The state of GRESB

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  • July 9, 2020 | Chris Ogletree
The state of GRESB

The State of GRESB

During a webinar in January, Goby was joined by members of the GRESB team to discuss the current state of GRESB, as well as recent ESG reporting trends and what the future holds for sustainable investment and ESG disclosure. Dan Winters, Head of Americas at GRESB, and Roxana Isaiu, Director of ESG at GRESB, joined Michelle Winters, Goby’s VP of Solutions, Mari Bishop, an ESG team manager, and Christine Cho, a senior consultant, for this discussion. Below is a transcription of the webinar, and you can click here to view the recording.

Michelle Winters: Thanks everyone for joining our first GRESB webinar for 2020. My name is Michelle Winters. I’m VP of Sales here at Goby for our ESG group and thank you for joining us. We have people from all over the world with us today.

During this webinar, we’re going to be discussing the impact of GRESB over the last ten years and moving into 2020 and beyond as well as some important updates to the GRESB Assessment with the 2020 prerelease. And then opening it up to questions and answers for the entire group utilizing the functionality. So the questions box, it should be in your control panel likely in the top right corner. The session today will also be recorded and sent to all participants.

Before we begin, I’d like to introduce you to our speakers. We’re lucky enough to have with us on the line, Dan Winters, Head of Americas at GRESB. We also have Roxana Isaiu; Director of ESG and Real Estate at GRESB. They’re going to be joining our experts here. From the Goby team, we also have Christine Cho, an ESG Consultant at Goby and in-house expert on the KPI side, as well as Mari Bishop, who leads up one of our teams here at Goby and specializes in the ESG strategy and planning.

With that being said, Dan is going to get us kickstarted here and we’re ready to go. Dan, all you!

Dan Winters: Excellent. Michelle, thank you so much. Chris, the rest of the Goby team, thanks for having us to kick off the year. You know January is still in the single digits. We’ve started a new decade and we’re rearing to go here at GRESB. So the way that I’ve laid this deck out is to take some time and give a little update as to what has happened, but I wanted to do that by laying the framework for GRESB. It has been ten years of GRESB because we just published that report. So we’re going to talk about what I view as three phases of GRESB. First phase is sort of this market development, the second phase of industry acceptance, and then where we’re heading next which is the performance phase.

So I wanted to start here. This a screenshot of our website from the “Insights” section under “News and Releases.” And we published our ten years of GRESB report towards the end of the year. And when you read this, I call out the quote here on the left-hand side by Patrick Kanters. He’s one of our board of director members and founding member of GRESB. And it talks about why GRESB was created. And the reason was it was simple, right? It was to put together a uniform and consistent metrics to measure sustainability of real estate and now, real asset portfolios. Because in this last thing here, if you can’t measure and compare, it’s very difficult if you are an asset owner to really engage with your fund managers and the listed property companies on how they might find ways to improve.

So I encourage people to go and take a look at this 10 Years of GRESB report. It’s pretty thoughtful and a lot of the questions that I think people are having, we worked really hard to address and in preparing for what's ahead with that section. So the URL is down there and let’s see if I can move these slides. Okay. So I talked about these three phases. Phase one of market development, two, we have industry adoption, and we just flip in this calendar to move into what I’m viewing is the performance metrics section or phase of the whole ESG movement and real estate.

So just to remind people what we do at GRESB. We assess and benchmark ESG performance of real asset portfolios and we validate that information when it comes in and we provide standardized... what I’m going to call non-financial data to capital markets and people that are interested in finding out how their managers are doing on E, S, and G.

So in 2009, we released the GRESB Real Estate Assessment. It has been at this for ten years. In 2016, we launched the Infrastructure Assessment and that’s for real asset portfolios that are a little bit different from real estate; cell towers, solar farms, wind, things that are not real estate. And infrastructure has gotten quite an uptick over the past several years. Last year, we had 100 funds and 400 assets submit to the infra-assessment and we’re pretty pleased with our market development efforts.

Let’s talk about phase one. In phase one, when GRESB was this kernel of an idea back in 2009, a couple key decisions were made. One was to take an ISO approach and that is on the left-hand side, “Plan, Do, Check, Act”, right? And you can see how that manifests itself within the real estate industry with targets and policies whether you have a data management system and what are you doing to reduce your consumption. Are you doing offsets to try to get to a net zero portfolio? All of those actions are being taken.

On the right-hand side, this is how it has been tailored to the real estate industry. The seven aspects of GRESB are now pretty well codified within the global real estate industry. And so from performance indicators to building certifications, these really you know and policies and disclosures, these map into two different groups. One is sort of a management philosophy and the next is a performance component. So I want to plant that seed for a minute because we’re going to get back to that in a second.

The second thing we did at GRESB in those first market development years is we put together a really strong governance structure. So we have a board of directors. There are three investor members that are a part of it. There are three non-executive directors, two of them are from the industry associations. We’ve got Michael Brooks from REALPAC up in Canada who took Steve Wechsler’s spots. Steve Wechsler was the or is the CEO of Nareit and he was a founding board member for many, many years. So we have very solid representation in North America from a really strong perspective of folks. There’s the GRESB staff. Our staff has grown to where we’re approaching 30 and I know that we’ll surpass that in the next couple weeks. And that’s up from I think it was ten or twelve when I joined five years ago. And so our staff continues to get stronger and stronger and then there’s more headcount as we continue to have a bigger impact within the industry. And then on the left and the right side, we’ve got our advisory boards. And the advisory boards are made up of institutional investors. Below that are the benchmark committees which are made up of the participants. We get an awful lot of feedback from institutional investors from the participants through these committees and then just writ large through the communications that come in from our members.

