Sustainability consultancy Evora Global has criticised the Global Real Estate Sustainability Benchmark (GRESB), which announced its results this week, for not being an accurate measure of sustainability.

Paul Sutcliffe, co-founder and chief operating officer of Evora Global – which submitted GRESB reports for more than 200 funds – said the industry benchmark was influential but needed to change to drive genuine sustainability.

“Real estate investors do put pressure on fund managers to obtain four and five star ratings for their portfolios. But they would be wrong to assume a five-star GRESB rating means their portfolio is highly sustainable,” he said.“Instead, a high rating suggests a well managed portfolio with strong ESG management systems, data coverage, and green building certificates.

“In simple terms, funds with access to data and strong systems in place do better than those without. Meanwhile, a portfolio that can provide comprehensive data and green building certificates for all its assets is likely to score well, even if true sustainable performance is lacking. I would personally support moves that increase the genuine sustainability of assets and quantifiably reduce risk.”

Sutcliffe said some assets that are energy efficient and actually very sustainable can still score badly on GRESB, particularly when data is hard to come by. “There are likely to be assets in some portfolios with lower ratings which could, in fact, be very sustainable in terms of performance, but have difficulties obtaining and supplying data,” he said.

Sutcliffe added that fund managers, keen to score highly on GRESB, will focus their attention to where gaining points is more achievable. “Understandably, fund managers tend to focus their efforts on areas where GRESB points are most achievable. This means plenty of attention is given to management and data collection,” he said.

“It also tends to mean they ensure assets in their portfolios have all simply obtained green building certificates, rather than ensuring those assets really excel in sustainability.”

Sutcliffe noted that GRESB has helped the industry but said real estate still has a long way to go in terms of sustainability.

“GRESB has indeed helped the real estate industry to prioritise sustainability and focus on issues like achieving net-zero emissions,” he said. “But for the real estate industry to hit zero, it needs to evolve, with greater emphasis on performance and sustainability improvements.”

Asked to respond to the criticisms, GRESB said it was “entirely focused on promoting transparency and helping investors, managers and asset operators drive sustainable change across the real estate and infrastructure asset classes”. The firm added: “This change starts with gaining access to real, comparable asset-level data to inform decision making.”

GRESB said the benchmark evolved each year “to reflect the most material issues our stakeholders face”, following annual updates to the GRESB standards, which scores are based upon. GRESB said these efforts were “led by the industry itself, through representatives who sit on and work with the GRESB Foundation”. 

GRESB said: “For more than a decade, participants in the real estate assessment have worked to dramatically improve their sustainability strategies and data collection, which has led average GRESB scores to rise over the years.”

The company added: “It’s true that a fund can gain a relatively high score on the benchmark with strong management practices and detailed data collection. These efforts are often the foundation needed to make smart investments to drive deep, meaningful sustainability progress at the asset level. 

“While Star Ratings can be useful to quickly differentiate quintiles within the benchmark, investors look deeper at the underlying data provided by GRESB to gain insights and to inform investment decisions and engagement conversations with managers.”

By using GRESB’s portfolio analysis tool and their own models, investors are very aware of the differences between two 5 Star funds, GRESB said.

“Through the GRESB Foundation, the assessments are continually evolving to align with emerging industry priorities and to increasingly recognise real-world sustainability performance,” GRESB said. 

“While our work is far from complete, we remain committed to creating a more sustainable future, working together with the real assets industry on the challenges ahead.”

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