GRESB Real Estate Update 2019

GRESB (Global Real Estate Sustainability Benchmark) assesses and benchmarks the Environmental, Social & Governance (ESG) performance of real estate assets, providing standardized and validated data to the capital markets, so that their investors can make better informed decisions and help ensure their own ESG requirements are met. It also helps the asset managers review their portfolio against their peers and identify areas for improvement from a sustainability perspective, with the ultimate aim of adding value and optimizing performance. 

The assessments are guided by what investors and the industry consider to be material issues in the sustainability performance of real asset investments and are aligned with international reporting frameworks such as the Global Reporting Initiative (GRI) [3] and Principles of Responsible Investment (PRI) [4].

In 2018 GRESB assessed 903 real estate funds and property companies, 75 infrastructure funds, 280 infrastructure assets and 25 debt portfolios. [1] This is up from a total of 850 entities in 2018.

Key timelines

On 1st April the portal to Real Estate Participants along with the new updated questionnaire opened. 

Screenshot 2019-04-27 at 18.13.35.png

Key updates

The main focus of the 2019 assessment development process seems to have been around enhancements to asset-level reporting functionality and the integration of selected Health & Well-being Module elements. Below is a summary of the key changes from the 2018 response requirements.

 

  • Continuous, all year use of the GRESB Asset Portal and API, with year round availability of the Asset Portal and API, assets can be added and edited throughout the year. Added data can then be used during the reporting period for aggregation to portfolio level indicators.[2].

  • Update checks have been made in the asset portal and improved guidance for asset level reporting have also been made. The updates to data integrity rules and live validation are designed to simplify reporting and improve data quality.

  • The access to the Template Tool is no longer restricted to members. The Template Tool enables participants to copy information across multiple submissions, reducing the amount of time spent replicating information across entities held by the same fund manager.[2].

  • The Validation Interview process has changed structure and will be mainly based on a desktop review. Note that the telephone call will still take place.[2].

  • The most exciting addition this year is the fact that a selection of Health & Well-being indicators have been incorporated into the Real Estate Assessment. With the release of the 2018 results and after a successful 3-year cycle, the Health & Well-being Module has served its purpose as an exploratory vehicle and incubator for new indicators and now a selection of health & well-being indicators have been incorporated into the GRESB Real Estate Assessment, effectively making these indicators a reporting requirement for all GRESB participants. The newly introduced Health & Well-being indicators are grouped as a separate section in the Stakeholder Engagement aspect [2].

How we can support

Members of our team have a wealth of experience managing the whole GRESB process from beginning to end and have submitted numerous responses. Currently the team are managing commercial property submissions for over 25 billion Euros Assets Under Management (AUM).

Our service offers:

1. To fully manage the GRESB process on your behalf: data collection & verification, analysis and submission.

2. Engagement with relevant stakeholders including tenants and property management to ensure all information is collected and to allow for submission benefits from stakeholder engagement.

3. Development of an action plan to optimise your GRESB score and increase investor satisfaction.

Please contact Rupert Clark Lowes or Harriet Assem if you would like to discuss GRESB support work any further. 

[1] https://gresb.com/about/

[2] https://documents.gresb.com/generated_files/real_estate/2019/real_estate/reference_guide/complete.html

[3] https://www.globalreporting.org/Pages/default.aspx

 [4] https://www.unpri.org/

Mandatory TCFD based reporting launching in 2020 for PRI Signatories

The Task Force on Climate-related Financial Disclosure (TCFD) sets out to ensure that companies transparently and consistently disclose their climate related risks. It enables and enforces companies to release material to investors and stakeholders so they have the necessary information to make informed decisions surrounding financial investment (TCFD, 2019 [1]). Furthermore, it allows businesses to identify any material risks they may be exposed themselves against the impending climate change risks.

In 2018 the PRI adopted the TCFD indicators into the reporting framework. To date, reporting has only been voluntary, however from 2020 onwards it will be a mandatory requirement for all PRI signatories (TCFD, 2019 [2]).

480 investors have already disclosed via the voluntary alignment under PRI, which demonstrates a forward thinking and a transparent approach from a substantial number of businesses and highlights the increasing awareness  of tackling these climate issues (PRI, 2019 [2]).

