GRESB adjusts 2020 path for benchmarking ESG performance

GRESB adjusts 2020 path to the stars

Canadian portfolios extend lead on U.S. peers with reweighting of score factors
Thursday, November 26, 2020

KingSett Capital earns accolades for achieving the top score among 28 prominent Canadian commercial real estate portfolios reporting to the 2020 GRESB global assessment of environmental, social and governance (ESG) performance. The real estate fund manager has additionally been recognized as the top performer for North and South America in the category of private diversified office/retail properties.

Despite the tumult of the COVID-19 pandemic, 1,229 real estate entities reported this year, representing a 22 per cent increase from 2019. Participating portfolios from every continent except Antarctica collectively hold 96,000 real estate assets valued at more than USD $4.8 trillion.

Five other Canadian participants also emerged as 2020 leaders, as results of the 11th annual benchmarking exercise were released earlier this week. QuadReal Property Group attained the highest score globally for diversified private portfolios. BentallGreenOak was tapped in two categories — as the manager of private industrial properties and the developer of office/residential projects in the Americas region.

GWL Realty Advisors and Brookfield Property REIT also led on the development front in North and South America, with GWLRA named as the top-performing private developer of office/residential projects and Brookfield getting the nod as a listed retail developer. Ivanhoé Cambridge was named a leader for private retail properties.

RioCan was also a standout performer in the GRESB public disclosure dataset for listed real estate companies, which is an additional reporting exercise tied to indicators for the disclosure of sustainability governance and implementation, operational performance data and stakeholder engagement practices. It earned the top Canadian score —97 — and placed in level A of the dataset’s five-level hierarchy.

“Canada is number one in GRESB in North America,” affirmed Dan Winters, GRESB head for the Americas, who sketched out this year’s big-picture results in an online presentation.

More than 50 per cent of participating Canadian portfolios were grouped in the top two brackets of results — indicating commitment, oversight, implementation and measurable outcomes related to seven different ESG aspects — with 11 earning 5-star status and six attaining a 4-star rating. Growing from an initial handful largely aligned with major pension funds, the field of reporting participants now encompasses a broader cross-section of private companies, investment and fund managers and REITs. In addition, Canadian institutional investors hold sway among GRESB’s investor members who subscribe to the data.

“Canada has some really strong leadership emanating from the very top, from their pension plans,” Winters noted. “We’re really an investor-led phenomenon, and it’s really institutional investors that are driving us along this journey. There’s tremendous pressure and push with the capital.”

Although the actual collective Canadian score was not revealed, a graphic plotting of national performances among this year’s 317 portfolios based in North and South America shows Canada well ahead of the United States, Mexico and Brazil. As a global region, those participants — collectively holding nearly 43,000 real estate assets valued at more than USD $2.1 trillion — posted the lowest the score this year, at 69.

However, parsed out of the Americas pack, Winters hinted the Canadian score is much closer to Australia/New Zealand’s leading tally of 77. While Canada has consistently outperformed the U.S. in previous assessments, he noted that it “extended” that lead this year.

Otherwise, global region scores are more closely bunched. The 187 Asian portfolios achieved an average score of 72 across 9,650 assets collectively valued at USD $1.15 trillion. In contrast, the European score is derived from a greater number of smaller portfolios. There, 610 GRESB respondents collectively holding 40,800 assets valued at USD $1.2 trillion nudged slightly ahead of the Americas, posting an average score of 69.5.

This year’s global average of 70 might appear to be a slip from the 2019 average of 72. However, it’s reflective of newly instigated reporting requirements and a readjustment of the weights attributed to the various components of the score to place more emphasis on asset-level performance measurements.

“We are working to transform and transition into a performance environment,” Winters said.

Looking back at GRESB’s 11-year trajectory, he suggested it has been a course somewhat in parallel with the rise of real-time reporting and data analytics. Many of the initial data collection challenges that reporting entities encountered have now eased considerably.

“It was a tricky business. No one had done that before. Maybe you could get ‘spend’, but getting consumption data and being able to manipulate it and report it outwards was very, very difficult,” Winters recalled. “As we look forward, we would like to achieve performance insights and move to what we call benchmarking 2.0, where we can define and score true performance and do it with global and local targets.”

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