All posts in Thought Leadership

Sustainability Qncepts and intellectual capital developed by Quinn & Partners

Six ways to leverage Investor Relations to attract ESG investment capital

Sustainability leaders with strong investor-focused reporting are positioned to access larger pools of capital from investors with ESG strategies. That’s because investors see sustainability as a sign of comprehensive, forward-looking approaches to managing business risks and opportunities. As the demand for sustainability information continues to grow, companies will need an increasingly investor-focused approach to their reporting. In this article, we describe how the Sustainability and Investor Relations teams can work together to improve reporting practices and attract ESG investment capital.


The business case for sustainability is clear

A raft of recent studies confirms that sustainability is good for business.

  • According to a 2017 Harvard study of 2,400 companies, those companies who performed well on material sustainability topics over two decades outperformed the market by nearly 5% annually.1
  • In a 2018 report on ESG ratings from MSCI, Sustainalytics and Thompson Reuters, Bank of America Merrill Lynch found that sustainability performance correlated with higher return on equity, lower price volatility and market outperformance.2
  • A 2017 study by Nordea Equity Research found companies with the highest ESG ratings outperformed the lowest-rated firms by as much as 40%.3
  • A recent study by Harvard Business Review found that ESG issues were almost universally top of mind for senior executives at nearly 50 global institutional investing firms, including the world’s three biggest asset managers (BlackRock, Vanguard and State Street).4
  • In Canada, $2 trillion, or more than 50% of institutional investor assets are governed by responsible investment principles,5 and all major pension plans and asset managers are signatories to the Principles for Responsible Investment.


Satisfying the demand for sustainability information requires a new approach

The correlation between sustainability and financial performance is driving investors to demand more – and better – sustainability disclosure.

In turn, that demand has led to a spike in sustainability information databases, ESG ratings and indices. For example, Bloomberg, Thompson Reuters, ISS, Standard & Poor, MSCI, Sustainalytics, FTSE Russell and DJSI all offer ratings to help financial analysts interpret and assess sustainability performance. Bloomberg terminals alone have approximately 900 sustainability indicators, and subscriptions to the service have nearly tripled in the last three years.

At the same time, companies are striving to satisfy this demand by reporting on their sustainability activities: 93% of S&P 500 companies now disclose sustainability information publicly.

Sustainability managers go to great lengths to align their reporting with frameworks and standards, such as GRI, SASB, TCFD, and CDP.However, investors often find sustainability disclosure falls short because it contains too much extraneous information and unreliable data that lacks comparability across companies.

The critical link between the supply and demand of sustainability information is the Investor Relations (IR) team. The IR team can act as a powerful liaison between two different and often disconnected groups – investors and Sustainability teams. The IR team can help Sustainability teams understand what is financially material to investors and identify useful sustainability information to disclose.

In our experience advising institutional investors and corporate clients, Sustainability teams who follow the following six steps report with more confidence and provide investors with high-quality information about what is most important for company outlook and value creation.


1: Promote collaboration between the IR and Sustainability teams

Set up regular meetings and ensure both teams have an understanding of each other’s strategic priorities, shared goals and key milestones. The Sustainability team should be aware of the requirements of the annual IR calendar – the AGM, annual report, quarterly reports, investor calls and events. Similarly, the IR team should be apprised of the sustainability disclosure reporting cycle – questionnaire responses, report publication, ESG rater solicitations.


2: Understand investor ESG priorities

Investors prioritize different information when making investment decisions. Profile your most important investors for sustainability-related investment positions. For example, many leading European institutions are starting to set portfolio decarbonization goals and routinely integrate climate change considerations into their investment decision-making.

Engage with your investors to understand what they consider to be the strongest indicators of sustainability leadership. For example, do they look for a clear link to the business strategy? Do they want to see a trend of improvements in resource efficiency, or are they more interested in an ambitious set of improvement targets?

Also enhance understanding of how investors apply sustainability information in their equity and credit research – what sources of information do they use, who does the analysis and how frequently? Sophisticated investors often apply proprietary sustainability-themed investment screens, while others may rely more heavily on third-party ESG ratings and disclosure scores.


3: Hone your reporting

Once you’ve established what your investors want to know, make your sustainability information clear, concise and readily available for investors and ESG raters. Take advantage of tools such as sustainability microsites and downloadable data charts. Equip the IR team with an information packet for investor roadshows and quarterly calls. This can be a selection of material from an annual sustainability report and scored results from disclosure frameworks, such as CDP, DJSI or GRESB.7


4: Be proactive about shareholder questions

Monitor and anticipate investor questions ahead of proxy season and develop responses proactively. This demonstrates a forward-looking orientation that helps investors understand your plans and upcoming initiatives.


5: Refine the message

Make sure the IR team is able to both speak articulately about your sustainability approach and connect your priorities to how the company creates shareholder value. Practice makes perfect – outline jargon-free messages and use case studies to highlight your sustainability journey and differentiate your firm based on your tangible sustainability actions and achievements.


6: Engage directly with investors to continuously improve  

Sustainability provides companies with an opportunity to build relationships with investors by driving new and different conversations about value creation. To maximize this potential, allow investors to weigh in on your sustainability strategy. Ask them what resonates and aligns with their priorities, and get their feedback on what you are aiming to achieve. Discuss your ideas about how the company can innovate and position itself as a future-fit investment over the long term.

Of course, the information shouldn’t flow only one way. IR teams at leading companies will no doubt see the relationship as beneficial too: Ideally, they will be working towards integrating sustainability into mainstream investor reporting, helping the markets integrate material sustainability information in fundamental analysis and valuation.


