The Global Real Estate Sustainability Benchmark (GRESB) recently released its 2016 Annual Survey Results, and many of our investors are undoubtedly encountering press releases, news articles, or social media posts discussing scores and trends. For those of us engaged in sustainability and responsible property investing, this has become a bit of an annual extravaganza – like the Grammy’s for green buildings!
But just what exactly is GRESB? Why does Principal Real Estate Investors participate? And how should investors, clients, and interested parties view and parse through this information? In today’s post, I hope to shed some light on how GRESB works, what information it provides investors, and how we use it to assess our progress and shape our strategies.
Launched in 2009, GRESB focuses on researching and assessing how real estate investment firms are incorporating environmental, social, and governance (ESG) factors into their strategies, decision making, and operations. The underlying rationale behind GRESB is that pension funds, investment managers, and real estate practitioners – in their role as fiduciaries – understand the ESG implications of real estate investments and their impact on investment performance. GRESB’s flagship initiative, the GRESB Real Estate Assessment, is an annual survey of real estate firms that provides unique benchmarks, trend data, and insights into the practices of participants. In this year’s survey, over 750 real estate entities participated, representing over $2.8 trillion in assets under management.
GRESB measures progress across two dimensions. First, management and policy benchmarks the ways a firm governs its investment portfolio, and how it sets strategic direction and engages stakeholders. Second, implementation and measurement primarily evaluates hard data on the environmental performance of real estate properties – energy and water efficiency, waste management, green building certifications, and year-over-year improvements. Through the survey results, investors can review and understand how real estate firms compare against defined peer groups. The GRESB results can further be examined according to the particular focus areas of any given investor, with separate scores available in environmental, social, or governance categories, or on special real estate functions like new development.
So what does this actually tell an investor? At a minimum, participation in GRESB indicates that the organization is taking significant steps to incorporate ESG considerations into its business practices. GRESB also acts as a comparative tool, allowing for analysis on performance and industry trends by geography, property type, or year. For example, in the 2016 GRESB Snapshot you can quickly see that overall scores rose six points from last year, or that funds dominated by office buildings outperformed other property types, or that hotels have the highest associated carbon emissions of any property type. As you dig through the GRESB website or individual fund reports, you will find extensive data and information on how investment managers are incorporating ESG considerations into their strategies, and how that aligns with industry trends.
At Principal Real Estate Investors, we like to view GRESB as a waypoint. It provides an important check on our progress, provides a comparison to both our history and our peers, and identifies areas for improvement. It has emerged as one of many tools that we utilize in setting the strategic direction for our Pillars of Responsible Property Investing initiative. A summary of our performance can be found here, and our investors who are members of GRESB can see detailed scoring and our responses by logging into their GRESB accounts. We’re proud of our results and accomplishments to date, and look forward to engaging more on these issues with our stakeholders.
To me, that is the true value and importance of GRESB. It provides a platform to discuss ESG issues with our clients and investors, and offers a mechanism to align investment priorities and strategies going forward. GRESB simply allows for engaged investors and investment managers to build a stronger partnership, and to be more successful in real estate investing.
Unless otherwise noted, the information in this document has been derived from sources believed to be accurate as of September 2016. Information derived from sources other than Principal Global Investors or its affiliates is believed to be reliable; however, we do not independently verify or guarantee its accuracy or validity. Past performance is not necessarily indicative or a guarantee of future performance and should not be relied upon to make an investment decision.
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