So here is, I went back and I looked. Every year we would do this assessment and we would issue a report. So there were research reports in 2011, ‘12, ‘13 and ‘14 and this was the graph that was in the 2014 report. And you can see how the industry changed at least through the scores and GRESB, right? In 2011, if you recall the names of those quadrants back a long time ago, five, six years ago, green starters, right? A lot of folks were down there just starting to try to figure this out. And people were pushing again in the upper right, the green star column or quadrant, excuse me. And so you can see how the scores 2011, ‘12, ‘13, they went up into the right. Helee knows. Helee at Goby knows that my favorite saying is, “Up into the right.” That’s what we want, but then in 2014, something happened. There was a schism and what happened is the assessment changed a little bit. We took out some questions that weren’t as relevant, we added some other things, we changed some performance components and it had an impact on the results. So I want you to hold on to that idea as well as we then move into phase two of GRESB.

Phase two is industry adoption, 2015 to 2019. So what happened in that phase is we have our three original founding investor members that are circled in green and they attracted an awful lot of folks. We’ve now, over this next five years, have grown to have over 100 institutional investor members. These are some of their logos and they use ESG information with our analytical tools to engage with their fund managers. So other things that happened is we attracted a lot of participant members as well. And so from the footer of our website, you can go down and you can take a look in the directory. Our investor members, our partners like Goby that have been great to help really push forward these ideas of sustainability and engage with the industry, right? So it’s a team effort. It’s a team effort by the 150 plus people that are on this call, the now over 500 members that are a part of GRESB and whichever of the four groups that you’re a part of in that directory, right? It has been a great, great decade.

So then what did those folks need? Well, they needed some resources, they needed our institutional investors. They need guidance on how to engage. The participants need some guidance on how to participate. And so all of a sudden, the amount of content on our website started to explode. So from the investor members standpoint, right? We’ve got our investor engagement guides and how to navigate the portal and there are things that they’re doing throughout the year. They're inviting their funds to participate. They can track the response from April 1st to July 1st when that’s submitted. Are you 20% done? Are you 80% done? Have you finished? Are you not going to complete an assessment this year? All of those things are tracked and then they can access data by requesting it from the participant.

If you’re a listed property company, that doesn’t really apply because you’re in a separate data set. But if you’re a private equity fund or firm, your results are yours and they’re only available to investor members that you ask through our portal for a data access request. Obviously, people are looking at this benchmark report. That’s the product that comes out on an annual basis in September. How did you do against peers? What are priorities that you have going forward?

So on that side, that’s the guidance for the investor members. Well, as more investors became part of GRESB, it drove participation. So you can see in 2014, right? We had 600 and now we have had over 1,000. So we’ve continued up into the right. We’ve had a really nice run here in North America. We’re at like 250 and close to 500 in Europe. So as participation started to drive forward, participants needed some information. You needed webinars like this, you needed things that are on our website. So there’s this step-by-step guide of successfully completing your GRESB Assessment. I encourage the folks here to go take a look at this, right? And at the bottom-line, the thing that’s circled in the bottom left, we're here to support you. I can’t emphasize that enough, right? We want to be a partner in your success and help you establish and grow an ESG program.

We don’t do consulting at GRESB. We have this framework and we put it out there and we continue to progress and improve it every year. And so from the run, from 2014 to 2019, looks like that. Nice, straight line up into the right. Good solid five-year history of continued industry advancement when it comes to ESG. Some things to note on this graphic are the two axes. We've got on the left-hand side, “Management and Policy,” right? That’s sort of a management-oriented component. Do you have policies, procedures? What’s your portfolio management view of ESG? And then the bottom axis is “Implementation and Measurement” and that really gets at the asset level data and how companies are putting targets. Are they achieving those targets and how is that really coming into play? This graph is to scale. So “Management and Policy” accounts for 23% of the overall GRESB score. “Implementation and Measurement” is 77%. Hold on to that thought. We’re going to come circle back to that in a little while.

So then I talked about the explosion of content. Well, if you click on the “Insights” box right next to the login button at the upper right of our website, you see that there are tremendous things that come in to us that we’re posting up there. So this is under the “News and Releases.” I talked about the ten years of GRESB that’s right there. That’s where you can access and find it. Things that I think people are interested in on this call are the GRESB Real Estate Assessments Development. And so there’s a posting on that along with the release of the 2020 assessment and that’s where you can get some more background information.

So also within the “Insights.” we have contributors. Contributors are folks like Goby. I know you guys have posted a number of articles over the years. Our ecosystem wants to communicate their best practices, their achievements and their accomplishments. And so if you got to GRESB’s insights or if you want to contribute to GRESB’s insights, I encourage you to do that. You can see over the past several weeks, there has been a lot of focus on stakeholder engagement from looking at the titles of these articles, right? And so those are being contributed by our partners. Also, here you can find that Real Estate Assessments Development section. Wanted to emphasize that in the 10 Years of GRESB that we led off with, that’s right here. So those are two nice content pieces that were published towards the end of the year or maybe when many of us were on break that it would be a nice idea for the folks online to circle back and take a look at those two documents.

