Canadian GRESB results lead the larger pack

Sustainability benchmark gaining influence in real estate investment decisions
Thursday, September 17, 2015
By Barbara Carss

Despite standout performance, Canadian achievement is somewhat obscured in the bigger picture of the 2015 Global Real Estate Sustainability Benchmark (GRESB) survey. Numerically, 11 Canadian organizations represent just 1.5 per cent of this year’s 707 participants, but they account for nearly 4.2 per cent of the value of the GRESB database, equating to 420 million square feet of space valued at U.S. $96 billion (CAD $126.7 billion).

That’s in keeping with North America’s disproportionate share of the total U.S. $2.3-trillion value of surveyed portfolios, but positioned well ahead of the larger pack. GRESB’s chief operating officer, Chris Pyke, affirms that Canadian results are more in line with those from the top-ranked Australia/New Zealand region, which registered an average score of 69, than with the 144 U.S. participants.

“If you take Canada out of North America, Canada does better,” he told a Toronto gathering earlier this week, hosted by the Real Property Association of Canada (REALpac).

Notably, Canadian organizations boasted a collective average score of 67 compared to the global average of 56 and North American average of 54, and likewise surpassed the global and North American averages in seven measured performance categories. Looking behind the numbers, that means policies and programs that lead to verifiable outcomes of energy and water efficiency, emissions and waste reduction, health and well-being.

The annual survey serves a twofold purpose as a support to investment decision-making and an agent of change. GRESB’s adherents endorse it as a consistent, straightforward means of gauging environmental, social and governance (ESG) compliance, while a sharp incline in participation — from 198 organizations in 2010 to 707 this year —  suggests major real estate players are increasingly adopting that view.

“We don’t score the building; we’re scoring the things that institutional investors invest in,” Pyke reiterated. “We are trafficking in what we believe to be material non-financial information.”

In turn, forging and augmenting what he terms “a systematic global platform to score and benchmark properties” compiles the data to help draw more conclusive connections between sustainability and asset value and income returns. It also begins to codify sustainability expectations.

“When the institutional investors ask for ESG information, those investors start a cascade of effects that actually inspire change,” Pyke asserted.

An environmental checklist that also spurs competition

In an associated panel discussion examining the Canadian GRESB results, prominent real estate executives commended the survey’s value as an easily understood benchmark for external analysts and an internal checklist for their own environmental management systems and engagement strategies.

“You get very rich, meaningful helpful data back,” said Andrew McAllan, senior vice president and managing director of real estate management with Oxford Properties, which was this year’s sector leader in North America among diversified office/retail properties.

This is the second consecutive year Oxford Properties has attained sector leader status, and McAllan reports that the title did resonate with clients, lenders and co-investors last year — recalling, for example, one meeting with J.P. Morgan representatives to discuss a proposed deal.

“The first thing they said was: Congratulations on your first place GRESB ranking,” he recounted. “And then they wanted to know how we did it so they could advise others on our strategy.”

In general, benchmarking exercises — including REALpac’s energy and water benchmarking programs — are seen to appeal to industry players’ inherent competitiveness, pushing them to better their own results while aiming to catch and overtake the identified front-runners.

“Part of that is human nature. Nobody likes to lose,” reflected Paul Zemla, chief investment officer with Bentall Kennedy LP, the 2015 North American sector leader for diversified properties.

Steadily improving GRESB results support that theory, as the global average score jumped from 47 in 2014 to 56 this year, even as 70 more organizations augmented the database. The number of participants achieving the highest Green Star ranking perhaps even more impressively rose from 36 per cent in 2014 to 56 per cent in 2015.

“The denominator is getting bigger and the scores are going up,” Zemla observed. “It’s working, and it’s working on implementation, not just policy and management.”

“We’re all chasing Australia, but we’re all moving up in the same direction,” Pyke concurred.

Barbara Carss is editor-in-chief of Canadian Property Management.

Photo courtesy of REALpac.

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