and the impacts the company’s actions have on climate and the planet.  

Currently, ESG reporting is not mandatory in all countries, however, companies are still choosing to disclose this voluntarily and making this practice business as usual. If done in line with various frameworks and standards it can enable businesses to be more transparent about risks, and how they are being managed, opportunities, and show progress against various environmental targets.  

ESG reporting standards and frameworks

With hundreds of ESG reporting standards globally, there is a need for consistency and comparability. Current standards used across the industry float between reporting standards and frameworks. See below for a few examples used across various sectors:

The Global Standards for Sustainability Reporting (The GRI Standards) enables any organization – large or small, private or public – to understand and report on their impacts on the economy, environment, and people in a comparable and credible way. The Standards are highly relevant to many stakeholders – including investors, policymakers, capital markets, and civil society. ​The GRI standards are easy to follow, and companies often use them when starting their ESG reporting journey. 

European Public Real Estate Association (EPRA) supports the transition toward a sustainable built environment promoting sustainability reporting and identifying opportunities for EPRA’s members related to sustainability regulations and initiatives at the European level.  Its mission is to promote, develop and represent the European public real estate sector. 

EPRA recognizes and awards outstanding companies that uptake their sBPR and guidelines: sBPR Performance Measures, covering environmental, social, and corporate impacts, and BPR Overarching Recommendations, consisting of 10 principles that underpin good quality disclosure. 

The annual EPRA BPR Awards recognize and commend the efforts of property companies that have successfully adopted the EPRA BPR Guidelines. 

The INREV SDDS is a standardized data tool that provides investors with the main financial management information they require in a format that allows them to easily upload the data into their own systems and their guidelines focus on the content rather than the format of the reports to the investors.  The INREV Guidelines set the standard for the non-listed real estate industry in Europe and the Asia Pacific. They are divided into 9 modules covering best practices for investor reporting, governance structures, valuation, liquidity, and more.

SDG National Reporting Initiative refers to the act of publishing and disseminating data and statistics on the SDG indicators for key stakeholders, including UN custodian agencies, government policymakers, businesses, non-governmental organizations (NGOs) and research institutions, and the public. They have identified 242 global indicators to monitor progress towards achieving the 17 goals and their 169 associated targets.

The European Commission shared EU rules called the Non-Financial Reporting Directive (NFRD) which lays down the rules on the disclosure of non-financial and diversity information. It requires large companies to publish regular reports on the social and environmental impacts of their activities. The rules apply to large public-interest companies with more than 500 employees. This covers approximately 11,700 large companies and groups across the EU, including listed companies, banks, insurance companies, and other companies designated by national authorities as public-interest entities. 

Following the entry into force of sustainability-related disclosure obligations under the Sustainable Finance Disclosure Regulation (SFDR) in 2021, the second series of disclosure requirements introduced by the Taxonomy Regulation 2 will become applicable from 1 January 2023 with the first reports from asset managers and other in-scope firms will be expected by July 2023. These disclosure requirements apply to all financial market participants (FMPs), including investment managers, that make available financial products, including EU and non-EU funds.

Some of the above frameworks are quite industry-specific, but there are frameworks that focus mainly on climate change like the Task Force on Climate-related Financial Disclosures (TCFD).

Before choosing the standard or framework that suits your company it’s advisable to understand what your company is already doing in terms of environmental, social, and governance aspects first e.g.:

Environmental:

  • Designing and delivering buildings responsibly  
  • Managing assets responsibly
  • Climate risks
  • Energy performance
  • KPIs
  • Targets

Social:

  • Creating value in the community 
  • Employee engagement
  • Health & safety

Governance:

  • TCFD disclosure
  • Human rights and modern slavery
  • Supply chain
  • Tax governance
  • Corporate governance

Identify your target audience, understand your main stakeholders, and undertake a materiality review to map which topics are material to your business and if you should be reporting on them. It is critical to collect all the necessary data related to the environment, society, and governance and report on it in line with one of the reporting frameworks. And lastly, you should decide how you would like to present your achievements, will it be published virtually as a complete ESG report or will you have separate ESG sections on your website, or perhaps you would like to print soft copies so you can share them with your investors.  

International investors with global investment portfolios (IFRS) are increasingly calling for high-quality, transparent, reliable, and comparable reporting by companies on climate and other environmental, social, and governance (ESG) matters.

In 2021, the IFRS Foundation Trustees announced the creation of a new standard-setting board—the International Sustainability Standards Board (ISSB)—to help meet this demand.

The intention is for the ISSB to deliver a comprehensive global baseline of sustainability-related disclosure standards that provide investors and other capital market participants with information about companies’ sustainability-related risks and opportunities to help them make informed decisions.

It is desirable to use one unified framework/standard in the future but for now, there is plenty to choose from. 

Contact

The transition to net-zero will require a long-term strategic plan and CI is here to help. Contact CI‘s team today to understand more about how they are supporting organizations to develop their net-zero roadmaps and ensure climate success.

This article was written by Justyna Tobolska, Senior Consultancy at Carbon Intelligence