So the 10 Years of GRESB, well the big highlight, let’s see if we can go back. The big highlight is we’ve grown from three founding institutional investor members to well over 100. We’ve had a number of new ones join at the end of the year and they account for a lot of money; 22 trillion dollars. We went from roughly 200 participants to over 1,000. So ten years, 100 institutional investors, 1,000 participants and that covers 100,000 properties globally. Last year, we received almost 70,000 assets with data. And that means the trailing twelve months of energy, water, waste, 70,000 assets came in with data within the system. That means not all assets can get data. We understand there are headwinds to doing that, but the industry has taken strong strides particularly over the past four to five years and 70,000 was a great number.

So here we are, at the advent of 2020, we’re in the phase three and the focus is really more and more on performance metrics. So why is that? So here, there’s a number of institutional investor-driven initiatives, right? Whether it’s the Montréal Pledge that came out in 2016 which was signed by 150 institutional investors to do a carbon footprint report of their entire financial portfolio. If you’re CalPERS and you’ve got 360 billion dollars and you’re going to do a carbon footprint report, that’s a daunting task and you need serious data. So one of the things CalPERS did in 2016 is they joined GRESB. And they did it for access to their real estate in infrastructure funds and wanting to have them engage and start putting sort of business processes in place to be able to get metrics so they can do and fulfill that Montréal Pledge and do that carbon footprint report. So every one of CalPERS separate accounts participates in GRESB and more and more of their infrastructure fund managers are participating in GRESB. And they’re in a great position to be able to fulfill that pledge.

The logo right above that, TCFD, is what’s being talked about now within the industry task force for climate-related financial disclosures, right? And so let’s take a look at that on the next slide. If you, on the right-hand side, you look at TCFD, right? And what are they after? They’re trying to understand governance around you know climate change. What is the company or in our case, a portfolio, think about that? What are they doing about those things? How does it implement their strategy? How do they integrate that into their strategy? How do they implement it in a risk management and what sorts of metrics and targets are they following?

Well, if you map that up against GRESB, that looks an awful lot like what the GRESB Assessment is. So the point of this is that organizations that are engaging and doing the GRESB Assessment are very well positioned to be able to issue TCFD reports. And we are very closely aligned and part of all of these different groups to make sure that our tailored approach is by industry, for industry. Constructive GRESB, being for real estate, can map well and be a useful tool for responding to these other investor initiatives.

So let’s switch gears here and talk about phase three and some advances that are happening within the GRESB Assessment. So first things first. So one of the big changes is that all 2020 benchmark participants will become GRESB members. We’re ten years as an industry driven benchmark. We’ve got a strong engagement track record and our objective is to really accelerate industry commitment. And so we're going to see everybody now who’s participating in the benchmark become a member of GRESB.

Our IT team has been hard at work throughout the fourth quarter and there’s a number of portal improvements that are coming. We do get tremendous kudos for our portal when it opens up on April 1st. It’s quite user-friendly, it’s easy to use and people are in it for a three-month duration, right? Because you don’t login on April 1st and finish it that afternoon. You’re constantly updating and getting new documents and finding data and whatnot. And so things that are being implemented right now are improved error reports, more information on scoring. You can read our scoring document that's in the “Resources” section on GRESB to understand how the scorings and weights are allocated. The validation decision rationale is available to all of last year’s participants in their benchmark reports. So you can read about why things were fully, partially or not accepted and the whole objective here is to improve submission quality. We’ve been doing great, but there’s always more improvements that can be done and so look for some nice new features within the portal when you get to log in on April 1st.

Third thing, and this is a new concept, is the concept of a review period. So for this year, the cycle of GRESB has been releasing results the first Wednesday of September after Labor Day. This year we’re aiming for a September 1st launch of what we’re calling Preliminary Benchmark Reports, right? So on September 1st, people are going to get their preliminary score. There’s a review period. That review period happens in September 2020 and this is an opportunity for people to look at their benchmark reports and see if there are some kind of glaring error or something that’s amiss, right? This is a very rare thing when it happens, but some rare things have occurred. And so we wanted to give an opportunity as the stakes are getting raised on this ESG information to provide for a review period. And then final results will be released on October 1st and that will include rankings and the final scores that can be distributed to investors. And so for some additional information here, you can go to that URL and you can see what the timeline looks like.

Another big conceptual thing happening, and this is the seed I planted before, is we’re splitting the assessment and we’re mapping the questions into management-oriented questions or performance-oriented questions. So management component is going to focus on the five things on the left. Strategy, policies, risk management, stakeholder engagement, and reporting, all right? And how well you do against your peers on those issues. Another important reason why we’re doing this, not only for the alignment with the logos above it, but also for private equity funds that are in fundraising mode. There are enough funds out there that approach us to say, “Hey, we don’t have any assets yet, but we want to engage, we want to improve, we want to be able to demonstrate our ESG capabilities and credibility.” So having the ability to do the management component is the whole idea behind that.