About Quinn & Partners

Quinn & Partners is a sustainability strategy and integration consultancy advising Canadian and American corporations and investors. With services range from sustainability strategy to implementation, training, communications and audit, our vision is to be our clients’ trusted advisor in all matters relating to corporate sustainability and ESG integration. If you would like to know more, please reach out to Francisca Quinn, Managing Partner, Quinn & Partners, at +1 416-300-8068 or for more information.



1Harvard Business School, George Serafeim, Better Information Better Markets, 2017:

2Bank of America Merrill Lynch, The ABCs of Environmental, Social & Governance (ESG), 2018:

3Nordea Equity Research, Cracking the ESG Code, 2017:

4Harvard Business Review, Shareholders Are Getting Serious About Sustainability, 2019: 2/14

5Responsible Investment Association, 2018:

6GRI (Global Reporting Initiative), SASB (Sustainability Accounting & Standards Board), TCFD (Task Force on Climate-related Financial Disclosure), CDP (Carbon Disclosure Project).

7CDP (Carbon Disclosure Project), DJSI (Dow Jones Sustainability Index), GRESB (Global Real Estate Sustainability Benchmark).

GRESB 2018: Participation and performance accelerate – and so does investor interest

Quinn & Partners’ Francisca Quinn & Tony Pringle were at the GRESB North America events in New York last week. Here they share insights from the Real Estate and Infrastructure Assessment results and how companies can act now to get ahead.

Image credit:

The Global Real Assets Sustainability Benchmark, GRESB, recently released the 2018 results of its widely adopted Real Estate and Infrastructure Assessments. Key takeaways: investors value environmental, social and governance (ESG) disclosures and the process helps funds and entities to improve sustainability strategies and performance. Here is a summary of the results and what they mean for you.

GRESB solidifies its position as the global ESG standard for real assets

In 2018, 184 new companies and funds participated in the Real Estate and Infrastructure assessments. The growth signals that investors and fund managers believe that ESG integration in real assets delivers value. The numbers speak for themselves:

  • Real Estate: 903 participants (+6%) with an average score of 68/100 (+5)
  • Infrastructure Fund: 75 participants (+17%) with an average score of 69/100 (+9)
  • Infrastructure Asset: 280 participants (+75%) with an average score of 48/100 (+6)

Nine years into the survey, GRESB covers the majority of public and private real estate investments around the world. Participants represent 61% of global listed real estate equities and 75/100 top private equity firms and property companies. The infrastructure sector’s uptake of GRESB after three years is similar to real estate.

Data. Data. Data. The most powerful tool to improve scores and achieve results

The real estate industry has succeeded in engraining sustainability in executive oversight and business management. Most entities score above 75% on Management & Policy. The focus is now shifting to data quality and improving resource efficiency and portfolio sustainability metrics. These are the areas where leaders now differentiate themselves in GRESB.

Driven by regulation, the infrastructure sector typically has good data at the site level. However, operating companies need to aggregate data across their sites to manage ESG as a business issue, set targets and report environmental and social impacts to investors.

Data also enables sustainability certifications, which is an opportunity for both real estate and infrastructure assets.

New Resilience Module helps to future-proof portfolios

The Taskforce for Financial Climate-Related Disclosures, TFCD, recently reported that 500+ major financial institutions have articulated support for its disclosure recommendations. In other words, it’s fair to say that investors and executives consider climate risk material. This year, GRESB reported that 114 companies answered the voluntary resilience questions and this demonstrates that companies are also paying attention to climate risk and associated issues like extreme weather, renewable on-site energy, Paris Accord-aligned carbon targets, etc.

Participating in the GRESB Resilience Module has several benefits:

  • Prepare for future submissions as GRESB adds resilience questions to the main survey
  • Understand portfolio risks from climate change
  • Understand ability to mitigate impacts of shocks and stressors
  • Develop action plans based on survey gaps

Infrastructure Fund Managers: Differentiate through ESG initiatives

Infrastructure funds are increasingly formalizing ESG due diligence and monitoring practices in a market where it’s harder to find value due to increased asset prices. The Fund assessment is competitive, and most funds score 60-80 out of 100 possible points. There are quick wins that most funds can execute to differentiate:

  • Show your investors you are committed – Become a PRI signatory
  • Systematically embed ESG in due diligence and monitoring – Encourage teams and assets to build ESG management and measurement processes and share results across the organization
  • Proactively report ESG performance to investors – Aggregate key metrics at the portfolio level – carbon emissions, health and safety, etc. – and disclose trends and targets

GRESB requires effort – and it’s necessary for smarter investment decisions

In closing, GRESB has become the global standard to benchmark and disclose sustainability performance in real assets. GRESB allows investors to assess funds and companies in their efforts to outperform and mitigate downside risk. Many investors also believe that ESG signals quality. We may soon see indices tracking the stock performance of GRESB participants versus the market.

This high-quality benchmark is founded on real information – lots of it. It can be tempting to not think about GRESB until Q2 next year, but that’s a major missed opportunity. Get started now! Use your results to focus your efforts on addressing gaps over the next six months – whether it is engaging with stakeholders, collecting more data or setting a target. Embrace the opportunity to stay ahead of the ever-increasing GRESB benchmark.


Quinn & Partners supports leading institutional investors, real estate and infrastructure companies with ESG integration and GRESB audits/assessment services. In 2018, the value of all Real Estate and Infrastructure Assessments that we submitted on behalf of our clients was CAD 210 billion, which is equivalent to 10% of all North American responses. Please reach out to Francisca Quinn, Managing Partner, Quinn & Partners, at +1 416 300 8068 for more information.


