Raising the bar: Key updates to the GRESB Building Certification evaluation process | The Pulse by GRESB

In this episode of The Pulse, we dive into the evolving landscape of building certifications. Our speakers unpack why these certifications matter, how the GRESB Foundation is updating recognition criteria to reflect industry advancements, and what this means for both certification bodies and GRESB participants. Tune in for insights on the future shift toward performance-based scoring. Listen to the full episode below, featuring expert insights from:

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

Charles: Welcome to the Pulse by GRESB, our interview series where we discuss important topics in sustainable real assets from GRESB to the wider industry. My name is Charles van Thiel. I am Director of the Real Estate Standard at GRESB, and today I’m your host. And we’re gonna talk about building certifications. To support this conversation and bring you all insight into this topic, I’m joined by my colleague Karl Desai, Senior Associate at GRESB. Karl, would you like to introduce yourself briefly to the audience?

Karl: Hi Charles, great to be here today. My name is Karl Desai. I have been working at GRESB over the last six or so months. Specifically working on a project around building certifications and how they’re recognized in GRESB. And I have a background in building certifications from the Green Building Council of Australia.

Charles: Great. I’d love to start this conversation with a bit of background to the audience about why is it that we’re talking about building certifications today and why is this topic considered important at GRESB nowadays?

Karl: As most audience members would probably know, GRESB is intended to reflect what is good practice on ESG and real estate in the industry. Building certifications have been in the industry for a number of decades now, and they really represent best practice for what buildings can achieve in terms of sustainability and ESG. So that’s the reason why there are a couple of indicators dedicated to building certifications, worth approximately 8.5%, and they’re embedded in the Real Estate Standard as we consider building certifications to be a good proxy for what is good levels of ESG management and performance.

Charles: Thank you very much, Karl. So would you like to share any observation with the audience around how the building certification landscape has evolved over the last few years?
Any notable change?

Karl: Yeah, absolutely. Over the last few years there’s been a great proliferation and sophistication around building certifications in the industry. Let’s say about 15, 20 years ago, there’d be a handful of those traditional green building certifications, which would cover a broad range of sustainability topics. We’re seeing greater coverage of themes that building certifications can cover. So they’re growing from looking at purely environmental themes to now looking at health and wellbeing and social impact themes. So basically it’s quite a dynamic space and there’s been a great proliferation of schemes generally including looking at not only single assets, but then looking at portfolios, neighborhoods, and districts, including community level certifications. So, it’s a growing space and that’s something that GRESB is highly attuned to.

Charles: So based on what you just described, that raises the question, how is it that the GRESB Foundation is looking at building certifications for the GRESB Standards to remain relevant for the future? So would you like to tell us a little bit more about what actually is happening at the GRESB Foundation side on the topic of building certifications?

Karl: So the GRESB Foundation flagged that building certifications were a space that needed some level of update and improvement within the Standard a few years ago. And so at that point, they put in place a multi-year development plan to try and keep up with the pace, with what’s happening in the industry around building certifications. Previously, building certifications were rated across two key parameters.

So, basically, how much of a portfolio’s floor area is covered? And the quality of the certification used to assess that. Since the multi-year development plan has been put in place, there’s been the introduction of a time factor. So this effectively reflects that older certifications are less valuable than more recent ones. And that gets factored into the GRESB assessment and scoring logic. And then, in 2024, updated criteria has been developed to better differentiate the schemes and how they are rewarded in terms of quality characteristics.

Charles: I’d love for us to dig a little bit deeper into the actual work currently ongoing on building certifications. Specifically on the revision of the criteria. Would you mind telling us a little bit more about what the key objectives of that work are? And why really does it matter?

Karl: Certainly. Initially, we had in place some criteria to screen building certification schemes that were submitted to GRESB, to ensure they meet minimum criteria. And that criteria has been in place for at least the last 5 to 10 years. But what we’ve seen with the growing number of building certifications available in the industry, increasing amount are being submitted to GRESB for review and to be recognized. A large amount of them are recognized. We’ve grown from having about 20 certification schemes recognized, 10 or so years ago, to about 250 building certifications from around the world being recognized in GRESB today.

Now that’s a large number, and the majority of them, about three quarters, receive full points, full recognition. So there’s limited level of differentiation between those 250 schemes. It makes the space slightly confusing for an investor or a manager to understand which schemes are best suited to them and are of good quality. So what we have done is we’ve updated the minimum criteria. We’re calling them the revised criteria, and the objectives of this process is threefold. Firstly, it’s to elevate the best in class schemes. It’s to refine the list of recognized schemes from the 250. And to enhance transparency on key metrics.

