With the rise of investor interest in Environmental, Social and Governance (ESG), companies are beginning to focus more attention on their ESG performance and reporting. But with all the various frameworks and lack of standardization for ESG reporting, it can be overwhelming to know where to begin and which framework may be the right fit for your organization.
Despite the numerous options available, each reporting framework requires very similar data. Before choosing the framework, it’s important to know: what is material to your organization?
The Various Frameworks
Selecting an ESG framework will depend on your reporting purpose, goals, and property type. The following are some of the most commonly used and most recognized frameworks.
The Global Reporting Initiative (GRI)
GRI is an independent international body that helps companies and governments understand and report on their sustainability metrics. The GRI Standards are modular and organized into three series of standards that can be used together, including Universal, Sector, and Topic Standards. Companies can download these standards from the GRI site for free, then use them for self-reporting.
Global Real Estate Sustainability Benchmark (GRESB)
GRESB is a global ESG benchmark used by investors, developers, and property managers to measure sustainability performance of a company’s assets and provide comparative analysis against industry peers. The insights are aligned with other international reporting frameworks such as Global Reporting initiative (GRI). GRESB is good for organizations with multifamily properties because it covers all the major environmental metrics such as renewable energy on-site, energy and water usage, and efficiency measures.
The Sustainability Accounting Standards Board (SASB)
The oldest of the ESG frameworks, SASB Standards, were established in 2011 and were developed to help firms communicate their sustainability information to investors. SASB tracks ESG issues for each of the 77 industries that it covers, and provides another useful framework for companies with multifamily properties.
Carbon Disclosure Project (CDP)
Currently, one of the most popular frameworks is the CDP, which suits many property types including multifamily and industrial.
Principles for Responsible investments (UN PRI)
Supported by the United Nations but acting independently, PRI was developed by investors to help them understand ESG factors in their investments. European companies and financial institutions favor PRI’s reporting framework since it is used to incorporate ESG issues into investment analysis and the decision-making processes. The framework can be used for industrial and multifamily properties, and focuses more on reputational risk.
Goal Setting and Data Collection
Now that you have an idea of the frameworks and chosen the one that fits your organization, the next and most challenging step is asset level data collection. No matter which standard choose, you will need to collect data on each of your properties in order to understand how they are performing against the framework’s metrics. This is the challenging but critical because you need to understand how each property is being operated.
Once you have the data in hand, it is easier to set appropriate ESG goals. From making properties more energy efficient to achieving net zero for your entire portfolio, the data will help you understand what improvements will be necessary and determine which goals are most feasible.
Standardization of ESG Reporting
Currently, there is no overall standardization across these ESG reporting frameworks. However, there is no need to worry whether your company has chosen the “correct” framework in terms of future-proofing your report, because an ESG framework just informs how you report on ESG, and most contain the same core metrics, especially surrounding energy efficiency and clean energy. The environmental goals for all these frameworks are generally the same: to lower greenhouse gas emissions, improve sustainability, and provide better transparency into the property.
Finding the Right Approach to Tackling ESG+R Goals
Once you have committed to a set of standards and collected the data on your properties, you should have captured the metrics that are imperative to your organization. The data will inform where to make improvements at each property, whether it’s implementing certain energy efficiency measures, improving your bike and walk scores, adding EV charging stations, etc. At the early stage, it’s worthwhile to implement that are cost effective, relatively easy to implement, and will have an immediate impact on your ESG score.
For those who have long-term ESG goals with an eye on ROI, keep in mind that energy reduction for the long term may require capital-intensive items and calculating payback periods for new equipment. Here, start with a of your portfolio, i.e., a systematic analysis of your GHG emissions sources that will help you understand the overall carbon footprint. GHG emissions reports can also be used to benchmark properties and show emissions reduction year-over-year, and serve as a good comparative tool between properties or portfolios.
Lastly, if your ESG goal is more ambitious, such as overall decarbonization to reach net zero in 30 years, there are multiple pathways to reach this milestone. Read more about these pathways here.
Whether your organization is just beginning to think about ESG or already committed to ambitious targets, a sustainability expert can help. Consider engaging a qualified ESG consultant with a commercial real estate focus to support your goals, from choosing the ESG framework that works for you, to data collection, to improving ESG performance for your entire portfolio.
For more strategies to improve ESG performance, view this free webinar hosted by Partner Energy.