Time for another initialism … GRESB (Global Real Estate Sustainability Benchmark) caters to real estate investors and asset managers who can use the findings from the annual survey to strategise and improve the sustainability of their investments. 

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It’s not an environmental certification per se but may be used with other certifications. If buildings in a real estate portfolio have some green certification, they may receive a better GRESB rating. 

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In this article, we’ll explore the ins and outs of GRESB, how it works, and whether investors and real estate fund managers should care about it. 

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What is GRESB?

Here’s the plain and simple definition: GRESB is a Dutch organisation that provides environmental, social, and governance (ESG) data for financial markets. It was founded in 2009 and helps set benchmarks for the real estate industry by evaluating infrastructure and investments worldwide. 

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The data from GRESB reporting essentially allows investors with real estate portfolios and asset managers to assess the sustainability performance of their properties. It’s a member-led organisation that includes investors and stakeholders from the real estate industry, and therefore the organisation uses data from those members to evaluate, score, and benchmark. 

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GRESB’s assessments aren’t limited to buildings but also include infrastructure such as roads, railways, and utility systems. 

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GRESB benchmarks

GRESB releases ESG data and industry benchmarks annually by assessing data collected via a survey. This survey involves said member investors and participants self-reporting ESG data of portfolios or individual assets. 

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This data is assessed based on the ESG standards created by the GRESB Foundation, a separate non-profit associated with GRESB. The GRESB Foundation creates the assessment framework in accordance with the Sustainable Development Goals, the Paris Agreement and international reporting frameworks. 

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There are various assessments, each resulting in a corresponding benchmark for the industry, including: 

• Real estate benchmark
• Real estate development benchmark
• Infrastructure fund benchmark
• Infrastructure asset benchmark

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Okay, but how does it work?

GRESB assessments follow an annual cycle, starting on April 1 and closing on July 1. Members report their data in a member portal, and once they’ve done that, the assessment period begins. This is followed by the early release of the assessment exclusively for members. GRESB reporting for a particular year isn’t made public until late in the year (September and October). 

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Here’s a breakdown of the process:

• Survey: GRESB conducts the annual survey that collects information from real estate and infrastructure companies and funds regarding their sustainability performance. The survey covers various aspects such as energy consumption, carbon emissions, water usage, waste management, and social responsibility initiatives.
• Scoring: Based on the information provided in the survey, GRESB scores each participating entity on different criteria related to ESG performance. These criteria typically include management practices, performance indicators, and stakeholder engagement.
• Benchmarking: GRESB compares each participant's performance against its peers within the same sector or region. This allows companies and funds to see how they compare to wider industry standards and identify areas for improvement.
• Assessment Correction: Before the results are announced publicly, the assessments are released to the members, which kicks off the assessment correction period (previously called the review period). During this period, participants may request corrections if they find errors in their assessments and scoring. 
• Reporting: GRESB publishes the results of its assessment, providing investors, asset managers, and other stakeholders with insights into the sustainability performance of real estate and infrastructure investments. This phase also involves the review period, where participants can consult on the assessment findings and scoring based on benchmarks. 

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4 types of GRESB assessments

GRESB offers four types of assessments catering to various real estate investments and projects. Let’s dive into each of them. 

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GRESB real estate assessment

The GRESB real estate assessment is for listed property companies, developers, private real estate funds and investors. Based on data collected from over 2,000 participants and investors, it produces global ESG benchmarks for the industry. 

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In 2023, GRESB's real estate assessment covered over 170,000 assets, a number expected to grow as new companies join the industry. The assessment follows international reporting frameworks and aims to identify material issues relevant to asset sustainability performance. The ESG data submitted by participants and investors undergo a robust validation process. Based on the data from peers, individual companies or investor portfolios are scored and benchmarked. 

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The findings are supposed to help decision-makers identify areas for improvement and adjust their investment strategies accordingly. The data also allows them to find opportunities to decrease the environmental impact of their real estate assets. 

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It produces two benchmarks, which consider the assets’ management and performance indicators. These are the GRESB real estate benchmark (for operational buildings) and the GRESB development benchmark (for buildings in planning or construction). 

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Each participant receives a score, which can be compared with peers. 

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GRESB infrastructure fund assessment

Infrastructure funds invest in public assets and services such as roads or utility systems. The GRESB infrastructure fund assessment examines the management of such funds in terms of ESG impact. It’s similar to a real estate assessment, resulting in individual scores and industry benchmarks. 

