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.
Imagine the following: with less than three months to go until the new year, you begin thinking through your travel plans for the holidays and decide on a road trip. In anticipation of the journey ahead, you visit your local mechanic. You explain to them that you do not typically go on these longer trips, and as such, want to cover all your bases, such as inspecting major systems, checking your tire pressure, and assuring that safety features are in working order. Your mechanic asks if you have records of previous work done to the vehicle, which fortunately you keep organized in the glove compartment.
So, what does a visit to a mechanic have to do with GRESB? In both scenarios, you are seeking a professional evaluation of the integrity of essential systems. Based on the outcome, you can discern where modifications are needed to advance on your journey. To this end, we have identified five best practices to ensure continued improvement of ESG performance.
- Identify key stakeholders and maintain constant communication.
Buildings do not operate in a silo – there are people involved in every aspect of operations and maintenance. Key stakeholders include property managers, tenants, and any entities involved in supporting ESG goals. Maintaining an open line of communication among these stakeholders will enable you to obtain a comprehensive view of the portfolio and address any issues in a collaborative way.
- Ensure data integrity and robustness.
A commitment to complete data coverage is the cornerstone of a successful GRESB submission. To aid in this endeavor, many clients turn to ESG data platforms to help organize and store their data including building certifications, utility readings, and other initiatives undertaken in past years. Complete data also enables clients to identify and correct any gaps that may be present at the asset level.
- Focus on ESG holistically.
Of the three components that make up ESG, Social and Governance are often taken less seriously. This is likely because changes around these components usually require a deeper level of organizational involvement and take more time to effectively implement. However, the only consistent way to ensure a positive trajectory in GRESB scores year after year is by focusing on ESG components equally.
- Chart out a sustainability roadmap.
A few months after the deadline to submit, GRESB releases a benchmarking report comparing a fund’s responses to organizations in a similar peer group. These results will identify strengths and areas of improvement that should inform a sustainability roadmap. This is a key tool that will allow an organization to understand what actionable steps are required to meet its ESG goals.
- Stay on top of market evolution.
Every year, ESG industry standards are evolving to be more vigorous. GRESB is a benchmark of ESG best practices within real estate, but it is not static. It is important to monitor developments within the industry and adapt accordingly to maintain a high likelihood of improving your score.
We have seen that when clients adopt these best practices, they are usually able to maintain a positive trajectory in their GRESB scores, which is viewed favorably by investors because it shows an ongoing commitment to ESG. One such client was able to raise their GRESB scores by 24 points in 2021 and 13 in 2022. To accomplish this, they created a sustainability roadmap based on a gap analysis from previous reporting years. Their priorities consisted of obtaining 100% data coverage for the funds they were actively benchmarking and the launch of new initiatives within social and governance components. In the coming years, this client is putting plans in place to decarbonize their entire portfolio.
Much like a diagnostic test that your local mechanic would run to check major systems, GRESB provides similar insight for your funds. Record keeping, consistent communication, and holistic evaluation are some of the key components to a successful road trip and sustainability journey. While GRESB is considered a yearly crunch, it should rather be the result of ongoing efforts to implement short-, medium-, and long-term ESG goals.
This article was written by Alejandro Muñoz-McKearney, Sustainability & Energy Analyst, and Gerardo Zambrano, Senior Sustainability & Energy Analyst, at Longevity Partners.