How will it affect your organisation?

Organisations who are signatories to PRI and are wanting to stay ahead should begin reporting their TCFD information now on a voluntary basis. Beginning this process early sets businesses up to be ready to report when mandatory requirements come into play next year. Those companies which are already signatories should review their responses to the TCFD questions, and be prepared for further questions which were not answered in previous years.

What indicators are becoming mandatory by PRI for TCFD?

PRI will make climate indicators within SG 01, SG 07 CC and SG 13CC (PRI, 2018, [3]) mandatory from 2020. They must be reported on, but will remain voluntary to disclose. Signatories can therefore either select their responses to be private or public, depending on preference. (PRI, 2019, [2])

How the TCFD framework works.

There are 4 disclosures required by the TCFD framework.

Governance

Disclose how the organisation oversee and assesses climate change risks and opportunities.

Strategy

Disclose how climate change may risk business strategies and financial planning, and consider how they can overcome these to future proof their business.

Risk Management

Describe how they identify and manage climate related risks and how they integrate climate risks into business risk management.

Metrics and targets

Disclose what metrics are used and what targets are in place to manage risks and opportunities.

Our services

Orbis Advisory and ITPEnergised have experience carrying out UN PRI submissions and can provide expertise to align your organisation with the TCFD framework in the run up for mandatory TCFD reporting within the framework as well as help with your UN PRI benchmarking process [4].

Other benchmark reporting platforms such as CDP and GRESB are also aligning the required responses with TCFD. We also have experience of supporting Clients with their CDP and GRESB submissions and can provide expertise to align your organisation [4].

Please contact Rupert Clark Lowes or Harriet Assem if you would like to discuss TCFD or UN PRI, CDP or GRESB.

References:

[1] https://www.fsb-tcfd.org/about/

[2] https://www.unpri.org/news-and-press/tcfd-based-reporting-to-become-mandatory-for-pri-signatories-in-2020/4116.article

[3]https://www.unpri.org/Uploads/z/r/r/14.sgclimatechangereporting_718999.pdf

[4] https://www.orbisadvisory.com/news

CLICK HERE TO DOWNLOAD THE BRIEFING PDF

Are you CDP ready?

The 2019 CDP questionnaires are soon to be released which means it’s time to start preparing for your company’s submission. As investor pressure and interest in ESG is becoming ever more prominent the benefits of having a good CDP score are becoming a necessity to stay ahead of the curve.

CDP, formerly the Carbon Disclosure Project, enables companies, cities, states and regions to disclose data about their environmental impacts, allowing them to manage and measure their effects whilst delivering transparency to stakeholders and customers.

Through CDP, investors request companies to submit data around climate change and carbon emissions, water security, and deforestation, providing opportunity to identify risk, demonstrate improvement and enable stakeholders to align profitability through sustainability.

Why comply?

Although companies are not legally obligated to submit under CDP, more and more companies each year are submitting their data. In 2018, 7,000 companies submitted, now representing 50% of the global market capitalisation (CDP, 2019 [1]) .Companies are under increasing pressure to demonstrate how they benchmark against their peers to secure continued investment, and achieving an A class score is becoming ever more competitive. CDP enables companies to respond to regulatory and policy changes, whilst delivering long term sustainability and profitability. It has been proven that businesses on the A list are significantly outperforming competitors in terms of growth and profit.

How it works

CDP collects data across four questionnaires; Climate change, Water, Forests and Supply Chain. Climate change, water and forests allows companies to disclose relevant data to investors, whilst Supply Chain provides disclosure to customers.

Climate Change

Companies have the ability to drive change quickly, through innovation and finding new ways to reduce the impact of climate change. The climate change questionnaire has contributed to companies identifying $53bn of savings (CDP, 2019 [2]) through transparency of carbon risks and reducing carbon contribution.

This is the largest questionnaire in terms of submissions and requires detailed information on climate-related risks and opportunities, greenhouse gas emissions, mitigation and adaptation activities, energy use, stakeholder engagement, targets and TCFD [3] indicators.