Charles: I can imagine how difficult and complex it must be to actually put together a revised list of criteria that aligns with current building certification practices, knowing how much that industry has evolved over the last 10 years. I’m interested to know a little bit more about how the foundation went about revising the criteria. What was the process that it followed? As you all know, the GRESB Foundation is an industry led initiative. So, of course, feedback from the wider GRESB membership is absolutely necessary in this work.

Karl: Yeah, you’re absolutely right there, Charles. What we’ve intended to do with developing the revised criteria is to work hand in hand with industry to ensure that the criteria are fit for purpose and reflect current best practice. So the process that we undertook was in Q1 last year, we did a horizon scan of leading schemes to understand what their processes and practices were and what we could set as a reasonable baseline for all schemes to meet. We did that desktop feedback. Put together a draft set of criteria, and then we consulted quite widely on that criteria. We had a three month public consultation process, where we received responses from over a hundred organizations from all around the world, across a broad range of stakeholder groups as well.

Then we held focused interviews and stakeholder specific meetings to really test the criteria, push and pull it in different directions to make sure it is fit for purpose and can cover a broad range of different building certification types. After the consultation process, we digested all the feedback that was received, refined the criteria, pushed that forward with the Real Estate Standards Committee. They provided some additional fine tuning and that was approved by the Foundation Board, I think in Q3 2024. More recently before we undertake the implementation of the revised criteria.

We’ve met with the largest certification schemes that are recognized within the GRESB assessment universe. so we’ve had about 10 one-on-one calls with certification bodies to make sure that the revised criteria is easy to understand and to respond to as we go through the implementation process.

Charles: It sounds like a pretty extensive and time consuming process, but this is obviously very important to make sure that the actual standard development process of GRESB remains very open and transparent and that key stakeholders are engaged. I can imagine that those criteria could be interesting for the wider audience to consult if needed. So I just wonder if these are publicly available today or not? And then my second question, Karl, would be, what is the timeline that we are following right now in terms of getting all these schemes reassessed?

And the reason why I’m asking this, Karl, is because I can imagine those revised criteria will not only impact GRESB participants in their choice for what schemes to undertake as part of their certification practices, but it could also impact the certifiers themselves, potentially having to implement some changes internally to comply with those in the future.

Karl: Yeah I’ll try to answer both those questions in one fell swoop. We have a landing page dedicated to building certifications on our website. So, yes, the criteria is publicly available. And we have links to previous news articles where we share the public consultation process and some of the main findings that came out of that. And that page also includes the intended timeline looking forward. So now that we have the criteria published as of December, 2024, we’re now switching into a mode where we need to sift through currently recognized certification schemes to understand whether they will meet the revised criteria. And we’re providing a long lead in period for certification bodies to submit information to GRESB to ensure that their schemes align with the revised criteria.

So the process is kicking off in the next month or so, and that will be running up until the end of 2026. And the updated list of recognized schemes who meet the revised criteria will be fully implemented in the 2027 GRESB Standard. Now a couple of notes. We appreciate that we need to smooth the transition period both for industry participants and certification bodies. So, what we’ll be doing to try and support that process is to have a tracker with schemes that have met the revised criteria available mid this year. That’ll provide early insights to our participants and we will keep the industry up to date.

Charles: Thank you, Karl. And of course we do intend to provide more forward looking information around how the results from that reassessment will impact the GRESB Standards and participants results before 2027. My final point here would be to incentivize all schemes currently recognized in the GRESB Standards to actually look at the landing page that Karl just mentioned and actually get their scheme reassessed as per the revised criteria so that we can provide the wider GRESB membership with insight around the results of that reassessment as early as possible. Karl, would you have anything to share with the audience around future plans on building certifications in the standards?

Karl: Yes. We have steer in terms of the strategic direction of travel for the standard, and that is to transition towards performance based scoring. So really understanding how we can reward performance based outcomes and as the standard increases scoring and reward for performance based outcome, we recognize there’ll be an overlap between what building certifications are seeking to achieve and what specific performance indicators within the GRESB Standard are seeking to achieve. So as a result, we anticipate evolving the scoring of building certifications to start to lift the lid on building certifications and understand how they’re actually driving performance outcomes for assets. It’ll mean that we’re really incentivizing performance outcomes, rather than just the achievement of a building certification itself. So this is intended to really drive high levels of performance across assets rather than just seeking a certification for certification’s sake. We recognize that building certifications will play a crucial role in laying the path towards a performance-based standard.

Charles: That’s very inspiring. Thank you so much for your insight today. I certainly look forward to seeing more development on that front in the future. That’s about all the time we have for today’s episode of The Pulse. Thank you Karl so much for your time and insights. I’m Charles Van Thiel and I’ve been your host today. See you next time on The Pulse by GRESB.