Once assets come into that portfolio in say your two or three then they would be in position to be able to do the performance component, right? That works for all portfolios that have standing assets and then the portfolios that will soon be having standing assets within it, right? And so the performance component is targeting the seven different bullets right here. And it’s do you have targets on energy efficiency, greenhouse gas emission reductions. What do your building certifications look like? How are you doing on performance indicators? It’s really the whole asset level data orientation of GRESB comes out in the performance component.

So that split is happening. It's not that big of a deal, but it is something to be aware of, right? And so here’s the idea. We want to have folks keep climbing the ladder. We're clustering in the upper right. I've been talking about this at our results events for the past two years. And so as we continue to move up and move forward as an industry, management policy, get those in place and guess what? Companies begin to implement, they begin to measure and performance improves and that’s what this is all designed to do is we’re looking ahead for the next I don’t know, three, five, seven years.

The last final really big change, if you will, is that asset level data is required in order to be able to get the GRESB performance score. And when we talk about required, it’s being able to identify where your assets are and be able to put forward a comprehensive list to say here are all of the assets in this portfolio, here’s the 100,000 square-foot at 123 Main Street in Chicago and it is an office building, right? And so on down the line.

Consumption data is not required. It's meant to be put in there as it’s available, right? So we know that it’s a continual struggle, but I want to reinforce that 70,000 properties were able to get asset level data reported in the GRESB last year. So we continue to chip away at that as an industry, as a collective group, and it’s getting better and better over time and we’re excited about that. So the idea is ESG data is flowing up from the property level and up to the capital markets and GRESB helps facilitate that.

So here’s the impact so history. I brought this slide forward, this graphic forward, and here’s what it looked like in 2014. There was this little schism and scores sort of moved sideways a little bit and then we had that uphill climb from there. So that began to look like this and you can see what I mentioned before, this clustering in the upper right. So when I, the team in Amsterdam did an analysis of the 1,000 plus submissions that came in last year and said okay with this performance split, what do the impacts of the scores look like this year if we do that?

And we looked at the 2019 dataset and we projected what it might look like for 2020. Here’s what we found. We found that management scores are probably going to go up a little bit. Maybe upwards of close to five points. We also found that performance scores might go down a little bit. Guess what? The same number of points, the five points, which is great. So on balance, things were feeling pretty equal. However, management policy is worth 23% and implementation of management is 77% so it could likely be that scores drop a little bit this year. That said, I'm aware that there has been tremendous momentum on ESG and companies continue to push to the up and to the right. So that red dot there is my projection of where scores are going to be in 2020 which is a little bit higher on management. I’m seeing some clustering at the very top of the 100 scale, but a little less on performance. So I think we’re going to move backwards there and I think it’s going to be perfectly aligned with everybody’s expectations.

So with that, I want to take a breath, take a break, turn over to Michelle at Goby and see what you guys think and offer some content to the folks. And then we’re going to bring Roxana into the conversation and we can talk some real specifics about data and whatever the questions are from the crowd. Go ahead, Michelle.

Michelle: Yeah, perfect. That was fantastic, Dan. So we appreciate that really great overview and exactly what Dan was saying a second ago. So we’re going to spend maybe a slide or so just highlighting some of the key aspects that Goby has in terms of a takeaway from the prerelease this year. So with that, Christine is going to start us off, Mari’s got a couple of comments and we’ll dive into the questions right after.

Christine Cho: Thanks, Michelle. So yeah. To cover a couple of key asset level spreadsheet changes from the 2020 prerelease that were made publicly available, you might have noticed that now the energy, water and waste efficiency measures as well as technical building assessments are tracked at the asset level on a yes no basis. And they’re now actually included as a part of the asset level spreadsheet in a separate tab. The questions that were previously within the survey have been removed and no supplemental documentation will be required. The same goes for building certifications which are now included in the asset level spreadsheet also as a separate tab.

And you may have also noticed that previously, reporting characteristics were all grouped into one, but now it’s all split out into asset characteristics as well as reporting characteristics into two separate tabs. Where asset characteristics now cover the general property details like address, gross asset value and floor area while the reporting characteristics focus on vacancy, ownership period and standing investment status. Data availability with date ranges are also now mandatory fields and all the energy, water, waste tabs where applicants are required to include from and to dates for which the data became available for each of the assets.

Scope three emissions are also in the 2020 GRESB Assessment should be calculated now as the emissions associated with tenant-controlled areas. So maximum data coverage should now correspond to tenant areas generated emissions. And to hand it off to Mari to go over some of the qualitative changes.

Mari Bishop: Thank you, Christine. So just a quick overview on the qualitative side. I know Dan and Christine already talked about some of the changes that we’re seeing on the data side, that asset level spreadsheet. And to kind of reiterate on what Dan was talking about, there’s not any crazy big changes this year on the qualitative side. However, there has been a bit of a shuffling, kind of like a restructure of how the assessment is set up. When you before saw seven categories, now the seven categories are three components. Performance and management which Dan spoke about a little bit earlier and the development component which is the third piece that applies to your portfolio if your portfolio does indeed do development work within any of your assets.

There's also the new construction. A portion which previously was considered as kind of like an extra depending, again, if your portfolio performed development now has been put within into those performance management and development component. So the questions have been absorbed by those categories. And the resilience module is still considered optional, but it’s still out there. And I know that we at Goby and I'm sure Dan will too strongly encourage everybody to participate on that one. But overall, a removal, consolidation of questions still to kind of get everything a little more streamlined and clearer. And like we’ve already covered during the first 30 minutes, there’s an increased focus on asset level characteristics on the data side and on the questions as well.

