Our industry is engaged in an important dialogue to improve the efficiency and resilience of real assets through transparency and industry collaboration. This article is a contribution to this larger conversation and does not necessarily reflect GRESB’s position.
In today’s competitive private equity real estate landscape, investment managers are fundamentally selling financial products. At its core, a financial product is an intangible instrument backed by a set of key performance indicators (KPIs). At RLB, we believe sustainability should be amongst these KPIs, transforming it from a compliance exercise into a strategic competitive advantage.
At RLB, we believe sustainability should be amongst these KPIs, transforming it from a compliance exercise into a strategic competitive advantage.
The challenge: Reframing ESG as a financial product, not just an outcome
ESG is usually framed as an outcome–net-zero commitments, greenhouse gas reduction pathways, decarbonization targets. While these outcomes are important, they don’t function effectively as transactional levers that the industry can rely upon for decision-making.
The fundamental problem has been inconsistency in ESG measurement. Most investment managers default to EU Taxonomy for their KPIs, but each organization works out these metrics differently. We have not been able to calculate KPIs in a consistent way that regulators, institutional investors, lenders, and valuers all agree is trustworthy and therefore carries genuine transactional value in the marketplace.
This standardization challenge has created a credibility gap that undermines ESG’s potential as a financial product. Even if your fund isn’t yet in scope of mandatory reporting, adopting regulator-recognized KPIs voluntarily makes strategic sense: futureproofing your investment products, giving auditors and investors confidence, and positioning yourself ahead of peers who are waiting until compliance forces their hands. When ESG KPIs are credible, standardized, and recognized by regulators and auditors, sustainability shifts from being a marketing claim to a genuine financial feature of the investment product.
GRESB has become a widely recognized benchmark, offering a rigorous and consistent framework to measure ESG performance at both asset and portfolio levels based on self-reported data. Strong GRESB performance not only demonstrates ESG leadership but also robust governance, responsible management, and financial resilience. It influences capital allocation, risk perception, and investor confidence, making it a powerful differentiator in today’s competitive market.
Despite these clear benefits, the reporting process can feel overwhelming and fragmented for busy real estate investment teams.
The solution: Five GRESB-aligned investment categories
RLB has developed a structured investment framework that connects sustainability performance with capital planning and ROI. The resulting five GRESB-aligned investment categories offer a way to redefine ESG initiatives in terms familiar to finance and investment teams, helping decision-makers understand how sustainability actions translate into operational and portfolio-level outcomes.
1. Efficiency projects & automation
These are quick wins that boost operational ESG performance and GRESB KPIs through relatively low-cost, high-impact upgrades that reduce energy, water, and waste. Examples include LED retrofits, building management system (BMS) optimization, HVAC balancing, and smart metering installations. Critically, this category also encompasses Data Automation and Management Strategies focused on enhancing data quality, reducing human resource burdens, and deriving true value from collected data.
These projects directly improve operational performance metrics under GRESB performance indicators and energy efficiency aspects, supporting GRESB energy, water, waste, and GHG intensity indicators whilst boosting building certifications like BREEAM, NABERS, and LEED. By automating data collection, validation, and reporting processes, organizations can ensure accuracy, improve compliance readiness, and free up teams to focus on strategic analysis rather than manual data handling.
The ROI is compelling: typically a payback period of less than three years, improved energy use intensity and net-zero readiness, GRESB points across performance indicators. For Data Automation and Management Strategies specifically, the ROI manifests through the ability to generate actionable insights that drive further performance improvements across the portfolio.
2. Capital expenditure projects
This encompasses long-term capital expenditure projects, including planned upgrades, refurbishments, and retrofits, that boost asset quality, asset value, and support decarbonization. Including heat pump installations, solar photovoltaic systems and on-site renewables, building fabric upgrades, and electric vehicle charging infrastructure roll-out.
These CapEx projects align to low-carbon, resilient, and certified design standards. They support GRESB performance, energy reduction, and enable certifications like BREEAM new construction/refurbishment, LEED, and WELL.
The resulting outcome is improved asset resilience and valuation, enhanced liquidity, green finance eligibility, GRESB points for sustainability investment, and enhanced occupier experience that supports ESG disclosures.
3. Operational expenditure projects
Here, we introduce operational improvements targeting recurring cost areas that can be switched to greener, more sustainable, and more cost-effective alternatives that elevate existing portfolio’s ESG performance, enhance operational KPIs, and improve management practices including green energy contracts, green leases, letters of authority, and sustainable facilities management service providers.
These projects typically require minimal to zero capital expenditure, instead redirecting existing operational budgets toward more sustainable alternatives. Financial returns manifest through reduced utility costs (often 10-20% savings through competitive green energy contracts), decreased waste disposal fees, improved tenant retention and satisfaction, and enhanced asset valuations driven by stronger ESG credentials.
The payback is often immediate or within the first contract period, with compounding benefits as green leases drive improved tenant behavior and sustainable service providers introduce continuous improvement practices. Critically, these initiatives are scalable across entire portfolios simultaneously, allowing organizations to achieve rapid GRESB score improvements while building a foundation for long-term sustainability performance and regulatory compliance readiness.
4. Risk mitigation and compliance
It is important to futureproof portfolios through proactive ESG risk controls, including acquisition ESG due diligence, regulatory disclosures and alignment, physical climate risk assessments, and transition risk modelling. This also includes ESG Asset Positioning Plans, which form part of an asset’s business plan and define how an asset’s ESG credentials are positioned to the market at point of transaction.
These core ESG activities are required by regulators, lenders, and investors and failure to comply risks funding, investment approvals, or value degradation.
They support risk management frameworks, asset value preservation and market liquidity, and corporate reporting whilst avoiding asset obsolescence, enhancing investor confidence, and ensuring alignment with regulatory requirements.
5. Strategic investments & innovation
The focus of this category is high-impact innovations and strategic decisions that align portfolios to ESG investor standards including green loans and sustainability-linked lending, property technology investments. They also encompass piloting ESG initiatives which are still in the early adoption stage for the majority of the real estate industry including circular economy pilots, nature-based solutions, biodiversity net gain strategies, and Whole Life Carbon design approaches.
These transformational ESG initiatives address climate adaptation, stakeholder engagement, biodiversity, and long-term resilience.
They support GRESB leadership, strategy, resilience, and stakeholder engagement indicators whilst attracting capital from ESG-conscious limited partners, strengthening performance narratives for marketing and brand equity, and enhancing social value reporting.
Looking ahead
As investors increasingly use GRESB performance as a primary filter for portfolio allocation decisions, achieving a high GRESB score has become essential for accessing institutional capital. Yet the technical complexity of the framework, combined with the cross-functional coordination required, means that for some optimizing GRESB performance demands specialized expertise that often extends beyond typical in-house capabilities.
The five GRESB-aligned investment categories outlined in this article provide a structured framework for redefining how sustainability actions connect to portfolio outcomes. However, understanding the categories is only the first step. The critical challenge for ESG leaders lies in prioritizing initiatives within these categories and securing internal approval from investment committees focused on financial returns and risk mitigation.
Tools like RLB’s ESG Initiative Prioritization Matrix–a practical tool designed to bridge the gap between ESG strategy and capital allocation decisions–build directly on the investment categories discussed here, providing a methodology to evaluate and sequence specific initiatives based on their Return on Investment and Strategic Impact.
This enables ESG leaders to communicate sustainability investments in the language of finance, transforming abstract concepts into concrete business cases that resonate with senior management and align with fiduciary responsibilities.
This article was written by Cedric Cools, RLB Partner – ESG. Learn more about Rider Levett Bucknall (RLB) here.