Water

Water management is increasingly becoming an area of scrutiny for corporate boards, making it a key area of focus for companies. CDP has seen an 80% increase in the number of companies demonstrating  action in their supply chain to manage and mitigate risks related to water and now over 4,900 companies complete this survey (CDP, 2019 [4]).

This questionnaire collects details of water strategy, future and existing water risk and water use, including water reduction targets.

Forests

75% of companies acknowledge that deforestation is a risk to their company in terms of affecting supply chain operations and revenue (CDP, 2019 [5]). Information is collected relating to the major commodities contributing to deforestation including, timber, palm oil, cattle and soy as well as deforestation activities.

Supply Chain

Over the course of one year, 3.5M metric tonnes of carbon emissions were cut by program members and their suppliers (CDP, 2019[6]). Now, more than 11,500 suppliers fill out this survey (CDP, 2019 [7]).

Customers that are part of supply chains can use this questionnaire to identify and deal with risks related to climate change, water security and deforestation.

Changes to 2019 process

In 2019 there are no major changes from 2018 to the survey’s which provides respondents the opportunity to build on what they submitted last year to consolidate data and improve results. As with 2018, there is a significant focus on TCFD [8] [9] and the reporting of financial information.

Key elements to be aware of:

  • There is one new question in the Water questionnaire around water-related risks in mainstream financial reporting.

  • Similarly, this new question has also been applied to the Forests questionnaire.

  • The Forest questionnaire now contains Coal, Metals & Mining sectors. These have been introduced as a pilot to add in more disclosures, therefore questions will be unscored in 2019.

  • The Financial Services sector has been postponed until 2020. This will include banking, insurance, asset owners and asset management.

Timeline of dates and deadlines:

  • March: Final version of reporting guidance and scoring methodologies published by CDP

  • April: official disclosure requests sent to companies. Online response system (ORS) opens.

  • July: 31st July is the deadline for all companies to submit their response using the ORS to be automatically eligible for scoring and inclusion in reports.

  • November: Scores and public responses released.

How we can help

Our team have over 50 years of corporate experience, technical expertise, a strong commercial understanding and a passion for helping businesses and their assets achieve increased environmental, social and economic performance.

We have experience delivering a number of energy and sustainability services which allows us to offer a service in line with top global consulting firms, but with a more flexible and tailored delivery approach.

Specific to CDP we can deliver:-

  • Analysis of current score and opportunity for improvement

  • Drafting and aligning responses to the scoring criteria

  • Risks and opportunities enhancement and workshops

  • Scope 1, 2 and 3 emissions reporting

  • Aligning your response to the requirements of the TCFD [10] questions

  • Setting targets and Science Based Targets

[1]https://www.cdp.net/en/scores

[2] https://www.cdp.net/en/companies-discloser

[3] http://www.itpenergised.com/why-tcfd-matters/

[4]  https://www.cdp.net/en/companies-discloser

[5] https://www.cdp.net/en/forests

[6] https://www.cdp.net/pt/companies-discloser

[7] https://www.cdp.net/en/supply-chain

[8] The Financial Standards Board (FSB) Taskforce on Climate-Related Financial Disclosure (TCFD) recommendations provide a common international framework for companies and investors to mainstream information about climate change into business and investment practice.

[9] http://www.itpenergised.com/why-tcfd-matters/

[10] http://www.itpenergised.com/why-tcfd-matters/

CLICK HERE TO DOWNLOAD THE BRIEFING PDF

Please get in touch with Harriet Assem – ITPEnergised or Rupert Clark Lowes – Orbis Advisory, if you would like to discuss CDP.

WHY TCFD MATTERS…

Introduction

With the release of the Task Force on Climate-related Financial Disclosures (TCFD), recommendations for voluntary consistent climate rated financial disclosures in June 2017, the topic of “TCFD” is fast gaining momentum and moving up the corporate agenda. Businesses are starting to realise the needs (risks) and benefits (opportunities) from identifying the climate change risks their organisations may be exposed to both now and in the future. In addition, the financial metric based approach of the framework enables for greater transparency and aligns its approach with how interested stakeholders are starting to want to gather this kind of data. 