Michelle: Awesome. So...

Dan: Yeah. Well, Michelle...

Michelle: Go ahead, Dan.

Dan: Something really quickly. I'm so glad that you brought up the resilience module.

We’ve had a lot of interest and uptick in participation in that both on the real estate and infrastructure side. It maps quite well with TCFD, right? Is there strategy? Can you have metrics right around climate change as well as what’s going to become a big topic which is asset level resilience. And how is the portfolio thinking about those issues. So it’s a you know this is a benchmarking exercise and it’s an exercise for internal what are you doing. And that allows you when you get some results to do some introspection as a company to say well you know what are initiatives and priorities that we should put in place as we navigate to the future. So I just wanted to emphasize that. Michelle, let me turn back to you.

Michelle: No, that was perfect. And I think that’s one of the things that we also hear frequently from our clients is what are some areas that we can drive improvements, what are some areas to focus on. Resiliency is one that we definitely recommend our clients to begin implementing as an initiative if they haven’t already in aligning with the updates that are happening within GRESB. And the other one we’ve been seeing recently as well is the community side with the community components of implementing. That has been, I think, an increase in initiative across our clients as well. Perfect.

So what we’d love to do and we wanted to spend a good portion of this webinar doing is really opening it up to questions. We're incredibly fortunate to have both Roxana and Dan available on the call today. I see that quite a few of you have been asking questions over into the side. And we want this to be an open forum. So please if you’re listening, you have questions, add them to the side panel for us. We’re going to dive right into them and then I’ll send them off to either a couple of Goby team members here or Roxana as well. Roxana, are you able to hear us and speak as well?

Roxana Isaiu: Yes. Hi, everyone. I’m online.

Michelle: Perfect. Well, perfect because I think the first question that we have is a pretty technical one that I know we had initially mentioned with you and that I'd love to shoot off to you first here and I'm going to read it. It's a little bit long so everyone on the call, hopefully we can follow along with this, but please, like I said, either chat or question if you’d like us to repeat anything. So the first question we have, “On the asset level spreadsheet, it now categorizes whole building data by tenant and landlord controls. If we have collected aggregated data from utility providers which combines that landlord controls and tenant-controlled usage, how should we report the data if it is strictly separated between these two categories?” Roxana, if you wouldn’t mind kind of taking that one and we can add to it from there.

Roxana: No, not at all. And I think I should start with a bit of background here because two years ago, GRESB introduced this split between managed and indirectly managed assets. And that’s a classification that we introduced and we defined because we wanted to make a distinction between assets buildings that were mostly or predominantly controlled and managed by the landlord as opposed to tenants where the tenant had most responsibility and the utmost responsibility around what kind of efficiency measures would be implemented, what kind of utility contracts would be found and so on.

As we’re moving into more granular data and with a move to asset level reporting and having visibility into what the assets are doing and focusing more on what performance means, we’re able to go deeper into how the assets operate. And so a big part of our assessment development effort this year was towards industry consolidation and terminology cleanup which is why we’re moving away from the split of managed assets and indirectly managed assets. It's merely a terminology change because the way that we interpret the relationship between the landlord and the tenant remains the same.

So to answer your question specifically, when in previous situations where you would only have whole building data and you would only report managed assets whole building data, you can still do that. It's just going to be called “Landlord-Controlled Areas Whole Building Data.” It’s pretty much the same thing, but instead of talking about managed assets, you’re just going to report that data under the landlord-controlled spaces.

Michelle: Perfect. Thank you. Yeah, I think that was a fantastic question as well on where we can put that data now, now that the asset management spreadsheet has changed slightly. And similar to, I think, a very specific question on where to kind of put additional information. So technical assessments are now tracked at the asset level spreadsheet through yes or no dropdown. Do we need to upload any additional supporting documentation or is it fine to leave as is?

Michelle: Roxana, I'll kick that back over to you.

Roxana: Yes. I think that’s a piece of good news for all participants on the line who used to have to compile this supporting evidence for these indicators. As of 2020, it is no longer necessary or required to upload supporting evidence. We’ve been tracking this kind of information for a few years. And having validated supporting evidence as well as the data reported for a few years, we now have a sufficient body of evidence to demonstrate that when the indicators are answered and when data is submitted here, it is generally very easy to provide supporting documents and compliance with a standard set of requirements around coding evidence. And so we wanted to take away some of the burden from the participant side when it comes down to reporting supporting evidence. And also take away some of the validation we put in from our side and rather focus on other indicators and their additional input.

So we do believe that technical building assessments and implementing efficiency measures remains very important and we track that information at the asset level will be able to provide a lot of industry trend analysis and aggregate information around those. But we will no longer require supporting evidence which I think is going to save a lot of break from everyone’s side.

Michelle: Perfect. And then actually to kind of build on that, another question that we’re receiving is in regards to the asset level data, how is that used for scoring or who owns the asset level data and who has access to the asset level data? So I know we’ve probably discussed that before in a previous webinar, but just kind of building on that. Is anything changing in regards to that data component, Roxana?

Roxana: Not at all. So the participant holds complete control over who do they want to share that information with. By default, we will not, we will not share that data with investors. Investors will continue to have access only to portfolio level aggregate results. However, if the participant wants to share the asset level data as well as the asset level output, they’ll be able to control that and share access with investors from their side.

