GRESB | Sustainability in Real Estate

SUSTAINABILITY IN REAL ESTATE: ADVANCING PORTFOLIOS USING GRESB

Stephanie Barr, August 2016

INSTITUTE FOR THE BUILT ENVIRONMENT

IBE is based at Colorado State University. We form

interdisciplinary teams of faculty, students and

off-campus professionals to take research to practice.

OUR MISSIONADVANCE THE

DEVELOPMENT OF HEALTHY, THRIVING

BUILT ENVIRONMENTS.

PROVIDE THOUGHT LEADERSHIP

OPTIMIZE TEAMS & PROJECT PERFORMANCE

DEVELOP LEADERS

WHAT WE DO

TONIGHT’S KEY POINTS1. What is the Global Real Estate Sustainability Benchmark and why

should you care?2. How does GRESB work, what does it measure, and who is it for?3. How does LEED NC & EBOM certification overlap with GRESB?4. How will GRESB impact the building design & construction industry?

5. Anything I missed?

2015 ESG RESEARCH FINDINGSGRESB.COM/INSIGHTS

Companies with superior ESG practices receive market benefitsAn updated literature review by Gordon Clark et al. indicated that 90% of empirical studies found that strong sustainability standards lower the cost of capital and in 80% of studies strong sustainability practices are positively correlated with superior stock price performance.

2015 ESG RESEARCH FINDINGSGRESB.COM/INSIGHTS

Sustainable property features lower default riskResearchers Xudong An and Gary Pivo documented that certain sustainability features, including energy efficiency, walkability, and proximity to fixed-rail transit, significantly reduce default risk in CMBS loans.

2015 ESG RESEARCH FINDINGSGRESB.COM/INSIGHTS

Consideration of ESG improves risk-adjusted returnsResearchers Natalie Trunow and Joshua Linder found empirical evidence that incorporating ESG factors into investment decisions improves the investment selection process and enhances risk-adjusted returns.

2015 ESG RESEARCH FINDINGSGRESB.COM/INSIGHTS

Higher GRESB ratings correlate to superior financial performanceA University of Cambridge study commissioned by the Carbon War Room and the Rocky Mountain Institute, found that, adjusted for risk, there is a significant link between portfolio sustainability indicators and REIT stock market performance.

A STRONG SUSTAINABILITY PROGRAM INDICATES A FIRM HAS THEIR HOUSE IN ORDER.

TRUST SOPHISTICATION

REPUTATION RETURNS

THE GLOBAL REAL ESTATE SUSTAINABILITY BENCHMARKFounded in 2009, GRESB is an industry-driven organization committed to assessing the ESG performance of real assets globally, including real estate portfolios and infrastructure assets. GRESB is headquartered in the Netherlands & is a subsidiary of GBCI.

BOARD

PURPOSEGRESB was built on behalf of large institutional investors to provide consistent, comparative, benchmarked data on ESG indicators.

Increased scrutiny demands benchmarking not green messaging.

“Investors are gathering together and demanding better sustainability data. They need standardized, comprehensive information that is consistent over time.”

– The Economist, 2014

WHO SHOULD PARTICIPATE?GRESB collects data at the portfolio level for: listed property companies, private property funds, developers, and real estate investors.

The GRESB Assessment is applicable across regions and property types.

HARRISON STREETReal Estate Capital

INVESTOR

DEVELOPER OWNER/ OPERATOR

THE SURVEY

SURVEY ASPECTS & WEIGHTING

SURVEY ASPECTS & WEIGHTING

Management & Policy

9% 9% 12%

30%Implementation & Measurement

9% 25% 25%11%

70%

CERTIFICATIONS & ENERGY AWARDSGreen building certifications are 11% of GRESB scoring.• Pressure from investors will drive

certifications on new developments

• Fund & asset managers will drive existing building improvements & energy ratings.

2015 SURVEY RESULTS

INTEPRETATION OF PLOTGreen StarScored above 50 in both axis.

Shows leadership and maturity of fund/entity.

INTEPRETATION OF PLOTGreen TalkerScored above 50 in Management & Policy, but low in Implementation & Measurement.

Shows the organization is sophisticated but hasn’t implemented measure yet. A good place to be for a new fund.

INTEPRETATION OF PLOT

“Green Starter”

Green StarterScored above 50 in Implementation & Measurement and low in Management & Policy.

Shows opportunity. The organization is filling out GRESB, that displays interest and possible commitment to improving.

INTEPRETATION OF PLOTGreen Walker

Honestly, they just got lucky.

Without the policy and management practices this implementation success will be difficult to sustain.

FINAL THOUGHTS• Capital is starting to drive sustainability efforts. This top down pressure is

exciting.• Research continues to tie sustainability to higher returns – this trend isn’t

going away.• GRESB allows for apples to apples, quantitative comparison of funds and

moves us beyond greenwashing.• GRESB’s integration into the USGBC Green Business Certification Institute

suite will support further refinement and growth of the program.• For savvy investors, particularly institutional capital, funds that complete

GRESB are seen as having competitive differentiation, while funds that don’t are viewed with risk and uncertainty.

ibe.colostate.edu@ibeatcolostate

s.barr@colostate.edu

INSTITUTE FOR THE BUILT ENVIRONMENT