The evolution of GRESB – Getting to business value

Last week, Quinn & Partners’ Tony Pringle was in New York City for the annual GRESB results release. Here he reports on GRESB’s continued growth and explains how your company can use the survey to create business value.


Eight years in: GRESB continues to gain momentum

GRESB – the Global Real Estate Sustainability Benchmark – has increased 20% annually since it launched in 2010. In 2017, 850 companies and funds participated, representing 77,000 assets and $3.7 trillion in real estate value.

Although North America still lags behind Europe in number of participants, it has almost three times the asset value, demonstrating that the assessment is well established in Canada and the US.

In public markets, GRESB participants represent the majority of market value, covering 54% of North America, 70% in Europe, and 50% in Asia-Pacific. To fill in the gaps, GRESB now scores non-participating companies based on publicly disclosed Environmental, social and governance (ESG) information. Although these scores are not as robust, they give investor members a full market picture. Including disclosure from non-participants also allows GRESB to compete with other ESG ranking organizations. Since GRESB’s suite of assessments also includes real estate debt and infrastructure, it provides investors a one-stop-shop for ESG data in real asset portfolios.

GRESB’s continued relevance is driven in large part by investors. GRESB is supported by 66 investor members, representing $17 trillion in assets under management – more than double the value of last year’s GRESB members. In a survey of these investor members, 94% stated they use GRESB data in their investment process, and two thirds stated they either mandate or strongly encourage participation from all the funds they invest in.

But transparency still trumps performance for investors: Only 35% of investor members set performance targets for GRESB, and these targets relate to participation or year-on-year improvement.


“The [GRESB] process makes us better.” 

This was the opening statement from James Kennedy, Managing Director of Asset Management at JP Morgan Chase at last week’s results release. Kennedy’s view was echoed by the sector leaders, demonstrating that investors alone aren’t driving GRESB participation. Curiosity, competition and companies’ desire to find business value appear to be equally important.

This sentiment was echoed by the sector leaders, who provided examples of how they turn GRESB questions into business value. Prologis, who’s conversations around tenant engagement have led them to develop a customer sustainability advisory council, is a prime example of innovating GRESB questions into business value.

“Internal conversations initiated by GRESB participation have made Boston Properties a stronger, more purposeful organization.” – Ben Meyers, Manager of Sustainability at Boston Properties.

Checking off a box in the GRESB survey doesn’t deliver value – that comes from developing an approach and executing a program to address a material industry E, S or G topic. GRESB’s true value, then, lies in using the survey as a change management tool to spark internal discussions and action plans around topics such as sustainable development, health and wellness, climate risk and resilience and tenant and community engagement. These are issues that span across departments.

For example, conversations on industrial property data with one client led to collaboration between property management, leasing, communications and operations to engage industrial tenants and green the standard lease. As more companies strive for GRESB leadership and check off more boxes, differentiation comes with execution, not score.


The stages of GRESB – From GRESB NYC results presentations

Source: 2017 GRESB results


What’s next: The assessment continues to evolve

“The test is getting harder” according to GRESB’s head of North America, Dan Winters. The leadership pack is getting more crowded as companies advance their practices and the assessment will change more in 2018 as a result.

Questions on sustainability management will dig deeper to identify companies with more sophisticated sustainability governance. Some of the questions from the voluntary health and wellness assessment will be integrated into the main survey. And there will be greater emphasis on providing property level performance data.


Recommendations for success

Having supported 12 GRESB submissions in 2017, with 10 Green Stars and one country leader, Quinn & Partners has learned a few tricks to improve score results and identify business value.

  • Start early: Have a plan in place to get going as soon as the pre-survey is released in January
  • Provide time to prepare for reporting for improved results: Give properties a pre-emptive head’s up, especially third-party managed properties
  • Start conversations that bridge silos: Set up meetings with multiple departments for questions pertaining to risk assessments, tenant engagement, community engagement, and health and well-being
  • Don’t wait for September’s results to plan for next year’s improvement: Develop action plans during the GRESB process in April
  • For non-participants, review the survey and do a gap analysis: Consider participating or at least identify areas where you can create value for your customers and company

For more information, please contact Tony Pringle (

Tony Pringle is a Co-founder and Partner at management consultancy Quinn & Partners. He is Quinn & Partners’ lead on Global Real Estate Sustainability Benchmark (GRESB) services for real estate, infrastructure and mortgage investors. He is also a member of multiple GRESB Technical Working Groups and supports GRESB training.

Building a trusted investor brand

If you do not include sustainability in your investor reporting, you may be missing out on a powerful opportunity to strengthen your investor brand. Investors are becoming more attuned to the value of a well-executed sustainability strategy and they are seeking evidence that companies are taking action.

That was the message driven home in December by institutional investors speaking at two landmark conferences – the inaugural Sustainability Accounting Standards Board (SASB) Summit in New York and the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (TCFD) Report Launch in London.

Here’s why sustainability reporting matters and how you can use it to satisfy investor demands, prepare for regulatory compliance, and differentiate your brand.

Sustainability matters because it is a proxy for good management

A recent study by the American CFA Institute reveals that 73% of surveyed investors consider ESG integration – or how a company manages issues relating to the environment, company stakeholder groups and governance – when researching and analyzing potential investments.

