The levels of ESG disclosures among real estate funds, companies and developers in Asia advanced rapidly in 2018, indicating that the market is responding to the increased amount of attention being placed on sustainability by institutional investors, according to the recently-released Global Real Estate Sustainability Benchmark (GRESB).
The global average GRESB Score increased again, reaching 68 (out of 100), with listed entities retaining their lead over the private sector. In addition to Asia, increases were seen across Europe, North America and Australia/NZ.
Entities in Japan and Hong Kong in particular are responding to the growing regulatory and market demands for increased ESG transparency, with a marked uptick in public ESG disclosure levels compared to 2017. The GRESB 2018 benchmark for 137 Asian real estate funds, companies and developers, on 75 institutional investors, saw an increase in score to 66, up from 63 in 2017.
Overall, a record 903 real estate companies, funds and developers reported to GRESB covering more than 79,000 assets across 64 countries. This year’s benchmark saw increased asset-level reporting on ESG data by more real estate companies and funds than ever before. Close to 50,000 assets were reported at the asset level, more than doubling the 2017 number.
Investors are seeking standardized and validated ESG data to “assess the sustainability of their real estate assets,” says Sander Paul van Tongeren, co-founder and managing director at GRESB. “This investor interest, backed up with accurate performance benchmarking, is empowering the spread of sustainable best practices across the world.”
The sector achieved a 4.9% reduction in greenhouse gas emissions year-on-year, accounting for Scope 1, Scope 2, and Scope 3 emissions (associated with tenant operations). In addition, 2018 saw a 2.5% average reduction in energy consumption and a 0.5% decrease in water consumption globally.
Increased Need for Transparency
As institutional investors increasingly recognize the need to assess exposures to the risks presented by climate change, they are placing a higher priority on continued integration of ESG practices and measures. Increasing transparency “makes markets more efficient, and economies more stable…,” says Michael R. Bloomberg, chair of the Task Force on Climate-Related Financial Disclosures (TCFD).
For example, a focus on transparency across business functions like asset management, due diligence and acquisitions has helped “make our portfolio more environmentally-friendly and resilient,” says Eric Duchon, global head of sustainability at LaSalle Investment Management. LaSalle achieved high GRESB ratings in 2018, with each of its eligible real estate private equity submissions earning the Green Star designation.
LaSalle is one of the latest organizations to join TCFD’s Investors Pilot, a group which will focus on developing the analytical tools needed to assess risks and opportunities presented by climate change.
The Hines Pan-European Core Fund (HECF) is another that achieved high GRESB rankings and that considers risk assessment and reporting an integral part of its management strategy. “Responsible investment…allows us to both deliver value to our investors and support and service of the communities where we operate,” says Peter Epping, senior managing director and fund manager of HECF.
GRESB Global Leaders
GRESB published a list of Global Sector Leaders that recognizes the real estate companies and funds taking measurable steps to incorporate sustainability into their operations and communicate their performance to investors and other stakeholders. The list can be found here.