A new suite of tools has been launched to help investors and fund managers assess the sustainability of real estate assets in their portfolios.
REAL Benchmarks, one of several new services created by real estate ESG-data provider GRESB, enables the identification of individual buildings with poor performance compared with peers to encourage owners to begin remedial work that will make them more sustainable.
Leveraging the organisation’s database of 170,000 properties worldwide, REAL Benchmarks will first provide benchmarks against which stakeholders can gauge the performance of their assets. The product has been launched amid growing demand from institutions who are looking more closely at opportunities within the real estate sector as part of efforts to diversify their portfolios amid capital market volatility. It will also help fill a yawning data gap that is preventing institutions from making fully informed decision on their portfolios, said REAL Solutions product manager Christina Djambazca.
“A mindset shift has occurred within the industry,” Djambazca told ESG Insight from her office in Amsterdam. “The use case has shifted from reporting and understanding ESG to actually taking action – action that has to be taken very quickly.
“A big issue in the industry the lack of data – so we’ll be focusing on the transparency element.”
Large Emitters
Real estate investors are scrutinising the energy performance of property because the built environment accounts for about 40 per cent of man-made carbon emissions. That makes the buildings in which we live, work and play among the single-largest contributors to greenhouse gases. The activities of the people who live and work in the buildings require large amounts of energy and water. These activities also generate waste, all of which add to the building’s ESG performance.
“Humans spend the majority of their lives within a building that requires consumption, requires heating, requires cooling, requires ventilation… ultimately that emits a lot” of carbon, says Djambazca.
Unlike other large emitters, such as vehicles and even factories, which are regularly replaced or refitted as new and greener technologies evolve, real estate rarely has the opportunity for a substantial makeover. A building that is built to stand for 50-70 years is only likely to be refurbished a few times in its lifetime, Djambazca explains.
That’s a critical issue; in the developed world almost nine-tenths of all buildings that will be standing in 2050 – the UN’s global target for reaching net-zero – have been constructed already. For this class of mega-emitters to reach the that target, remedial work needs to be carried out by individual properties and tenants as a project that wouldn’t otherwise be timetabled.
Benchmarks and Estimates
GRESB’s REAL Benchmarks provides GRESB members with a dashboard on which they can access benchmarks on a range of properties classified according to a variety of typographies, including location, against which they can compare assets in their portfolios. The dashboard enables users to visualise the data too, making comparisons easier.
The tool is fed with aggregated data gathered from the annual GRESB Real Estate Assessments, which has been collecting asset-level data since 2020 and provide a broad view across the sustainability performance of buildings owned by the organisation’s clients. There are no plans yet to include metrics on buildings not owned or managed by GRESB clients, but the number of properties being registered by new and existing users is growing quickly.
Of the properties already listed, about 45 per cent have 100 per cent data coverage, including energy usage and type and water use. Real Estate Assessments are updated every year, meaning GRESB’s benchmarks are always current.
Clients are provided with tools and data to make estimates on the datapoints that are missing.
“We have a very robust and very rigid data quality process for all of the information that goes into the main assessment,” says Djambazca. “So this is the information that participants know is actually reported data, and it results in a reliable benchmark that they can trust.”
Djambazca says that the benchmarks will ultimately lead asset managers to encourage owners and tenants to upgrade the emissions performance within properties instead of unloading them from their portfolios, which would not solve any shortcomings. Soon, GRESB will also release REAL Statistics, a similar set of insights, for financial institutions.
“It is up to the fund manager to decide on their strategy and how exactly they manage their own portfolio – should exclusion be the only way out then this is of course an option but this is not what we would ultimately want to be the target of managers,” she said.
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