Michelle: Perfect. Great. Well, we’re getting a lot of great questions coming in so of course, please keep sending them. I'm going to keep going through them here for us. Another one that was indicated that I think went a little bit to Dan in some of what you were mentioning in your presentation here, but there is a lot of momentum behind convergence with the ESG reporting formats to TCFD and SASB becoming core standards. How is GRESB consistent and inconsistent with maybe SASB in particular?

Dan: So I responded...

Michelle: Roxana or Dan, I’m going to ask you to comment there.

Dan: Yeah. I responded to Catherine just individually, but I'll say for everybody here on the call. So back in 2016 when SASB, they’re after 77 different verticals. Whether it’s software, airlines, technology, right? Until they get to real estate and it’s a sector. It's a vertical. And GRESB had been around for seven years at that time. And so their first shot was off the mark and some meetings were convened. And as a result, the SASB is basically 95% GRESB, maybe 98%, right? We let them look at our materials and basically copy what we had because we had coalesced the industry. So if you’re doing a GRESB Assessment, you have all the metrics in place to be able to choose to report under the SASB constructs...

Michelle: Great. Another question that actually maybe Dan related to your presentation. There are a couple questions related to the review period that you were mentioning. So is this something that you can maybe dive into a little bit further on? Is that going to be replacing response checks? It sounds like it’s you know after. Could you dive into that a little bit in more detail?

Dan: Yeah. Roxana, do you want to lead and I'll fill in blanks if needed?

Roxana: Sure. Sure. So this review period is not meant to replace any of the other processes that already exist. As Dan said, we’ve been running this assessment for about ten years with a set process reporting period. There’s a reporting period, there’s a validation in scoring period, results come out and that’s it. And because we’re talking about that benchmark, there’s nothing much you can do to the data set after the fact. A change in somebody’s data set will have an impact on it as well so that’s that.

Now, as this data becomes more and more relevant and starts being involved in investment decisions and products and so on, it has been signaled to us especially over the last couple of years that we need to have a risk management process built into the standard reporting process because mistakes can occur on anyone’s side. A small reporting mistake or apparently a small reporting mistake can have a big impact on the overall score. But we want to make sure is that final reports and the results that we put out there are as complete and accurate and representative of the situation on the ground as possible.

So we built in this period, review periods, into the calendar to serve as a buffer for correcting any of these very significant well, let’s call them errors or mistakes or oversights or I don’t know, things that were not correctly represented to begin with both from our side and the participant’s side. In an ideal world, this month will not be used for anything. So there will be this one-month period where nothing will have to change and there will be no edits whatsoever to the data set and everything’s fine. And we hope that’s going to be the case, but we also know that it’s time to sort of have this risk management process in place to ensure that the final data set is correct. And we’ve done everything we can possibly do to ensure that. So we continue to encourage everyone to go for a response check to check and double-check and triple-check their answers before they submit because it’s always better to prevent than to cure anything once it has happened.

Michelle: Absolutely. Perfect. Okay. And are all of the dates still anticipated to be the same with the precheck his year?

Roxana: So you mean the response check?

Michelle: The response check, sorry. Yes.

Roxana: Yeah. The response check calendar remains the same. Everything that has to do with the reporting period remains the same so that’s still going to be in between April and June. This review period doesn’t impact the reporting process whatsoever. The only difference compared to the previous GRESB calendar is the fact that instead of having the official results launched in September, we’re now going to have it in October.

Michelle: Perfect. I’ll get that on my calendar. So then kind of leading into a few other questions that are listed here. A lot of the questions that we’re seeing are related to of course on the data side which we also frequently see here at Goby. Some of them are saying you know if we don’t have all the data, is it worthwhile to even submit? Will the reporting be required to respond on both management as well as performance depending on the assets and their funds or is this going to become more of an option in the future? I know our team has a couple thoughts here, but maybe Roxana if you want to take that first and we can expand on it from there.

Roxana: So to address the first part of your question, if you don’t have all the data, absolutely it’s definitely worth reporting. Actually, there are very few portfolios and very few fund managers out there that actually have all the data. I would say that’s rarer. Having all the data is rarer than not having all the data. And the GRESB exercise, the GRESB process is a very educational process especially for those that don’t really know where to start and have very different pieces of information and are looking for a framework that helps them puzzle everything together and get a sense of what they’re meant to do from a GRESB perspective.

And of course, your market behavior comes into play and a lot of competition comes into play. Nobody wants to be the last, nobody wants to be at the bottom of the ranking and that’s exactly what we’re trying to encourage. And the moment the framework is able to encourage improvements and or drive any sort of improvements, that’s perfect.

Dan: So I was looking at the number of questions that are in this chat box. Oh my goodness! There’s like 40 of them. Look if you score...

Michelle: Trying to organize.

Dan: Oh my gosh. If you score a 26, that’s great. You have information and that’s awesome, right? This is a benchmark. If you score a 62, obviously, people want to score a 62. It’s better than a 26, but when I look at people and firms that have participated for six, seven, eight, nine years in a row, that’s the trajectory, right? Seventeen, 22, 27 and then you know all of a sudden maybe there’s a breakout. Forty-five becomes a 60 becomes an 80, right? That’s the idea, but my gosh nobody’s sitting on their hands waiting for the perfect score. It's the elusive thing. You’ve got to get in the game.