Investors increasingly view companies that take a proactive approach to sustainability as well-managed. That’s because many sustainability-related issues are tied to future trends that can significantly impact markets, inputs, economics and business models.

Take climate change, for example. The global 2015 Paris Agreement and new Canadian federal and provincial legislation aimed at addressing our radically warming planet are altering the business landscape in far-reaching ways. All industries will be affected in some way: the need to manage energy cost risk, deal with carbon constraints, market new services or access innovation subsidies are just a few of the foreseeable impacts.

Of course, climate change is only one sustainability issue. Business ethics. Workplace safety. Child labour. Pollution. They’re all part of the emerging agenda. Failing to address these in company disclosures looks odd through the investor’s lens and can negatively impact the management’s reputation and brand – not only among investors, but also among employees, customers and other important stakeholders, all of whom see value in a sustainable enterprise.

Act now – ahead of investor regulations

Your disclosure strategy also positions you to comply with any future regulatory disclosure requirements. In a recent landmark report, the Financial Stability Board, chaired by Bank of England Governor Mark Carney, highlighted the need for better corporate climate change management information to support the financial services sector’s lending and insurance underwriting decisions. In fact, select sustainability reporting in financial disclosures is already mandatory in some jurisdictions, including the European Union, Norway, South Africa and parts of Asia.

It’s about disclosing pertinent information – not best performance

Investors are not expecting companies to be a star in all areas of sustainability. They are seeking affirmation that that the companies in their portfolios have started to elevate sustainability to C-Suite and board room discussions. They want assurance that management teams are addressing the broader environmental and societal issues affecting their businesses, and they want to know that companies are managing these as they would any other business issue. “Transparency trumps performance.”

Report on the most important issues

Disclosure should incorporate topics that are most material to the company and its industry, and it should tie into a general discussion about the company’s broad strategic challenges and opportunities, including the management of current and future risks.

At a minimum, reporters should provide a qualitative discussion about the company’s management approach and support the narrative with quantitative performance data. To prove that sustainability is managed as a business issue, it is valuable to discuss future objectives and progress to targets. It is also valuable to name those in senior management or at the board level who are responsible for strategy oversight and performance improvement.

Sustainability reporting should start with financial reporting

Historically, companies have published sustainability information separate from other core investor disclosures. In our opinion, this is unwise: it subjects the reporter to undue litigation risk as financial reporting guidelines clearly state that companies need to disclose factors that “would reasonably be expected to have a significant effect on the market price or value of a security” (Ontario Securities Commission).

Sustainability opportunities and risks can have material implications on company cash flow and asset valuation. For example, how is climate change affecting product demand, supply chain and physical infrastructure? What are the investment returns from water and energy efficiency programs? How is the company creating strategic opportunities through stakeholder partnerships?

The largest companies in the world include sustainability information in their annual financial reports. According to a 2016 KPMG study, three of five of the 250 largest companies in the world follow this practice, and this number is expected to grow. Most also independently assure the information.

Incorporate voluntary reporting to deepen brand building

Progressive companies recognize that voluntarily disclosing detailed sustainability information generates profound reputational benefits among their broader stakeholder groups. This can be done through supplementary channels, such as a stand-alone sustainability or corporate responsibility report and through your company website and social media.

Don’t be daunted – just get started

Formulating your company’s response to sustainability risks and opportunities takes commitment, time and effort. But do not wait until you have the best possible message because it will likely never happen. Start with a few key messages: What is at stake for your company? What is your overall plan? Which executives are in charge? Complement this with a simple scorecard and report on emerging performance indicators.

Whether you are incorporating sustainability information disclosures into financial disclosure or reporting voluntarily, help is at hand. Reporting standards such as the Global Reporting Initiative (GRI) and Carbon Disclosure Project (CDP) provide cross-industry guidance, while the Sustainability Accounting Standards Board and Task Force on Climate-related Financial Disclosures supply checklists tailored to specific industry sectors.

It is important to realize that even publishing sustainability “work in progress” information is beneficial to your reputation and your risk management strategy. It signals to the investor community that your company has a prudent and insightful approach to managing emerging, macro-type risks. And it puts you on a path to developing a robust sustainability disclosure strategy that will drive company action and clearly differentiate you amongst your capital market competitors.


To learn how Quinn & Partners can help you map out your sustainability reporting strategy please contact Francisca Quinn at 416-300-8068 or

New GRI Standards Released

Some of you who follow sustainability news may have seen last week’s news about the “new” GRI Standards. For all current GRI reporters, all is well – no cause for concern. For other, non-GRI sustainability reporters, there is now an exciting opportunity to gradually adapt to the well-recognized standards and declare “GRI-referenced” for partial report sections. In this short email, we’ll explain what you need to know.

In our view, the GRI Standards are a reorganization of existing G4 guidance. It does not provide anything new. However, the new format makes guidance more easy to navigate and comprehend and there is more direction on challenging areas such as “boundaries” and “context”.

GRI – the global sustainability reporting authority

Since 2000, the Global Reporting Initiative’s (GRI) Sustainability Reporting Guidelines have been used by thousands of organizations in more than 90 countries to guide sustainability reporting. On October 19, 2016, GRI released the “GRI Standards”, which modify the current “GRI G4” guidelines (launched May 2013) to a set of more flexible and modular Sustainability Reporting Standards.

Moving from a de facto standard to a formal standard will allow GRI to be referenced more broadly by governments and market regulators around the world. Becoming an official standard also means there is greater clarity in language and better distinctions between “requirements”, “recommendations” and “guidance” – good news for those in charge of developing GRI reports.

