GRESB OIC 2011: Hall of Fame

GRESB was born in 2009 when several of Europe’s leading real estate investors, asset managers and academics joined forces to assess the environmental performance of public property companies and private property funds around the world. The four founding partners, APG Asset Management, PGGM Investments, the Universities Superannuation Scheme and the European Centre for Corporate Engagement at Maastricht University say this was the first global effort of its kind.

But while the awards add credibility to the GRESB project at such an early stage the partners are swift to stress they are not becoming complacent.

“At the moment, there is no systematic information on the environmental performance of public and private real estate investments. Institutional investors, such as the founding members of GRESB, need data and a consistent methodology for both types of real estate investments,” they say.

“Furthermore, we have reviewed the data used by current ESG data providers for the listed spectrum and found that most of it was not up to date and in some cases we found the information to be more than four years old. But that was not the only source of frustration, as coverage was limited to the largest real estate companies. For instance, we found the ESG data provider with the highest coverage for Europe covers less than 40% of EPRA members,” they continue.

The 2009 survey – the first phase in building what is intended to become the leading sustainability benchmarking tool for the real estate investment industry – sought to create an overview of the current level of integration of environmental management in all listed property companies and private property funds around the world. Public and private property investors were the target of this phase and they were presented initially with 14 detailed questions relating to the presence of environmental management policies, integration of environmental issues in property management and disclosure of environmental policies in their schemes.

They were then asked to respond to 26 further questions aimed at providing evidence about how they implement and measure their environmental policies. “By way of example, we asked investors to supply detailed information on energy consumption, water consumption, waste collection and recycling, CO2 emissions and on employee training programs and remuneration policies,” the partners explain.

The benchmark is based on current best practices in real estate environmental management. Metrics include elements identified by responsible investment rating agencies, the general guidelines of the Global Reporting Initiative (GRI) and key performance indicators, the relevance of which has been scientifically established. “The scorecard provides detailed insight into the policies, implementation, and measurement of environmental practices of property companies and property fund managers,” claim the partners.

The results of the 2009 survey were translated into a simple benchmark based on a binary rating scheme in which most questions received one point if answered positively and zero if negatively. To recognise the importance of actual measurement of environmental metrics, questions relating to direct measurement received more than one point. “The exact rating per question is available upon request,” the partners say. The final scores were then standardised on a scale of 0-100 to facilitate how they are interpreted and peer group comparison. The maximum score for Management and Policy is 23 points and the maximum score for Implementation and Measurement 35 points. This results in a weighting of some 40% for Management and Policy and some 60% for Implementation and Measurement within the benchmark.

The survey results led directly to the development of GRESB. “The benchmark can serve as an assessment tool for which the highest score is 100. The maximum index score reflects optimal environmental performance, an environmental policy that is fully in line with the creation of shareholder value, so it does not conflict with the primary fiduciary responsibility of the pension funds. Managers of listed property companies and private property funds should aim for this environmental performance level,” the partners say.

With the first round of the survey complete, the founding GRESB partners worked hard to get the second phase ready. This was launched during the spring of this year and the partners confirm that it will provide institutional investors with a due diligence tool to assess the environmental performance of their real estate investments. This tool will cover:

Environmental and social performance
Peer benchmarking and reporting by region, sector and investment universe
Existing and new real estate investments
Investments being able to be instantly

Respondents of the survey receiving an automated report, including the relative performance of their assets against their peers and detailed suggestions for improvement

By using information collected by GRESB, the partners argue that institutional investors will be able to compare the environmental performance of individual property investments with their environmental real estate targets. “The intention is that this benchmarking will serve as a catalyst for environmental engagement in real estate investments. The results of the second phase survey, which are expected in September of this year, will form the basis for a collective effort towards a more resource-efficient institutional real estate industry,” they add.

Such has been the success of the investor GRESB survey and benchmark, that by March this year, 11 of the world’s largest pensions asset managers, representing €1trn in assets under management globally, had joined forces to create a similar model using the same name, the Global Real Estate Sustain-ability Benchmark for their side of the industry. “The GRESB Foundation will thus execute an annual survey to scrutinise the sustainability of fund managers in the real estate industry. The goal is to simultaneously create shareholder value and reduce the sector’s substantial carbon footprint, by creating more transparency in the environmental sustainability of real estate investment managers the world over,” the partners say.

Outstanding Industry Contribution 2011

GRESB