Roxana: I think there were a couple of other questions...

Michelle: Go ahead.

Roxana: What was the last part of your question? Sorry.

Michelle: No, no. I think that was perfect. I think the other piece is that there are a lot of questions related to some of the changes that are occurring on the management and the performance side. So I think the questions are, are we seeing that many of the questions are essentially the same, but maybe just segmented differently and streamlined.

Roxana: Yeah, absolutely. So part of this new structural update does offer an increased level of flexibility. Perhaps starting with the management team and only submitting the management portfolio. Now, that’s a good start and if that’s all you can do at the beginning, that’s great. At least that gets used to the process and you have a better feel of where to begin and how to begin. And this whole reporting process is not as complex as it would be to do the whole thing at once. However, just reporting on management side does not provide the full picture of what you’re actually doing and what your portfolio actually does in terms of environmental performance. And that’s going to be clear from the result as well because you will only have access to a limited set of data points and results and comparisons from one component as opposed to everything that is relevant to a portfolio.

So to be more specific, if you’re managing or if you own standing investments portfolio, you have to complete two components. One on management that’s evaluating the sustainability practices of your organization and everything applicable to the portfolio itself in psychology and procedures and new strategy and gives you objective. And that will get a score so that’s the management score. And then separately, you’ll have the performance component that’s evaluating the performance of underlying assets. And that’s where all the data on energy and carbon and water and waste and tenant engagement and flight change comes in. And that will provide a performance score.

Together, these two components and these two scores will determine the GRESB score and the GRESB rating and the GRESB peer group and the GRESB rankings and basically all the high-level items that an investor would look at that you would be able to communicate on and include like that. Otherwise, of course, you can submit each component individually and stick to that especially if it’s your first year or perhaps you’re an opportunistic fund that’s only interested in improvement to the management component at that specific time, but then you will only seek to do on the management side or conversely on the performance side.

Michelle: Great. So a couple other questions here and then we’re going to be getting close to the end of time here, but I thought this one was a great one maybe. Dan, I know u talked to this quite a bit, but the question is, “When investors ask what is the ROI for participating in GRESB as consumption restrictions around performance can be contained without reporting, how do you suggest that we answer that question and show a financial return without merely showing the efficiency gains?” I know you love to talk to this, Dan.

Dan: I’m glad you chose that one. Actually, if you heard me clacking away back here, I was responding to that question privately. So look, ESG is baked into so many different corporate processes and things from I don’t know. Energy, water, waste, yeah, but HR from tenant engagement, right? What’s the ROI of keeping another tenant around as opposed to having a release and do new TIs and have vacancy and all that? I don’t know, but it’s positive. And can you then tag it to oh, the fact that we did GRESB caused that to happen? I don’t think so, right?

So my response to that question was, honestly, it was like trying to figure out what your ROI is to go get an MBA, right? I did. I went and got an MBA and I have a second Master’s degree too. I didn’t necessarily sit down and figure out that I was going to get a 10, 12, 15% ROI on my tuition payments and room and board. But I've said to myself, “You know what? This is going to be good.” And if you look at GRESB, it’s a series of best practices. You’re benchmarking yourself against peers globally. And going through the process, wash, rinse, repeat year after year after year shows organizations getting better.

And the key question that I ask when I have one-on-one meetings whether it’s with Nareit or a private equity firm and their management team is, and I only ask this of folks that have been doing GRESB three years or longer, I look them in the eye and I say, “Is this worth it? Are you getting enough positive ROI do you think or is this just a bunch of busy work?” And people will look at me and they’ll say, “We’re highly confident that we are getting positive ROI.” Is there some busy work in here? Yeah, right? However, and I've had principals, founders of their companies look at me and say, and this happened in Chicago maybe three years ago where somebody said to me, “You know what, Dan? I’ve learned an awful lot about my company that I didn’t know before. Yeah, I knew we had a couple LEED buildings here and there, but there’s a lot of things going on here. And now, that we’ve organized and sort of put a framework in place to figure this out, things are going great and we’re excited and we’re going to do more.” And that’s the typical response I get. The question begs a numerical answer that I’m unwilling to give because it just doesn’t work that way.

Michelle: I like the analogy. I already have a Master’s, but maybe I’ll go get an MBA too. No, that’s perfect. So I have a couple more technical related questions here that I want to slide through for a few minutes remaining. And then whatever we don’t get to, keep those questions coming. Our team will be sure to respond separately for each of you and we’ll be sure to share the questions with all the participants, but I thought this was a good one. At the end of Dan’s presentation, I know that you were talking about the new construction being part of the module and can we explain further in detail? And I'm actually going to turn things over to Mari for a couple minutes on our team to maybe talk through it. And then of course Roxana or Dan if you want to expand.

Mari: Yeah. So, sorry. I know I mentioned that very quickly in passing, but it doesn’t necessarily apply for everybody. So it does apply if your portfolio has new construction within it of course and what you did before. So what you did for 2019 if you participated, new construction was a module of its own and it was kind of not considered in the main survey response scoring. So now, there is no new construction module. Actually, there’s no module. They’re components. So all the questions, all of the different points that were covered within that new construction are now part of those three components, the management, performance and development. And therefore, are also counted towards the overall score of your overall submission.

