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: greens.org.au

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.