New modular structure provides flexibility

The GRI Standards incorporate all key concepts and disclosures from the G4 Sustainability Reporting Guidelines, but they clarify requirements, recommendations and guidance in shorter pieces that can be applied selectively. Companies which follow the GRI Standards will continue to state “In accordance with GRI”.

The modular approach will also be helpful for the Global Sustainability Standards Board (GSSB), GRI’s newly-formed standard-setting body, as it updates the reporting guidance over time. Instead of issuing new versions of the (200-page or so) guidelines and implementation manual, only select pieces need updates. 

Implication for reporters

The GRI Standards are required for all GRI sustainability reporters publishing as of July 1, 2018.

Reporters transitioning from G4

For organizations already reporting in accordance with G4 Guidelines, the impacts on the reporting process are minor. No new topics have been added, key concepts such as Reporting Principles, Management Approach remain and most disclosures from G4 carry over.

Reporters transitioning from G3 or G3.1

If your organization is transitioning from G3.1, you have two options. You can either align select sections of your sustainability report and declare “GRI-referenced” OR if you desire to report “in accordance” with GRI, you need to go through the same step as you would have in moving to G4 – consult with internal and external stakeholders to define material topics and provide information about management approach and performance for each of these. For information on the evolution from G3.1 to the content used in G4/GRI Standards, we suggest consulting this article.

Your pathway to GRI Standards reporting

Current reporting status      Steps to GRI Standards
In accordance with G4
  1. Identify the (minor) changes in disclosures using GRI “transition document”
  2. Report on required organizational and business information
  3. Relabel and rearrange overlapping disclosures; re-organize GRI table
G3.1 compliant report
  1. Engage stakeholders and conduct materiality analysis
  2. Win internal support for more comprehensive disclosures (G3.1 versus GRI Standards)
  3. Report on required organizational and business information
  4. Relabel and rearrange overlapping disclosures; construct GRI table
Non-GRI report
  1. Adopt select GRI Standards modules OR
  2. Engage stakeholders and conduct materiality analysis
  3. Report on required organizational and business information outlined by the Standards

The team at Quinn & Partners is well versed in sustainability reporting, GRI Standards and integrated reporting. For current clients, we will raise the new sustainability reporting opportunities with you in our ongoing advisory services. For new clients, please get in touch to discuss sustainability reporting and the GRI Standards.

Results from GRESB Infra are out! First global assessment of the state of sustainability in infrastructure

Assessment results from the first GRESB Infrastructure survey were released Tuesday at a New York event hosted by JP Morgan Asset Management.

Fifty-one infrastructure funds representing around 140 energy, transportation, telecom, waste and water management and social purpose assets responded to the 2016 questionnaire. The largest single infrastructure fund/asset type was Renewable Energy with 16 funds participating.

The GRESB Infrastructure survey is an independent, third party tool that objectively assesses how well an infrastructure fund or operating company integrates ESG considerations into its governance and investing practices. It also measures the fund’s success in driving overall ESG performance.

Asset owners and asset managers agree: GRESB is a valuable management tool

The Infrastructure survey builds on the ‘Global Real Estate Sustainability Benchmark’ (GRESB). One year in, the infrastructure version appears to have achieved similar uptake as the original real estate survey.

At a launch panel, representatives from Dutch pension giant APG and JP Morgan Asset Management spoke to the business case for seeking environmental, social and governance (ESG) information associated with the infrastructure assets they are planning to buy or hold.

They strongly agreed that ESG integration responds to three important investor drivers:

  • ESG beliefs of clients and beneficiaries
  • Fiduciary duty to invest responsibly – “with changing regulation and macro trends one cannot afford to have stranded, illiquid assets”
  • Correlation between ESG and returns.

Ignoring GRESB “not an option”

“Only standardized tools give us the ability to measure performance and understand who is doing better and worse,” said Steven Hason, APG Asset Management co-head Americas Real Estate and Head Americas Infrastructure.

“Through the score and feedback reports, we can engage with our partners in a more knowledgeable way. Ignoring tools such as GRESB is not an option – we are seeking to double the funds we earmark for responsible investing from US$ 30 to 60 billion,” Steven stated.

Amanda Wallace, Executive Director of JP Morgan Asset Management’s equity infrastructure investment group (current investments in 16 operational companies), added that in addition to being good governance and a value enhancing practice, collecting ESG information allows portfolio managers to track continuous improvement and identify best practices across its portfolio of global assets. Operational practices can be shared to drive improved performance among all assets.

Early days for measuring ESG integration results

The average GRESB fund score was 54 out of 100. This score primarily speaks to integration of ESG considerations in the investment process.

The GRESB asset score which evaluates how sustainability is implemented in asset operations was significantly lower at 33/100. This means that there is lots of work to be done at the asset level in measuring ESG performance indicators, obtaining certifications and engaging stakeholders, all information fund managers like to see to make effective decisions.

“You cannot manage what you cannot measure” management guru Peter Drucker famously wrote, and all investor sponsors agreed that being able to prove that ESG is happening at the asset level through quantifiable data is a serious issue for fund managers.

As one panellist said, “If our policies say we are integrating ESG, we need evidence to prove what we are doing. Many asset operators are just starting to track sustainability performance, but there needs to be some hand-holding and encouragement to get us where we need to be.”

GRESB Infrastructure tool likely to become industry standard

The GRESB Infrastructure assessment is filling an ESG information void among privately held infrastructure assets. Furthermore, it is creating a long sought-after infrastructure industry standardisation of ESG management practices and performance measurement. This is relevant for all infrastructure companies, including publicly listed entities.

