When it comes to sustainability reporting, it can be easier to envision what that might look like in resource-heavy industries like mining or oil and gas, or in manufacturing sectors like chemical production. And while those sectors may bear the brunt of environmental protection, they aren’t alone in having environmental and social impacts in the business community.
Investors are looking for transparency in sustainability performance across their portfolios, regardless of sector. With looming Net Zero deadlines in 2030 and 2050, there is increased urgency among investors to show their investments are doing their part to meet reduced carbon emissions.
If you’re in the real estate and infrastructure sectors, you may already be a part of sustainability initiatives in your industry. Maybe your buildings have LEED accreditations, or your fleet vehicles have switched to greener energy sources. You’ve worked to find more water efficient options or you’ve implemented safer waste management practices.
The challenge in every industry is reporting your sustainability efforts in a way that is meaningful and useful for investors. They need to see not only your progress over time, but also be able to benchmark you against other similar organizations within their portfolio.
Environmental Social and Governance (ESG) reporting is one tool investors use to track sustainability among portfolio companies. It looks not only at a company’s environmental performance, but also social aspects like diversity and ethics, as well as governance concerns like board composition and executive compensation.
One option if you’re receiving requests for ESG data in the real estate and infrastructure sectors is the Global Real Estate Sustainability Benchmark, or GRESB reporting program. This is just one of many ESG standards available to the business community, but tailored specifically to real estate and infrastructure.
Why Use ESG To Report on Sustainability?
As we’ve said, companies in the real estate and infrastructure sectors may already be participating in some type of homegrown or industry-specific sustainability initiative. Issues like energy efficiency are top of mind for most businesses these days as rising costs and inflation put a dent in everyone’s bottom line.
But these in-house and other industry initiatives may not include a standardized reporting requirement which means while they might be valuable at the organizational level, they don’t provide much transparency to investors and financial institutions.
Anyone can claim to be a sustainable business, but without data to back it up, investors aren’t able to make informed decisions and report back to their stakeholders. ESG looks at three areas of a business’s or investment fund’s sustainability. These are:
- Climate Change
- Greenhouse Emissions
- Water Stewardship
- Forestry Management
- Waste Management
- Materials Handling
- Energy Efficiency
- Diversity and Inclusion
- Hiring and Labor Practices
- Privacy and Security
- Ethics and Human Rights
- Board Composition
- Compensation and Incentivization
The exact reporting requirements under each heading will depend on the standard being followed and what your organization does. But the important thing is rather than stopping at policies and mission statements, ESG aims to make sustainability quantifiable.
Data is the name of the game in ESG reporting. ESG standards use verified quantification methodologies, so the data presented can be compared over time and across industries. More and more, investors are requesting organizations within their portfolio, or those seeking investment, to complete some kind of ESG reporting.
Which ESG Standards Are Available?
There are a number of ESG standards for companies to choose from. These include:
- International Sustainability Standards Board or ISSB. Similar to the International Accounting Standards Board, the ISSB prescribes ESG reporting for financial statements to meet the information needs of investors and capital markets
- CDP – the CDP is widely used, but focuses specifically on climate reporting
- Science Based Targets Initiative or SBTi – this program was developed for private sector organizations with Net Zero pledges
- Task-Force on Climate-Related Financial Disclosures – The TCFD is developing standards on disclosures to investors, lenders and insurance underwriters, with many of their recommendations driving disclosures to the American SEC
- BSSR – this new standard prescribes ESG reporting requirements for the 1000 largest companies in India
- CSDR – another geographic standard, this one is being rolled out for EU-based companies
- Global Real Estate Sustainability Benchmark or GRESB – an industry specific standard developed for the real estate and infrastructure sectors
Many investors will have a particular standard they want portfolio companies to use, since comparability is so important. But if you’re free to choose your own standard, one of the key considerations is materiality.
What Is Materiality in ESG?
Materiality helps organizations understand which elements of ESG are most relevant to their operations and most valuable to the investors and other stakeholders. If you’re using a broad standard, you’ll need to complete a materiality assessment to make sure your report is complete.
For example, your investors may be very concerned about climate change. Even if you’ve already made significant efforts to cut energy use and reduce greenhouse gas emissions, this element may still be material to your report to satisfy investor requirements.
On the other hand, your organization may have specific diversity targets when it comes to your hiring practices. Documenting and quantifying your progress for your own internal purposes may make this element material, even if it’s not part of the investor’s request.
To make things simpler though, rather than taking the time to go through each of the elements of an ESG standard and determine which are material to you and your investors, you could choose an industry-specific standard like GRESB where that work has largely been done for you.
How GRESB Works for the Real Estate and Infrastructure Sectors
Choosing an ESG standard designed specifically for your industry helps immediately address some of the questions around materiality. By using an industry-specific standard, you will only have to provide quantifications and disclosures relevant to your operations. For the real estate and infrastructure sectors, the standard of choice is GRESB.
GRESB gives asset managers an established and verified framework to complete their ESG reporting. It allows reporting organizations to:
- Identify risks and opportunities
- Standardize ESG data collection
- Benchmark your performance against the industry
- Engage with investors
Currently there are over 140 institutional investors managing over $47 trillion in assets that use GRESB to monitor their portfolio’s sustainability performance and make informed investment decisions when evaluating new companies.