Michelle: Perfect. Yeah, absolutely.

Roxana: The new construction major innovations aspect morphed into the development component. And the good news for any portfolio that has both standing investments and development projects is that they’ll now get two reports. One filled with the standing investments and one filled with the development projects and that’s really great. It's the kind of feedback we’ve been receiving for a few years and we weren’t really able to implement it, but with the new structure, that’s possible. And what this means effectively is that we now have two very good benchmarks. One for standing investments and one for development projects. And we’ll be able to provide very actionable insight and very specific insight into both types of activities. So the new construction major innovations score will be elevated into a proper report and into a complete analysis for anyone that has development projects.

Michelle: Yeah. That's something that we’ve definitely heard historically as well. So I think we’re excited to see that as one of the upcoming changes. Maybe couple more technical questions here. So one is. “Do the energy efficiency measures and building certifications need to be loaded at the asset level or is there still an option to report it at the portfolio level?” Roxana, maybe I'll kick that over to you as a quick question.

Roxana: Both will have to be reported at the asset level and there will be no option for portfolio level reporting.

Michelle: Great. And then another technical question. Can residential companies which have unit level, not asset level data, still participate?

Roxana: Yes, definitely. Definitely. And I know the residential is always a bit of a weird duck in this whole situation, but, again, it comes down to the definition of the asset and what’s most relevant in terms of how you define asset. So we’ll put out more specific items around that as well, but obviously residential is a sector and property type that’s covered in the assessment and it will be possible to report not at the unit level, but to combine...

Dan: Roxana, question for you. Have we published the 2020 guidance document yet?

Roxana: No.

Dan: I don’t know the status.

Michelle: That was going to be my next question, Dan. You’re reading my mind.

Dan: Well that question came in from Conan O’Connor in Toronto at EPL so I wanted to since we’re on that. What’s the timing on that?

Roxana: So we’ve been busy getting the assessment ready and that was published in the prerelease version on the 19th of December and we’re now working on the reference guide. The plan is to publish that on the 1st of March.

Dan: Tremendous. Okay.

Michelle: Perfect. Yes. That was going to be my planned last question for the moment so Dan really took it away from me which is perfect timing. I think it’s a great way to kind of wrap everything up. That’ll be the next big release. Obviously, it’s updated information from the GRESB team. Since we are coming to the end of our hour here, I want to be respectful of everyone’s time. But if we didn’t get to your question, we’re going to collect all of these and reply back, again, as a collective group and of course utilize our resources with Roxana and Dan as needed. But Dan or Roxana, anything that you would like to say from either of your end before we wrap up this webinar?

Dan: Yeah. I think the folks that were watching the screen probably saw me cruise through that appendix. When this document is sent out there, know that there were some more slides that we didn’t go through really how institutional investors are gravitating around our data. And so I just wanted to leave with this closing remark about benchmarking, right? It kind of feeds into what’s the ROI of all of this. And it’s difficult, right? It’s difficult to attribute causation or correlation to doing GRESB. But if you look at this and what this assessment is, it is a series of global best practices for the real estate industry.

So when I think about this and who and how and why, right? In phase one, why did people participate? Typically, it fell into two camps. Either curiosity or compliance. Compliance means that one of your LP investors said, “Hey, we want you to do this GRESB Assessment.” APG has over 300 investments that participate in GRESB, 300 LP positions, right? And there are others with an awful lot as well. The other side of the coin is curiosity. People that have been doing sustainability, guys like Dave DeVos who has been at this for a long time and is doing a great job in a very you know an old line company, right? Curious. And so let’s go benchmark ourselves, right? That’s the participation driver and here is what we saw, right? It kind of looked like that.

And then the next phase we had you know competition. You get that peer, you get that number, you get that peer benchmark and it makes you celebrate if you score 82 and it makes you work harder if you score 28 because you see that your peers are actually doing things and they’re doing more. And it gets organizations to set targets and meet those targets, right? So phase two is really all about competition and then we saw what that looked like; big push to the upper right.

And so, let’s end this with where we are in phase three. It’s really continuous improvement and it’s all about risk management and business value. That and it gets back to the question that was on the table, the ROI of sustainability, GRESB, we have a building certification or whatever it is, right? This is really all about continuous improvement, benchmarking, understanding where your strengths are, your weaknesses are and going and tackling them as an organization. That's what the GRESB sort of cycle of this annual assessment is all about and we’re really excited going into 2020.

So thanks everybody for being part of this call. Michelle, I'm going to turn back to you. That’s my piece.

Michelle: I think it’s a fantastic way to summarize it. I think we’re looking forward to great things ahead into 2020 and beyond. So thank you everyone on behalf of both GRESB and Goby for taking the time to join us today. If you should have any additional questions following when we close out this webinar, please feel free to email at And we’ll look forward to sending this webinar as well as the questions and answers out to the group. Thank you so much for your time and have a great start of the year.

Ready, Set, GRESB: A strategic guide for turning ESG insights into actionable results

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Chris Ogletree

Chris joined Goby in 2016, and as Inbound Marketing Manager oversees generation and development of a wide range of content, such as email campaigns, social media, website administration, and marketing collateral, as well as supporting improvements to the design & functionality of the Goby platform.

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