We suspect the framework will catch on in the same way that the GRESB Real Estate assessment has become the sustainability reporting and performance norm for almost 800 real estate funds and companies across the globe.

A number of other fundamental drivers support predicted growth in GRESB Infrastructure. The world needs green infrastructure, and it will increasingly be financed through private channels. With institutional investors increasing their portfolio weightings in infrastructure and embedding responsibility principles in investment policies, fund managers need to prove they use ESG in their processes.

The GRESB toolkit will likely be the way to go in this maturing investment class. It will be used as guidance for good sustainability governance during the first couple of years and thereafter converge into a tool that can correlate risk/return profiles with ESG performance. For maximum benefit, it’s best to get on board early.

Quinn & Partners has supported leading institutional investor clients with ESG integration and GRESB audits/survey services since 2013. In the 2016 Real Estate assessment, our team submitted responses for a total asset value of nearly CAD $130 billion – equivalent to 10% of all North American responses. For more information, please reach out to Francisca Quinn, Managing Partner Quinn & Partners, at +1 416 300 8068.

Read more about the GRESB assessment report here.

Mandatory energy & water disclosure to start in 2017

As Ontario is starting to tackle climate change in a significant way, it needs to address emissions from all industry sectors. For real estate owners and managers, the most significant regulation is the Energy Statute Law Amendment Act, which became law on June 9, 2016.

The act requires Ontario properties to report annual energy and water consumption to the Ministry of Energy using the ENERGY STAR Portfolio Manager. This legislation builds on similar obligations present in EU and the US, where sometimes buildings are ranked in league tables to inform the public.

The act covers actions by properties, utilities and regulators

Through amendments to Ontario’s Green Energy Act (2015), the Energy Statute Law Amendment Act establishes the province’s authority to make new rules:

  1. Properties must disclose whole building energy and water consumption and ratings
  2. Utility distributors are required to provide property owners with utility information
  3. The Ministry of Energy has the authority to publicly disclose certain submitted information

It will provide full transparency of energy and water use to landlord and tenant

The rules, also known as the Energy and Water Reporting and Benchmarking (EWRB) regulatory requirement, is likely to be approved sometime this year and should be viewed as a performance management tool. It allows beginners to see opportunities for efficiency improvements and cost savings and encourages a more experienced company to outperform benchmarks. The Ministry of Energy will likely publish the information, allowing companies and properties to benchmark their performance against their peers. Disclosure of building data will also allow the market to price in resource efficiency in purchasing, leasing and lending decisions.

  1. It can help property managers:
  • Manage energy and water costs
  • Obtain a full picture of the energy, water and greenhouse gas emissions footprint of a building
  • Respond to tenant sustainability information demands
  • Identify energy and water-saving opportunities
  • Set goals by providing a relevant performance benchmark
  • Drive results by comparing similar facilities across the province and learn from the best
  • Correlate energy and water efficiency investments with returns over time
  1. It will also help property owners:
  • Improve sustainability information availability
  • Inform investment decisions and allocate capital to efficiency upgrades
  • Protect asset value by having increased knowledge about ill-performing assets
  • Evaluate sustainability performance of current and potential investments

Start now by using free ENERGY STAR

Since the deadline for the first reporting period is fast approaching, we encourage you to sign up for the free ENERGY STAR Portfolio Manager and begin to populate the system with energy, water and property information to get into the habit of doing so. Prioritize buildings larger than 250,000 square feet (located in Ontario).

Take advantage of the regulation as an opportunity to use the Portfolio Manager for all of your properties as there are numerous benefits. The Portfolio Manager is widely used to:

  • Track portfolio energy and water data and costs
  • Calculate greenhouse gas emissions
  • Generate property ENERGY STAR rating and ranking
  • Assist green building certification
  • Sync and consolidate data with other sustainability information systems

Detailed regulation specifies that most building types are mandated to report, but verification not yet required

A proposal notice for the EWRB requirement spells out what is involved in complying with the Energy Law Amendment Statute Act.

Content Description
Building types
  • Office, retail, multi-unit residential and some industrial properties over 50,000 square feet
Reporting system
  • ENERGY STAR Portfolio Manager (free) to be used to report monthly energy and water consumption and building characteristics once per year
  • Portfolio Manager calculates greenhouse gas emissions.
Data verification
  • Building owners must confirm that the reported data is accurate
  • Verification by a third party is not required (at this point)
Annual disclosure
  • Ontario’s Open Data website will publicly disclose the information one year after the initial reporting period
  • Greenhouse gas emissions and floor areas will not be disclosed publicly
Temporary exemptions
  • Properties experiencing low occupancy, financial hardship or new construction are exempt until those matters are resolved
  • Manufacturing facilities, small multi-unit residential buildings, data centres, communication towers and buildings currently reporting under “Energy Conservation and Demand Plans (O.Reg 397/11) and Greenhouse Gas Emissions Reporting (O.Reg 452/09) are exempt

Regulation timeline is phased over 3 years, starting next summer for largest buildings

Furthermore, the Ministry of Energy proposes a phase-in of the EWRB over a three-year period.

Year Period Deadline to report Property size threshold
Year 1 Jan 2016 – Dec 2016 July 1, 2017 >250,000 sf
Year 2 Jan 2017 – Dec 2017 July 1, 2018 >100,000 sf
Year 3 Jan 2018 – Dec 2018 July 1, 2019 >50,000 sf

2016 Global Real Estate Sustainability Benchmark (GRESB) results

With a record 759 participating real estate companies and funds in its seventh year, the GRESB survey is here to stay. It is the global standard for assessing sustainability in real estate. It will gradually be adopted by sophisticated investors and tenants as a tool to select assets that are resilient and cater to market demands. If you did not participate in the 2016 survey, consider this as a 2017 objective. Companies reporting to GRESB improve significantly over time.

