November 30, 2017

The global real estate industry continues to make significant advances in its sustainability performance, according to GRESB’s latest survey results.

The 2017 GRESB Real Estate Assessment – which featured 850 real estate entities across 62 countries – gauged the environmental, social and governance (ESG) performance of participating organisations. The sector’s average score this year rose to 63, up three points on the 2016 results, with participants reducing their “like-for-like” energy consumption by 1.1 percent, carbon emissions by 2.2 percent, and water consumption by 0.5 percent.

The Urban Land Institute’s latest Greenprint report echoes the GRESB result; the report notes that property owners have been motivated to improve environmental performance by various market drivers, including the surge in investor mandates focused on sustainable and responsible investing, demand from major tenants, and the range of global energy efficiency regulations that now exist for commercial buildings.

Growing commitment

Simone Concha, Sustainability Director for JLL in Australia believes that this year’s rising GRESB scores demonstrate the property industry’s commitment to improving their resource efficiency, explaining that sustainability is a way for “property organisations to differentiate their capabilities, compete and attract investors.”

Head of Energy and Sustainability at JLL, Matthew Clifford, agrees. “The survey findings show that sustainability can deliver great business results, as evidenced by responsible investment funds’ outperformance in all medium- to long-term time periods,” he says. “Property investors are dialled in to the best ways to generate strong returns, and sustainability is clearly one of those strategies, with 94 percent of GRESB investor members using the results data in their investment process.”

Since the inaugural assessment in 2009, participation in GRESB and the performance of its members has continued to increase. This trend is an important signal that the property industry is embracing greater transparency.

Clifford believes that investors are welcoming this enhanced transparency of the ESG performance of their real estate portfolios – allowing them to better see where their money is going, and to what use it is being put.

In the vanguard

Publicly-traded firms (with an average score of 66) once again performed better than private entities (average score 62) in the GRESB survey results.

Although the performance gap has narrowed, the listed sector tends to score better as firms have to answer to shareholders, and compete with other organisations that are expected to show good corporate citizenship, notes Concha.

Attracting investment is a strong driver for publicly-listed firms, and sustainable portfolios are proving increasingly attractive to investors.

“The combination of shareholder interest, regulation, listing rules and so on mean public entities have transparency and disclosure as part of their DNA,” explains Clifford. “By contrast, while there are some excellent examples of private entities – many of them large, global businesses – that are propelling the sustainability agenda, they have not always had the same drivers to disclose.”

At a sectoral level, offices also demonstrated better sustainability performance than other property sectors.

Tools such as NABERS, which are mandatory in office sale/lease scenarios in Australia, have driven greater disclosure and performance improvements compared to other asset classes.

However, Clifford says that, beyond office portfolios, JLL is seeing a big upswing in sustainability across the retail sector, and in mixed use facilities. Over time, therefore, the gap between offices and other asset classes may even out.

As this year’s GRESB and ULI Greenprint scores illustrate, the real estate industry continues to make strides in its sustainability performance. As ever, more can be done. But there are powerful investor and performance reasons for industry participants to take those next steps.

“Future-fit businesses have clear sustainability plans,” observes Concha. “They measure, monitor and report on progress. And they know how important this is to their ability to thrive.”


Matthew Clifford

JLL’s Asia Pacific Energy & Sustainability Services

Never miss an update from The Investor.

Subscribe Now!