Charles van Thiel tells Pirkko Juntunen how the sustainability benchmark is reflecting investor demand for asset-level performance
GRESB has become an industry standard sustainability benchmark for real estate fund managers, and earlier this year it undertook a consultation to address potential shortcomings and to ensure it remains for fit for purpose. The eventual changes could have important implications for institutional real estate investors, for whom GRESB is ultimately meant to serve, and their third-party fund managers which have effectively been encouraged by GRESB over the years to disclose and improve their performance in sustainability.
In a recent paper, PGIM, one of the world’s largest real estate investment managers, welcomed the “direction of travel” of the proposed changes, while raising concerns about implementation. The paper said: “The 15-year-old [GRESB benchmark] remains the most widely used investor-led standard for comparing sustainability performance across real asset portfolios. Proposed changes to the standard signal a pivot away from process and disclosure, and toward actual, measurable asset performance. Given the close links between GRESB scores and investment decisions, these changes could have wide-ranging impacts for investors.”
The takeaway from GRESB’s ‘Road to Performance’ consultation is it signals a significant shift in how sustainability is assessed, moving the emphasis beyond policies and disclosure towards measurable outcomes and asset-level performance. In its summary of the consultation findings, it concluded: “The feedback confirms a clear market expectation: GRESB should continue moving toward a more performance-focused Real Estate Standard that rewards real-world performance, focuses on the metrics that matter, and reduces unnecessary complexity.”
Charles van Thiel, director of the real estate standard at GRESB, says the changes are driven primarily by evolving investor expectations. “Over the past decade, sustainability assessments have focused on reporting frameworks, governance structures and management processes, as investors and managers sought a common language for ESG performance,” he says. “The market has now matured to a point where investors increasingly want evidence that sustainability efforts are producing tangible results.”
According to van Thiel, investors seek assurance that capital allocation is generating real-world outcomes and that sustainability scores should better reflect impact. “The objective of the reforms is to strengthen alignment between benchmark scores and measurable performance, so higher scores correspond with stronger sustainability outcomes,” he notes.
“Investors want benchmarks to evolve and better reflect real-world outcomes, but they also value predictability and continuity”
A central challenge is ensuring fair comparisons across geographies and asset types. GRESB acknowledges that performance metrics can be influenced by factors beyond a manager’s control, including climate conditions, energy systems and local market characteristics. As an example, Van Thiel says, two identical buildings in France and Poland could have different carbon performance due to national electricity grids, rather than, for instance, management quality. GRESB’s future methodology will seek to control for energy mix, climate zones and geography so that managers are assessed on actions rather than location.
Van Thiel recognises that perfect normalisation, or fairness, is neither practical nor desirable. Alongside methodological adjustments, he expects benchmarking to emphasise comparing similar assets within comparable sectors and markets to maintain peer-group comparisons.
The reforms also raise questions about benchmark stability. Investors and managers have expressed concerns that increasing weighting of performance metrics could affect year-on-year comparability and create uncertainty. Van Thiel acknowledges a tension between change and stability. “Investors want benchmarks to evolve and better reflect real-world outcomes, but they also value predictability and continuity. To address those concerns, we have extended the notice period for major methodological changes from 12 months to 24 months,” he explains. GRESB has consulted somewhere between 250 and 300 organisations and is considering transitional mechanisms to help participants interpret results.
One option under consideration is a dual-scoring approach when reforms are introduced in 2028. “Participants would receive both their score under the new methodology and an indicative score calculated under the previous framework. This would help managers explain performance trends to investors and preserve continuity during transition,” van Thiel says.
Operational performance critical for the future
In its paper, PGIM has argued for performance to be “anchored” in operational energy and emissions, which are “among the most mature, decision-relevant indicators in real estate and are the right place to increase performance weightings first”.
Van Thiel agrees that operational performance and transition readiness are key priorities for the sector. Under the proposals, operational energy performance, operational carbon performance and embodied carbon in development projects are key focus areas for 2028. He also says resilience is expected to become a larger area of development from 2027, aligning the benchmark with investor concerns around physical climate risks and long-term asset durability.
However, he stresses that increased focus on climate-related performance should not be interpreted as narrowing sustainability. While climate performance, resilience and transition readiness are priorities, biodiversity, nature and social sustainability remain material issues, and prioritisation should not be confused with redefining sustainability. “Science defines, humans prioritise,” he says.
Looking ahead, van Thiel expects the benchmark to become more outcome-focused while reducing reporting burdens. “Planned changes include removing less material reporting requirements, increasing automation and making reporting available on a more continuous basis rather than a single annual cycle,” he adds.
GRESB is also exploring more targeted ratings that better reflect capital allocation. “Rather than relying solely on broad global ratings, future assessments could provide more specific comparisons based on region, sector, investment strategy or market segment, making it more granular and relevant for each participant,” van Thiel says.
Taken together, these developments reflect a broader shift across institutional sustainability benchmarking towards greater emphasis on performance evidence, while still retaining structured reporting foundations that allow comparability across markets and time. “For investors, the emphasis on outcomes is intended to improve decision-usefulness of scores without removing the underlying reporting architecture that has been built over the past decade. This balance between comparability, data quality and real-world impact remains central to the ongoing consultation process,” he concludes.
To read the latest IPE Real Assets magazine click here.