In Canada, GRESB participation was up 45% from 11 to 16 participating entities. We saw the first REIT participate together with 5 pension plans, 8 private funds and 2 privately owned companies. The average Canadian score was 66 points, which is higher than both the global average of 60 and the North American score of 59. However, the gap between Canada and North America is decreasing, which suggests that GRESB is now mainstream in the Canadian market. In the past, only the premier pension funds participated in GRESB. In 2016, we see many private funds catering to third party investors and a publicly listed REIT using the GRESB survey. For example, in the U.S. close to 25% of participants are publicly listed companies. GRESB helps them to strengthen reputation and identifies value-add opportunities.

Looking at the Canadian results, we can see that sustainability is paying off. Over the last year only, participants on average reduced energy by a staggering 5.6%, water by 1% and greenhouse gas emissions by 6.1%. Data also reveals an increased focus on carbon management and climate change practices, as well as increased on-site renewable power.

Canadian properties also score highly in engaging tenants and employees on sustainability, while lagging somewhat in supplier and community engagement. Addressing these areas will help drive future improvements. New this year was the Health and Well-being survey module. Although there is a strong demand for assets focused on human health, the survey results indicate that Canadian real estate companies have some way to go. Stay tuned for a Health & Wellbeing results update from GRESB in October.

The team at Quinn & Partners supports a large share of the North American GRESB reporters. We provide a suite of advisory services from strategy and program implementation to measurement and reporting. In 2016, our team project-managed GRESB disclosure on behalf of investors representing 130 billion in assets under management. That is almost 10% of the $1.3 trillion which participated in North America.

Please contact or for more information.

See the GRESB Canada snapshot here

For Global and North American results, click here

Infrastructure investors seek win-win-win with new GRESB survey

Eight global institutional investor giants with US$1.5 trillion in assets under management have kicked off a ground-breaking initiative to standardize and advance the assessment of environmental, social and governance (ESG) factors in infrastructure investments. The founding investors have recruited GRESB, the organization that developed the global real estate benchmark now used by over 700 real estate funds, to manage and administer the survey. Together with Canadian supporters Alberta Investment Management Corporation (AIMCo) and Ontario Teachers’ Pension Plan (OTPP), Quinn & Partners had the privilege of attending the official launch of GRESB Infrastructure in London on September 7 and we provide a summary below of the key take-aways.

Founding members of GRESB Infrastructure
The winners: GRESB Infrastructure brings benefits to investors, investees and larger society

“With [infrastructure] asset lives spanning several decades, understanding ESG factors is critical to mitigating risk and maximizing returns,” explained Patrick Kanters, Managing Director of Real Estate and Infrastructure at APG Asset Management (Dutch pension plan with US$470 billion AUM). A standardized ESG benchmark allows investors to systematically assess risks, compare relative performance among current and prospective infrastructure holdings and engage fund managers and asset operators to improve performance. This is increasingly relevant because many long-term investors see infrastructure as an attractive asset class matching value appreciation with long-term liabilities, serving as a hedge against inflation and often providing predictable cash flows.

Identifying ESG risks or poor performance does not mean an investment will not be undertaken or withdrawn. Rather, the benchmark enables investors to have an informed conversation with managers and operators and mitigate, price or manage risks and opportunities. The end result is increased performance. “I am a believer in market forces,” says Nils Kok, CEO of GRESB, pointing to studies demonstrating links between financial performance and ESG performance in real estate. The GRESB real estate survey has been a very important tool in facilitating this analysis which in turn has been key to the benchmark’s success.

The GRESB survey benefits infrastructure fund managers, operators and assets as well. Having one standard will reduce the work of investees who often respond to different ESG questionnaires from multiple investors. One of the largest benefits will be the sharing of best practices within the same sector and portfolios. This is something that the founding members already have experienced success with and expect more of with increased scale.

Finally, this initiative seeks to increase investments in infrastructure while improving efficiency, social performance, and climate resiliency. As noted by one attendee, infrastructure is one asset class where increased sustainable investments almost certainly leads to significant societal benefits. This is reflected by the fact that increasing resilient infrastructure is one of the UN’s 17 Sustainable Development Goals.

How it works: The best of GRESB, tailored to infrastructure sectors 
The infrastructure benchmark covers 8 aspects (shown below) and builds on the key strengths and learnings from 5 years of GRESB real estate progress. Similar to the GRESB real estate survey, the infrastructure tool assesses ESG at the organizational level using questions relating to management, due diligence practices, policy and disclosure and stakeholder engagement. It also addresses ESG at the sector and asset levels by looking at practices relating to sustainability benchmarking, monitoring, performance and engagement. The methodology enables an investor to compare portfolios comprised of different types of infrastructure assets.

GRESB Infrastructure – 8 survey aspects

The GRESB Infrastructure standard is aligned with and complements existing sustainability standards that are used by investors and asset operators such as PRI and GRI. Together, the instruments focus on a core set of questions that enables informed discussions and provides actionable benchmarking information, not just stand-alone reporting.

The survey is designed to be used by all types of infrastructure investors. Founding members include Aviva, which focuses on debt investment, PGGM and APG, which primarily invest in infrastructure funds as well as direct investors like OTPP and AIMCo. For each situation, the survey can be utilized to provide a benchmark of how ESG is being managed in the portfolio.

