Written by Brent Shone
This month, GCX is shining a spotlight on the real estate sector. As many of the GCX DASH- clients hail from this sector, we will be keeping a close eye on the latest green building and real estate sector developments at this year’s Green Building Convention, where we will also be showcasing our work.
The Global Real Estate Sustainability Benchmark (“GRESB”) annual results for 2021 were recently released, so the timing of the Green Building Convention could not be better. The South African contingent comprising of Growthpoint, Redefine, Hyprop and Fortress make up part of the six African participants in the annual real estate benchmark, all of whom are market leaders and front runners in the sector.
Who is GRESB?
Founded in 2009, GRESB’s mission is to provide a consistent framework for real estate managers and developers to report on the environmental, social and governance (ESG) performance of their assets. The ESG and sustainability space are evolving at a rapid rate, with the emergence of various reporting standards, disclosure frameworks and rating agencies.
GRESB has become the global standard that the real estate and infrastructure sectors are looking toward for guidance and market performance indicators. As an independent body, GRESB aligns their reporting framework within the confines of the UN Sustainability Development Goals (UN SDGs), the Paris Climate Accord as well as other major reporting frameworks (such as TCFD, PRI and GRI) to ease the regulatory burden on companies.
What is the GRESB Real Estate Benchmark?
The GRESB Real Estate Benchmark is a product of the GRESB Real Estate Assessment (“the Assessment”). This Assessment is annually self-reported by GRESB participants and has 2 primary components comprising of:
- The management component: Focuses on aspects such as risk management, strategy, and stakeholder engagement to name a few. Companies who are aligned with the Task Force on Climate Related Financial Disclosures (TCFDs) will have these aspects largely covered due to requirements of the recommended disclosures; and
- The performance component: Measures the performance of assets within a portfolio. Indicators such as greenhouse gas emissions, energy consumption and waste generation are measured as part of this component.
The 2021 Real Estate Results
The GRESB Annual Real Estate benchmark results for 2021 were announced on October 15. Since its inception, the participants in the annual benchmark have grown to over 1500 participants globally, with over $USD5.7-trillion of assets under management, equating to R82.65-trillion, and nearly 117,000 individual assets included in the benchmark.
The benchmark results highlighted that one of the biggest improvements in scoring criteria this year came in the data monitoring and review component of the assessment. An increased number of companies had their data externally reviewed and verified, meaning higher quality ESG data that can accurately enable investors to judge a company’s performance, and for the company to set targets based on high quality and granular data.
This bodes well for the real estate sector, as benchmark results also illustrated an overall improvement in data coverage across the performance indicators. Data coverage across energy and water consumption, and waste generation improved, meaning more companies are starting to track their consumption down to an asset level.
Along with the increase in data coverage, the results illustrated an overall decrease in both greenhouse gas and energy intensity of the participants. While this can be attributed to the vast impact of the Covid-19 Pandemic, the GRESB survey of participants illustrated that more companies had begun introducing energy efficiency measures in their assets.
Interestingly enough, the majority of the participants in the benchmark this year have a diversified real estate portfolio, meaning their portfolios compromise various categories of real estate assets. While the performance indicators may remain the same, each asset class presents unique challenges for data collection. The challenges of data collection and capturing have been highlighted by companies such as Blackrock. By illustrating and showcasing the overall improvement this year in data coverage, companies have started placing greater emphasis on collecting their asset-level data.
What does this mean going forward?
As we slowly begin to adjust to our new normal and are tempted to ignore the widespread effects of the Covid-19 pandemic, in reality, this isn’t always possible. However, the results of this year’s GRESB survey illustrated promising signs in the real estate sector despite Covid-19 and has given us more than a few reasons to be optimistic. For businesses to be placing emphasis on sustainability and ESG performance, whilst being heavily financially impacted by the pandemic, is an extremely positive sign for what is to come, and we know that this is just the beginning. Slowly but surely people and businesses are waking up to the benefits of prioritising sustainability.
The steady growth in GRESB participants means that more real estate companies are looking at ESG not from a compliance but a performance perspective. The evidence of this lies in the increase in data collection by participants. But merely collecting data is not enough, the real change begins when the data is used to inform strategic decision-making and setting long-term targets. A report from the World Green Building Council (WGBC) published this month highlights the need for the built environment sector to be on a clear decarbonisation path by 2050. In order for this to happen companies in the sector need to have their targets in place, the data to support them and the financial backing to be able to act on their ambitions.
Over a hundred institutional investors make use of the GRESB benchmark data to inform their capital allocation decisions. We have seen more real estate companies accessing sustainability linked finance in the past year, with the latest being allocated to Equites Property Fund by Rand Merchant Bank. It goes to show that companies who prioritise ESG performance in their business will reap the benefits that the market has to offer.
GCX and GRESB
This year, GCX became the first GRESB partner in Africa, with Africa only having 6 participants in this year’s assessment, there is plenty of room for the African real estate sector to showcase its credentials to the global market. At GCX we pride ourselves on being able to give companies confidence in their sustainability data. We work alongside our clients to ensure that there are the correct workflows in place to ensure accurate data collection and then to identify and plug their data gaps.
GCX DASH- offers a single version of the truth and a consolidated view of your organisation’s sustainability data. GCX’s monthly data collection and consolidation processes remove the stress of having to collect a year’s worth of data to meet the deadline as the data can be configured to meet the GRESB requirements and exported from DASH-, submission-ready.
To find out more about how GCX can help you navigate your company’s sustainability journey, get in touch.