“Increasing transparency makes markets more efficient, and economies more stable and resilient.” —

Michael R. Bloomberg.

Will your Organisation be Impacted?

Whilst not yet legally required the short answer is YES if you want to stay ahead of the curve and build in business resilience which will future proof you from the risks of climate change.

The framework is sector wide covering both financial and non-financial sectors, however, companies with listed debt or equity, plus asset managers and asset owners are strongly encouraged to adopt the recommendations. This is to encourage more informed investing and lending for debt and equity providers and responsible and sustainable insurance underwriting for insurers, enabling interested stakeholders to consider the risks and opportunities and make better informed decisions. Also it provides the information and tools for asset managers and asset owners to undertake effective and future proofed management of their assets.

The TCFD has also provided additional guidance for 8 identified sectors which may be most affected by climate change. These include;

  • Energy Group;

  • Transportation Group;

  • Material and Buildings Group;

  • Agriculture, Food and Forest Products Group;

  • Banks;

  • Insurance companies;

  • Asset owners; and

  • Asset managers.

A link to the additional guidance documents can be found here

The Benefits

The TCFD taskforce has identified a number of key benefits of implementing the framework, which include:

  • “Easier or better access to capital by increasing investors’ and lenders’ confidence that the company’s climate-related risks are appropriately assessed and managed; 

  • More effectively meeting existing disclosure requirements to report material information in financial filings; 

  • Increased awareness and understanding of climate-related risks and opportunities within the company resulting in better risk management and more informed strategic planning; and 

  • Proactively addressing investors’ demand for climate-related information in a framework that investors are increasingly asking for, which could ultimately reduce the number of climate-related information requests received”. TCFD, October 2018, Overview of Recommendations and Status Report.

How it Works

The TCFD framework requires four specific disclosures to be made in financial filings or other reports.

The framework asks for disclosures on the following four core areas;

  • Governance – companies are asked to describe management and the boards’ role in how they oversee and assess the climate change risks and opportunities;

  • Strategy – companies are asked to describe any identified risk and opportunities the business has and their associated impact on the business strategy and financial planning. They are also asked to look to the future and provide comment on the resilience of their strategies taking into account different climate related scenarios e.g. a 2°C or lower scenario. The task force encourages forward-looking information through Scenario Analysis, as it is a useful tool for considering and enhancing resiliency and flexibility of strategic plans (TCFD, March 2018, TCFD Overview of Recommendations and Guidance). 

  • Risk Management – the company is asked to describe how they identify, manage and assess climate related risks and how this process has been integrated into the businesses risk management programme.

  • Metrics and targets – the business is asked to disclose and discuss what metrics they have used and targets they have set to assess and manage any material risks and opportunities they have identified. They are also asked to disclose their Scope 1 and 2 greenhouse gas (GHG) emissions and risks, and if appropriate Scope 3 GHG emissions as well.

The Future….

With the climate change agenda receiving continued and increasing attention, both at government and public level and a move to a lower carbon economy, the risks from climate change are becoming more prevalent to organisations.

Whilst the TCFD framework is not yet compulsory there are number of indicators which imply it will soon be, such as the increasing number of supporters including governments (Belgium, France, Sweden and UK, according to the TCFD, September 2018, TCFD 2018 Status Report) and that existing sustainability benchmarks such as CDP and PRI are aligning their scoring with the TCFD framework.

One of the main issues with the framework will be around providing meaningful disclosure. This is likely to take time to obtain and will need a lot of internal buy in. Given the likely future and associated benefits it is recommend that organisations should be exploring now how they can comply and start embedding the recommendations into their current strategies.

Our Services

Below is a list of some of the services that ITPEnergised and Orbis Advisory can provide to help align your organisation with the TCFD framework recommendations:

  • Gap Analysis

  • Benchmarking

  • KPI setting

  • Stakeholder engagement

  • Greenhouse Gas (GHG) reporting

  • Materiality Assessments

  • Scenario Analysis using the 2° tool

  • Science Based Targets

  • PRI and CDP alignment

Please contact Harriet Assem or Rupert Clark Lowes if you would like to discuss TCFD.