Next steps: Early mover advantage for infrastructure investors and operators coming on board in 2016

The GRESB Infrastructure survey will be open to submissions from global infrastructure investor and investee companies and funds in 2016, following a consultation period.

As with the GRESB real estate survey, it is expected that the infrastructure survey will evolve over time. Investors and investment managers who participate in the first year benefit from being able to influence the survey development and improve ESG practices ahead of GRESB standards becoming the basic expectation for investors.

As an example, APG, which seeks to increase its infrastructure portfolio by about 2% (US$9 billion) in the coming years, has made GRESB Infrastructure participation a requirement for all investments moving forward.

If you would like to know more about how to get involved in GRESB Infrastructure please contact Francisca Quinn (416.300.8068) or Tony Pringle (647.972.2377).

Carbon Bubble

Diversify beats divest

pic for carbon bubble

As investors are integrating climate change impacts in investment decisions, fossil fuel-reliant companies should diversify their energy sources. This will sustain company valuations and manage future cost of capital.

Carbon bubble. Divest movement. Unburnable carbon. Stranded assets. These are recent additions to the Bay Street executive’s vocabulary as well as any company board director whose company is involved in the extraction, processing and distribution of coal, petroleum and natural gas. From having been a term previously used by fringe climate change activists, the mainstream investor is now taking note. With climate change awareness on the rise, companies in all industries need to seriously test the robustness of their business models to ensure future shareholder value.

Companies in the fossil fuel industry may face serious limitations in how much of their carbon-based resources they can monetize as climate change regulation forces governments to limit greenhouse gas emissions, and that has major investors concerned. With stock market valuations based on reserves of coal, petroleum and gas deposits, investors may hold portfolios that will significantly decrease in value as 1) restrictions make extraction unprofitable or 2) alternative energy sources become more economically viable.

Many significant investors, including the national Norwegian and Swedish pension funds and the university endowments of Harvard and Stanford University, have recently adopted restrictions in their portfolios’ exposure to coal and other fossil fuel assets. In November 2013, Goldman Sachs divested its equity share of a new coal terminal to be built in Washington state. Moreover, the global investment giant BlackRock teamed with the FTSE Index Group in May to create a fossil-fuel-free index to track the performance of non-carbon exposed portfolios. Serious investors are taking action and managing their exposure to the carbon bubble. This leads us to pose the question – “What are the implications for companies that are dependent on capital markets?” Will investors move away from companies which are heavily reliant on carbon-based fuels or weight portfolios towards the ones that are most “carbon lean” or that diversify into low-carbon energy?

According to the Financial Times, there is currently $670 billion invested in the fossil fuel industry, of which a large share of value could be at risk. There is no exact figure of the total capitalization of companies whose value chains rely on access to inexpensive fossil fuels, but it is presumably in the tens of trillions. Producers of steel, cement, paper, glass and metals are heavy users of coal and natural gas. Most North American rail and truck operators use diesel as their primary energy source. Diesel and gasoline power most agriculture equipment. In many parts of the world, real estate is dependent on natural gas for space and water heating. And a large share of electricity producers are heavily weighted towards coal and gas in their generation mix.

How will these sectors be exposed to carbon restrictions? Even if companies will still be able to access fossil-based fuels, the expectation is that energy costs will increase significantly compared to alternative energy sources that continue to fall in price. Will these companies be able to compete with peers investing in more efficient technologies and alternative energy sources? Will investors discount these companies’ share prices or increase the risk premium in financing and lending decisions? Or will investors simply restrict investments to top-sector performers?

With so many unknown parameters, what strategies should you consider to evaluate more sustainable business models and hence minimize future risk of increased cost of capital? The following suggestions ensure that you and your management team have done the strategic research and analysis that will equip you to make better decisions and answer questions from board members and stock analysts:

  • Incorporate climate change and carbon restrictions in your risk matrix and integrate in your strategic plan
  • Map your company’s dependency on fossil fuels both in internal operations and in the supply chain
  • Benchmark your carbon intensity – carbon emissions per production output or revenue – relative to a set of your competitors
  • Perform a scenario analysis of your exposure to both fuel supply limitations and changes in input costs
  • Consider where you can decrease dependency of finite energy resources by energy efficiency investments and use of renewable energy
  • Incorporate a carbon “shadow price” in investment decisions to consider higher future energy costs

In conclusion, stranded assets are being seen as a realistic scenario and investors will evaluate risks relating to carbon exposure. How can your company take steps to mitigate this risk and contribute to the transition to a low-carbon economy?

Sustainability Qncepts

This is the first note in our series Sustainability Qncepts Explained. For further insights on managing the risk of stranded assets or effectively responding to requests from investors concerned about the carbon bubble, please contact us.


Carbon Bubble by the Numbers

Annual global greenhouse gas emissions from fossil fuels (2010) 30 Giga tonnes
Total greenhouse gas emissions from current reserves of all public and private companies (excludes potential reserves) 2,900 Giga tonnes
Total greenhouse gas emissions from current reserves of TSX -listed companies 33 Giga tonnes
Capital invested in fossil fuel industry in 2013 $ 670 billion
Capital invested in the Alberta Oil Sands in 2013 $ 33 billion
Price of one barrel of oil 1964 vs 2014 (inflation adjusted) $ 20 vs $106
Cost to produce one watt of solar electricity 1974 vs 2012 7667 vs 74 cents