Author

Matt Ellis

Matt Ellis is the Founder and CEO of Measurabl and former Director of Sustainability Solutions for CBRE (NYSE: CBG), the world's largest commercial real estate services company. He is an Aspen Institute First Movers Fellow and a member of the City of San Diego’s Sustainable Energy Advisory Board.

Green Building

GRESB Merges with GBCI: What it Means for Survey Respondents

written by Matt Ellis

Just over five years into its existence GRESB, the benchmark for portfolio-level sustainability performance has merged with GBCI, the dominant building-level sustainability certification body.

The move makes clear winners of GRESB (the Global Real Estate Sustainability Benchmark) and GBCI (the Green Building Certification Institute): they now have almost total dominion over building- and commercial real estate company-level green certifications and rankings. Arguments for and against the merger have since cropped up. While healthy dialogue will help us get to stronger, more transparent and ultimately more valuable measures of non-financial performance, this post is not about taking sides.

Instead, it’s a look at the merger’s practical impacts on Survey Respondents. From this point of view, the merger is a decidedly good thing. Here’s why:

In order to win the trust of those who would disclose (Survey participants) and purchase its data (Investors), GRESB needed to bring more rigor to its auditing and assurance processes. At its core, this is what the merger is all about. GRESB and GBCI drive this point home in their joint press release: “GBCI’s established expertise providing rigorous third-party review, verification and training, will be extended to the GRESB Survey… Together, GBCI and GRESB will provide investors with reliable information to inform global real estate investment decisions [italics mine].”

But improved rigor doesn’t just build trust in GRESB’s scores and rankings, it’s also a prerequisite of any credible measure of non-financial performance for the global commercial real estate industry. And this is the (unicorn?) data point for which we’re all searching. As rigor increases, GRESB will be in a better position to sift through its haystack of asset- and entity-level information to tell us what truly matters, why and by how much.

This gets to the other benefit of the merger: deeper and higher quality data sets. GBCI’s market visibility and credibility should expand GRESB’s reach. As it ensnares more respondents and increases its Survey sample size, data depth and robustness should similarly improve, helping drive more accurate measures of financial performance. Consequently, investors who fret they’re buying reports filled with dubious data should be assuaged.

As investor confidence in the Benchmark grows, Survey participants can take comfort that a more stable and sophisticated GRESB will translate to more accurate scores and rankings. More accurate scores will carry greater currency with investors, which means the time and expense of sustainability reporting will be worth it. Ultimately, as incentives and market signals for sustainability performance become clearer, companies will devote more resources to taking action on sustainability as opposed to merely disclosing it which, of course, is the whole point. It’s also the moment at which Survey respondents get greatest benefit from participating in GRESB.

While these outcomes are by no means assured – much hard work remains in front of the newly wed organizations – some practical impacts are highly likely:

GBCI will bring enhanced rigor to GRESB’s methodology as well as its data collection and assurance processes.
Greater rigor will enhance the value of GRESB Survey results.
More robust scores and rankings mean investors will use them to scrutinize financial performance.
Greater investor scrutiny will raise the stakes and lead to fiercer competition.

In other words, the bar will get higher.

11/04/2014 0 comment

Green Building

After GRESB: Four Things to Consider After (and Just Before) You Submit

written by Matt Ellis

You’ve purged your inbox of property manager emails and compiled a mountain of data into one gleaming, “almost-final” 2014 GRESB response. Just one last meeting with the Powers That Be stands between you, the submit button, and a well deserved glass of [insert choice beverage here].

Here are a few things to keep in mind when you reviewing your GRESB response with management:

Use GRESB’s Response Check: GRESB offers a free, high-level Response Check before final submission. Take advantage of it! You can put your boss (and yourself) at ease knowing you get a free practice swing before the real moment.
Expect a different score: The significant overhaul of GRESB’s reporting system and methodology eroded some of the institutional knowledge veteran reporters had accrued because they had to rejig their processes and systems to accommodate new questions and data requirements. At the same time, the new score weightings will almost certainly lead to some shuffling around which quadrant reporters fall into. There will be winners and losers, so make sure to set management’s expectations accordingly.
Prepare for an audit: GRESB has drastically tightened its validation and assurance process to expose inaccuracies and improve the quality of its benchmark. Make sure to discuss a plan of attack with management for if and when GRESB comes knocking. If you need resources to bolster your ability to respond to an audit, make sure to ask for them now.
Plan for next year: It’s the last thing you want to do, which is why it’s the most important thing you can do: plan for next year while everything is still fresh in your mind. What systems can you put in place at the asset level to ensure better results and easier data collection? What organizational policies need a tune-up? While you won’t be filing a GRESB response for another nine months, the 2015 reporting period is coming up in only six. Once you toss out the holidays, you really only have five months to put in place the changes on which you’ll be reporting next year.

Ladies and gentlemen, welcome to the world of continuous reporting!

