This blog post has been updated on 16 February 2023.
A recent update to the GRESB website has amended the timeline for scoring intensities, although it still shows clear support for recognizing performance: "Moving towards a better recognition of performance is one of the top priorities for GRESB over the next couple of years."
Scoring intensities would mean a big change, one that needs the appropriate time and involvement of the industry to undertake correctly. GRESB is not confining itself to a precise timeline at the moment, and rightly so: "This transition to real performance assessment will begin with the start of scoring intensities in the future."
But beyond benchmarking and reporting, looking at intensities remains critical to assessing one's portfolio to inform investment decisions.
A new year comes with new beginnings, one of which is annual reporting like GRESB. Although the GRESB Portal doesn’t open until April 1st, managers and consultants across the globe are starting to think about GRESB and the savvy ones are already beginning to collect their 2022 data.
From year to year, GRESB usually only makes incremental changes to the Assessments. They might tweak some answer options or add new questions they are testing out but won’t score. This year, changes will be found around net zero, physical climate risk and transition risk, and diversity, equity and inclusion, designed to reflect the increasing importance of these issues. A detailed list of the changes can be found here, and indeed, a quick look will show that most of changes won’t be scored or otherwise have an impact on scoring. You can also already find the 2023 Real Estate Reference Guide here— it's a key resource for GRESB reporting.
Managers should be focusing on how to improve and streamline their data collection processes for GRESB and other reporting requirements. And while everyone would like to see an improvement on their score year on year, at this point, this can only be achieved by reporting correctly and reflecting actual improvement in 2022. That is to say, there aren't any actions that can be taken now to improve last year's performance. So while managers are putting resources toward collecting data and reporting correctly, it is also a key moment to invest resources in improving performance in 2023 in order to prepare for reporting next year.
There is a particular urgency to improve performance this year. Attention is being focused on ESG like never before; mandatory and voluntary reporting frameworks are being developed and adopted around the globe; and our global and sector carbon budgets are lower due to emissions overshoot the past couple of years. And, starting in 2024, we can expect bigger changes to the GRESB Real Estate Assessment: with the development of their 5-year roadmap, GRESB has laid the groundwork to shift the Assessment to be more performance-based. In their own words, one of the top priorities over the next couple of years is,
Moving towards a better recognition of performance… This transition to real performance assessment will begin with the start of scoring intensities as of 2024.
You can find this information and answers to other important questions here.
Currently, the Energy Aspect accounts for 14% of the score, comprised of Indicators for energy data coverage, like-for-like change, and renewable energy. We don’t have more detail yet on how intensities will be scored, but somewhere within the formula, energy intensity could count toward point accumulation. Energy use intensity is calculate by dividing the total energy consumed by the total gross floor area and is often normalized by factors like occupancy rate. It gets at the heart of building performance more accurately than just data coverage, like-for-like change and renewable energy do.
So what does this mean? Well, it probably means that we can expect a drop in scores as scoring becomes more rigorous with these new metrics. The GRESB Assessment and scoring model hasn’t seen this much change since 2020, when average scores saw a decrease (for the first and only time). It was also marked by much displeasure throughout the industry, which relies upon GRESB Scores for a number of things, including communicating ESG performance to investors, and generally expects to see scores increase year over year to reflect their improved ESG strategies.
While we don’t know the precise nature of the changes for 2024, knowing that intensities will be scored does allow us to factor them into strategy this year. In the Scaler platform, we provide clients with a GRESB dashboard that fully aligns with the Asset level Spreadsheet to streamline reporting and make the Performance Component much easier to complete. We estimate points received for asset-level indicators according to the GRESB Scoring model, so that clients have an idea of how they will score long before they submit.
In addition, we provide clients with a more rigorous Scaler Score which already takes intensities into account. Each asset is scored, giving precise insight into which are underperforming and how each contributes to the GRESB Score and our Scaler Score. In this way, we empower managers to focus their resources effectively and actually improve ESG performance, and as a byproduct their GRESB Score too.
We’re excited to welcome GRESB's transition to a more performance-based Assessment. So while you are looking back at 2022 data, remember that now is the time to also look forward and prepare for changes in 2024 scoring. Hopefully we’ll be looking at the next shift in ESG reporting that not only recognizes the importance of management and policies, but also emphasizes the importance of translating this into improvement measures that have an impact.
Get in touch below to learn more about our GRESB tool, how Scaler can help with data collection and reporting and how to improve performance and prepare for the future!