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With validated ESG data from this assessment, infrastructure funds can report to their investors or attract new investment. The assessment mainly focuses on the management component, which examines policies, leadership, target-setting, reporting, risk management, and stakeholder engagement. 

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The performance component of the assessment is optional, and assets under the fund may choose to participate. However, at least 25% of a fund's assets must participate to receive a performance score.

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GRESB infrastructure asset assessment

As you can probably guess, this GRESB infrastructure assessment is conducted at the asset level for investors, fund managers and asset operators. It looks at the ESG data of individual assets and scores them. This type of assessment can enable asset operators, their investors, or fund managers to understand the ESG performance of assets and identify where they stand relative to their peers.  

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The assessment process and timeline are similar to that of real-estate assessment. The data is self-reported by participating members. This type of assessment is available to infrastructure assets across different sectors, including power generation, transport, data infrastructure, energy and water resources, transport and social infrastructure. 

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Unlike the fund assessment, the asset assessment has a mandatory performance component, which looks at the ESG performance of individual or multi-assets. 

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GRESB infrastructure development asset assessment

The GRESB infrastructure development asset assessment is the organisation’s latest offering. It focuses exclusively on planned or under-construction infrastructure projects and the sustainability of pre-operational infrastructure assets. 

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The assessment applies materiality based on location, sector and development phase. The idea is to provide actionable data and create benchmarks for large infrastructure projects worldwide in the early stages. With this assessment, asset operators and investors can pivot their plans and efforts to improve ESG performance during and after the development phases. 

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Who is the GRESB for?

GRESB’s assessments are ideal for real estate and infrastructure stakeholders, whether it’s investors, fund managers or developers. Unlike sustainability reporting regulations and certain green certifications, a GRESB assessment is voluntary. 

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It’s a globally recognised assessment that uses comprehensive third-party data validation and helps create industry-wide benchmarks that participating companies can use. By extension, the GRESB rating is also useful for investors who have invested in real estate projects or are planning to. Participants may use the rating to report to investors or attract new ones.

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Besides the assessments, participants can also tap into the ESG tools offered by GRESB that may help improve ESG management and policy making. 

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How can the GRESB assessment help real estate investors and managers?

GRESB assessments and rankings aim to enable decision-makers behind real estate assets to understand their ESG performance. This can be instrumental in helping investors decide which of their investments meets their sustainability expectations. 

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On the other hand, it can be beneficial for property companies to show investors their sustainability competitiveness. A PWC survey revealed that investors want to see more clarity on ESG data. An assessment like GRESB that follows a comprehensive data validation methodology and turns it into easy-to-understand scoring can be useful in satisfying investors.

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Shortcomings of the GRESB benchmarks

GRESB has also been scrutinized for its structure, as it relies on industry insiders for data. Their motto, ‘for industry, by industry,’ reflects that. As data used in the survey is self-reported by investors or companies, the integrity and quality of that data have been questioned. 

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However, the organisation's advocates say that its assessment standards are in line with international frameworks. They also argue that involving stakeholders from the real estate sector is important so they have a say in shaping ESG standards. 

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Going green takes effort!

GRESB members include some of the biggest names in the real estate sector and heavyweight institutional investors. The assessment, published annually, provides important benchmarks that are useful for both members and non-members in the industry. 

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It not only evaluates the ESG standing of assets and investments but also paves a path for improvement. That said, the organisation's industry-led approach has raised some questions. Still, as an assessment, it’s regarded with repute worldwide and may even help participants with mandatory ESG reporting. 

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FAQs

What does GRESB stand for?

GRESB stands for Global Real Estate Sustainability Benchmark. It’s an organisation that rates and benchmarks real estate portfolios and assets, as well as infrastructure funds and assets, based on self-reported ESG data from members. 

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What is the GRESB rating in real estate?

The GRESB Rating depends on the GRESB Score and where the entity stands compared to others in the GRESB group. They adjust this every year. If a company is in the top fifth, it gets a five-star rating. If it's in the bottom fifth, it gets just one star.

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Is there a GRESB certification?

GRESB doesn’t certify real estate assets. Instead, its assessment provides a score and ranking. Participating real estate companies and investors can compare their scores with their peers to see where they stand regarding ESG performance. 

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