Companies that report to GRESB get access to a number of features to help them better understand their ESG performance. These include:
- A scorecard so you can compare your efforts and success to that of your peers
- A benchmark report to better understand the industry
- A portfolio analysis tool so you can slice and dice data and compare across geographic regions
- A data exporter so you can incorporate it into other modeling and reports
GRESB reporting also integrates with other ESG standards and frameworks, so you can streamline your efforts if you’re required to report to more than one program. For example GRESB is currently working on integration solutions with the SFDR in the EU, and the TCFD in the US.
There are three assessments conducted by GRESB, which generate four benchmarks. The assessments are:
- Real Estate Assessment (generating the Real Estate and Real Estate Development Benchmarks)
- Infrastructure Fund Assessment (generating the Infrastructure Fund Benchmark)
- Infrastructure Asset Assessment (generating the Infrastructure Asset Assessment)
Real Estate Assessment
The 2022 Real Estate Assessment included reports from over 1,820 property companies, REITs, funds and developers. Together, these make up $6.9 trillion in assets over 66 countries. The assessment includes three components covering Management, Performance and Development.
The Management Component considers the organizational level and measures elements like strategy and leadership. It requires documentation on policies and processes, as well as details on risk management and stakeholder engagement.
The Performance Component looks across the organization’s portfolio performance. This highly quantifiable component looks at environmental considerations like energy consumption, GHG emissions, water consumption and waste.
The Development Component considers ESG risks and opportunities during design, construction and renovation. As such, it may not be applicable to every location each year, but can significantly impact performance from one year to the next, depending on how many projects are undertaken.
Infrastructure Fund Assessment
Infrastructure funds typically include businesses from a wide variety of sectors. The GRESB Infrastructure Fund Assessment looks at the performance of sectors including:
- Energy generation
- Energy transmission
- Water resource management
- Social infrastructure
Unlike the Real Estate Assessment, the Infrastructure Fund Assessment only looks at two components. The Management Component looks at ESG management and investment related to:
- Risk management
- Stakeholder engagement
The Performance Component looks at ESG performance across the fund’s underlying assets. Participation in reporting to the Performance COmponent is optional for these assets, but a fund needs to have a minimum of 25% participation or else they will not be given a GRESB Score or qualify for Benchmarking.
Infrastructure Asset Assessment
The Infrastructure Asset Assessment is available to both single and multi-asset operators. If your assets are part of a larger infrastructure fund, using the Infrastructure Asset Assessment is one way you can help the fund meet their 25% minimum participation target for the Performance Component of the Infrastructure Fund Assessment.
The Infrastructure Asset Assessment measures ESG performance for a wide variety of infrastructure sectors, and weights considerations differently based on your sector. Applicable sectors include:
- Data Infrastructure
- Energy & Water Resources
- Environmental Services
- Network Utilities
- Power generation (excl. Renewables)
- Renewable Power
- Social Infrastructure
Like the Infrastructure Fund Assessment, the Infrastructure Asset Assessment includes two components: Management and Performance.
As with the other assessments, the Management Component measures strategy and leadership management, policies and processes, risk management and stakeholder engagement approach. It assesses ESG performance at the organizational level.
The Performance Component measures ESG activities at the asset level. It is designed for infrastructure companies with operational assets. In total, the Performance Component comprises twelve aspects including:
- Output & Impact
- Health & Safety
- Greenhouse Gas Emissions
- Air Pollution
- Biodiversity & Habitat
- Certifications & Awards
When Are GRESB Reports Due?
Regardless of which assessment your organization or fund is reporting to, reports are due each year in the spring, with the reporting window open between April 1 and July 1. Once data is submitted, it undergoes a multi-level validation process before it is scored and benchmarked.
If you are able to submit your report before June 1, you can request a Response Check from GRESB. This is a high-level review of your report to look for errors and ensure the submission is complete. While organizations are not required to complete a Response Check prior to submitting their final report, this can greatly reduce mistakes and wasted time filing updates later, while increasing overall data quality.
How To Make ESG Reporting Work for You
If you need to report to GRESB or other ESG frameworks this year, you’re already on the clock. Preparing a baseline ESG report can be a time consuming task, not to mention the fact that once you’ve provided data to GRESB and investors once, the expectation is you’ll provide ongoing updates for the benchmark each year.
It can be a steep learning curve. You’ll need to gather information at both the organizational and asset level. This means pulling data from leadership, HR, purchasing, operations and maintenance, and funneling through a central sustainability team to build the report. It’s not uncommon for this team to also have other responsibilities, so they can’t spend all their time reading up on the latest ESG standards and chasing after information requests.
A software solution like FigBytes can help make ESG reporting work for you. It’s designed to comply with the standard requirements of the GRESB assessments. It also uses a cloud-based data collection platform, so each team can enter data directly, rather than information getting lost in a tangle of spreadsheets and emails. FigBytes will even integrate directly with utilities and internet-of-things connected equipment to pull the data it needs.
By using a platform like FigBytes, you’ll be able to streamline and customize your reports to share with programs like GRESB, as well as other investors and stakeholders. You’ll also be able to update data each year or as you need to to provide comparable results to track your progress. If you have ESG deadlines looming, or if you’ve already started building your report and need help tackling the workload, FigBytes can help. Reach out to one of our advisors today to get started.