Canadian energy saving prowess

GRESB reveals Canadian energy saving prowess

Growing global database of real estate players demonstrate sustainability gains
Wednesday, September 14, 2016
By Barbara Carss

Canadian energy saving prowess is unrivalled in Global Real Estate Sustainability Benchmark (GRESB) results released last week. Canada’s participants — encompassing eight private funds, five pension plans, two privately owned companies and one REIT — collectively surpassed both the North American and global average scores across seven differently weighted management and operational categories, but perhaps even more significant year-over-year reductions in electricity consumption and carbon emissions get somewhat overshadowed in the survey’s larger picture.

The 16 Canadian organizations accounted for more than 337,000 megawatt-hours (MWh) or nearly 42 per cent of electricity savings tallied in North America from 2014 to 2015, while 162 GRESB participants in the United States delivered the remainder. Canada’s nearly 90,000-tonne cut in carbon dioxide (CO2) emissions also equates to more than 22 per cent of the North American total. Nevertheless, benchmark designers counsel against cockiness.

“It’s not sufficient to have performance alone,” Chris Pyke, GRESB’s chief operating officer, told a Toronto audience last Friday. “Investors are not looking to invest in your last project. They are looking to invest in your next project.”

GRESB, now in its seventh year, is a portfolio-level approach to plotting sustainable intent, practices and outcomes, aimed at helping investors see connections to asset value and returns. Participants self-report through a rigorous assessment process, including third-party validation requirements, and are subject to random checks and site visits.

The benchmark database has steadily grown from just three European pension funds in 2009 to this year’s slate of 759 entities in 63 countries that hold 66,000 individual assets with a gross value of USD $2.8 trillion. Canadian participation has more than tripled over the past four survey periods, with five new players added this year.

Transparency underpins change

“Six years ago when we started participating, we had great uncertainty whether we wanted to participate,” Andrew McAllan, senior vice president and managing director, real estate management, with Oxford Properties, recalled in opening remarks at the results release presentation. “Six years later, it’s an integral part of how we do business. The benefits we obtain in our participation in GRESB far outweigh the time it takes to participate.”

With the most recent results, Oxford ranks as a North American leader for diversified office/retail portfolios for a fourth consecutive year. Bentall Kennedy, Global and North American leader for diversified office/residential portfolios, and the Minto Group, a North American leader for private residential portfolios, are the other Canadian participants tagged as top performers within their property sectors.

GRESB’s consistent metric and heightened transparency of environmental, social and governance (ESG) information provides investors with a tool for gauging assets’ fit with their own corporate governance demands. It has also provided the data to back up intuitive and/or anecdotal conclusions about sustainability’s role in asset value — evidence that can then become green-perpetuating when investors and tenants use it as a basis for more demands.

“We believe the investor matters. They push down and create opportunities for change,” Pyke affirmed. “Without information, you cannot differentiate the leaders from the liars.”

Participants are scored on a 137-point scale allocated to seven different aspects of sustainability. These are further broadly characterized as Management & Policy, equating to 28 per cent of the total score, and Implementation & Measurement, making up the greater portion of available points.

Performance indicators — which include energy and water use intensity, carbon emissions and solid waste diversion — and stakeholder engagement carry the heaviest weighting, and together account for 50 per cent of the total score. The other five aspects range from 9 per cent to 12 per cent of the total score and cover: management commitment; policy and disclosure; risk and opportunity assessments; monitoring; and building certification. Final scores are expressed as a percentage of 100.

Climate change context

This year’s global average score is 60 — climbing from 54 last year. Australia/New Zealand is once again the top world region with an average score of 74 derived from 52 participants. The average score for Canadian participants rose slightly over last year’s result, from 65.5 to 65.7, and remained well ahead of the 2016 North American average of 59. Meanwhile, the average score was 56 for Europe and 54 for Asia.

“Our colleagues in Australia and New Zealand continue to kick our butts,” Pyke observed. “Canada is the only major country that is between the rest of the pack and Australia.”

Globally, GRESB participants recorded a 1.2 per cent reduction in energy use, a 2 per cent drop in carbon emissions and a nearly 2 per cent cut in water consumption compared to 2015 results. Two Canadian performance indicators were considerably above that global baseline, representing a 5.5 per cent energy saving and a 6 per cent reduction in carbon emissions, whereas water savings, at slightly more than 1 per cent, fell short of the global average.

Canadian participants also surpassed the global average score for stakeholder engagement. However, like the larger database, they have gained more ground with their own employees and tenants than with their suppliers and surrounding communities. “There’s where there is more opportunity,” Pyke advised.

Pyke placed this year’s progress in the context of other industry and world advancements since the 2015 results were unveiled, including: the Paris Agreement on climate change; major real estate associations’ buy-in through the Action Framework for sustainable investment; and recently gained status as a stand-alone GICS sector. GRESB participants are arguably already the vanguard.

“The rate of improvement is double the rate of background improvement in the economy at large,” he said.

Still, all economic players will have to up their game if the global temperature is really to be held to no more than a 2-degree Celsius increase.

“Buildings are part of the problem,” Pyke acknowledged. “But the way we build, maintain and operate these buildings is part of the solution. We have to live up to the challenge that our sector is facing.”

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

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