GRESB is the leading global real estate ESG reporting framework and benchmark, with over 2,000 participants in 2023 across 75 countries. The annual GRESB Assessment analyses ESG performance for real estate and infrastructure funds, companies, and assets globally.
The GRESB Real Estate Standard is continually evolving to reflect best practice in ESG, and the changes affecting the 2024 submission have recently been released. Katie Upton and Annie Schneidau explain these changes and their impact on future scoring.
Management
A number of minor changes have been made to the management section, in order to streamline reporting, including through removing replication. While these updates are minor, this will affect the way the assessment is scored and approached. These include:
- Minor changes to LE2, LE5 and LE6 to remove replication. This shouldn’t impact anyone significantly and is quite a good logical move.
- RP1: The option ‘Section in entity reporting to investors’ has been removed from the list of ESG disclosures, which previously could have scored 1.4 points
- RP2.1: Communication of incident monitoring will now be scored, and this must be to at least 5 stakeholder groups to achieve the full 0.25 points.
- RM1: Environmental Management Systems must now be either aligned with a standard or externally certified to achieve any points. The overall score for this section has been reduced to 1.25 points, and systems which are only aligned will score half of this now, rather than 5/6.
- RM4: The total score available for ESG due diligence for new acquisitions has dropped from 0.75 to 0.25
RM5: Climate Resilience and Opportunities
In order to provide greater alignment with the Task Force on Climate-related Financial Disclosures (TCFD) framework, participants will now need to report not just on how they consider climate-related risks, but now also climate-related opportunities (CROs). There are a range of areas of opportunities as identified by the Task Force, through which organisations could realise cost savings or see growth, including:
- Resource Efficiency
- Energy Source
- Products and Services
- Markets
- Resilience
This section will now be scored, at 0.5 points.
With the disbanding of the TCFD in late 2023 and IFRS taking over the monitoring of progress of companies’ climate-related disclosures, it will be interesting to see what further updates GRESB include on this.
Stakeholder Engagement
Whilst not included in the scoring until 2025, in order to ensure that sufficient data can be collated, GRESB has confirmed that the scoring of SE4, Employee Safety Indicators, will be changing for 2025, so that four metrics rather than the previous two must be recorded in order to achieve full points.
Performance
Targets
From 2024, participants will be rewarded in T1.2 for having a net zero target, and the full point will be achieved by this, regardless of the methodology and requirements of the target. To accommodate this score, indicator T1.1, Portfolio Improvement Targets will drop from two points to one. Envision can help you to set ambitious and achievable net zero targets.
Energy performance
In the first step towards providing an operational performance-based standard, energy efficiency will be scored from 2024 onwards, though the calculation of this is yet to be released. This won’t have a direct influence on the score for next year’s submission, and will just be a ‘supplemental insight’, however it is expected this will be fully incorporated in future years.
Energy performance reporting will see an update in the 2024 standard, with operational and non-operational energy consumption split out. This is expected to see further separation in future years, however, for 2024 the scope is just focusing on EV Charging. Whilst data availability may restrict this, the aim is for assets to not be penalised with their like-for-like scoring by having an increased uptake in EV charging.
Building Certifications
Building Certifications have seen two updates for the next submission, firstly through the timing of validity – provided the certification is submitted for before the end of the reporting year and the certificate is received before the GRESB submission deadline, the certificate is now still deemed valid. This will result in scoring for this topic not being restricted by any delays in certification.
The other update affecting building certifications scoring is that the impact of these will now decrease over time, reflecting the relevance of schemes. A time factor will be applied to both building certifications at the time of design/construction, and for operational building certifications,
Other changes:
- Residential portfolios can now report multiple energy ratings per asset, and reporting guidance has been clarified
- Medical Offices have been reclassified from ‘Office’ to ‘Healthcare’
- Performance benchmarking and scoring will now be included at the country level, not just property sub-type
- Intensity values of assets will be calculated for those with over >50% data coverage, previously 100%
Beyond 2024 – Future Changes
The GRESB Foundation has also published their Road Map for the future evolution of the Real Estate Standard. The indication is that future versions of the Standard (2025 onwards) will include advanced requirements in the following areas:-
- Net Zero – further developments to continue to drive improvements in both operational and embodied carbon emissions
- Biodiversity – inclusion of biodiversity indicators and performance metrics, linked with the work currently underway by the Taskforce on Nature-related Financial Disclosures (TNFD)
- Diversity, Equity and Inclusion – scoring of DEI performance rather than just reporting
- Physical Climate Risk – quantification of physical climate risks and integration of resilience into asset management, linked with the Physical Climate Risk Assessment Methodology (PCRAM)
These are all important elements of an asset management ESG strategy and Envision will be monitoring this evolution closely and will report back on these in future news.
How Envision can help you:
Envision has experience working with numerous real estate funds on their GRESB journey, who range from first time participants to funds achieving and maintaining 5* status. We have a wide support offering, from initial Gap Analysis work, support in preparing the GRESB submission, Data and Report Verification and Assurance, as well as broader roles in supporting the development and delivery of specific ESG Targets If you would like to find out more, please get in touch via contact@envisioneco.com.