08/05/2014 0 comment

Green Building

Cliff Notes for GRESB: What’s New In Performance Indicators

written by Matt Ellis

A new and substantially different version of GRESB’s Performance Indicators aspect has landed. So toss out your old spreadsheet (it won’t help this year), pull out your copy of the GHG Protocol, and get ready to rethink your approach to this important aspect of GRESB!

First, why the change? The new Performance Indicators (PI) aspect has been overhauled in an attempt to make it clearer, better reflect the reporting realities of GRESB’s diverse respondents, and accommodate feedback from stakeholders. While the market absorbs the changes, we can try to get in front of them to understand what’s being asked of us and how best to respond. We’ll start with a quick scan of the new PI aspect. It reveals some familiar terms such as “Like-for-Like” and “Consumption”, as well as a lot of new ones like “Energy Intensity”, “Data Coverage”, “Base Building” and “Indirectly Managed Assets”. Here’s a look these new concepts and some thoughts on how to address them:

Data Coverage: This is the percentage of portfolio floor area on which you’re reporting. For example, if you know energy consumption for 100,000 square feet out of a 1,000,000 square foot office portfolio, your data coverage is 10%. Simple, right? Not so fast! To get this right, you’ll need to calculate data coverage for every asset by either (a) base building and tenant spaces OR (b) by whole building. If you elect to go the base building/tenant route, you’ll have to allocate individual meters according to who pays the bills for each. When you’re done, aggregate all asset level data for each property type in your portfolio…or just sync your data in Measurabl and let us handle it all for you!

Why Data Coverage Is Important: Data coverage is a HUGE driver of your overall score. Simply put, the more of your portfolio for which you state energy, carbon and water performance (waste is the sole exception to the data coverage phenomena), the better.

Optional Data Coverage: This is intended for reporters who state portfolio size in “units” or “lettable” (aka rentable) area. If you stick to reporting in good old fashioned square feet or meters, you can ignore columns E & F entirely. Phew!

Why Optional Data Coverage Is Important: Occasionally, the size of real estate holdings is reported using denominators other than square feet. For example, hospitality and residential property types are frequently described by the number of “units” in their portfolio. Using this option when square footage is not available may be convenient.

Intensity: Absolute consumption of energy or water is an all but useless abstraction. The only way to compare the consumption/output of one portfolio with another is to normalize it according to some common denominator. Normalizing helps us compare performance across different portfolios. So if Portfolio A uses 1.2 kWh and Portfolio B uses 2.5 kWh, respectively, per square foot per year, we’re in a position to say something more meaningful given the size of the overall portfolio. The good news about intensity calculations is you have flexibility about which normalizer (“denominator”) you use. We suggest a basic formula of: (Total Usage for One Year / Total Square Feet). You’ll notice this is the identical formula applied by ENERGY STAR Portfolio Manager to get Energy Use Intensity (EUI). In GRESB, you’ll need to calculate intensity for each property type (or let Measurabl do it for you!). One of the drawbacks of allowing so much discretion over intensity figures are calculated is that variances in calculation methodologies may result in diminished data comparability from one respondent to the next.

Why Intensity Is Important: Intensity figures give an “apples-to-apples” view of energy, carbon, water or waste consumption/output across buildings and portfolios of different sizes, geographic distribution and composition.

Indirectly Managed Assets: These are assets where (i) you own less than 50% of the building and/or (ii) a single large tenant controls the day-to-day operations. The first case is quite common – many buildings are owned as part of a joint venture or LLC. In these circumstances, the majority partner will typically manage day-to-day operations, establish environmental policies, and handle billing and contracting matters. So if you’re a minority partner, it’s unlikely you have data on which to report but, if you do, it would go under “indirectly managed assets”. If you own less than 25% of the asset, count your lucky stars – you don’t have to report on it at all!

The second circumstance – where a single large tenant “runs the show” – can also trigger an asset being reported as “indirectly managed”. This should be easy to spot. Just look for any building where the lease structure explicitly devolves responsibility for day-to-day operations, maintenance or enforcement of environmental policies to a single large tenant. Where that’s the case, report the asset as indirectly managed.

The concept of reporting on indirectly managed assets is a somewhat unusual requirement for a standard based on the principal of “Operational Control”. Operational Control means you report on the assets over which you exercise “day-to-day authority” – all 100% of the asset, not just the amount proportional to your economic interest (that’s a different reporting concept called “Financial Control”). For GRESB’s purposes, we recommend doing your best to report on indirectly managed assets, but rest assured GRESB understands this is a difficult group of assets on which to collect data.

Why Indirectly Managed Assets Are Important: This allows GRESB to distinguish between those assets where you have real ability to influence performance, and therefore should be held accountable for environmental outcomes, versus those where you do not.

We hope this sheds light on some of the trickier concepts in GRESB’s new 2014 Performance Indicators aspect. We’ll dig into how to properly allocate tenant meters and some of the other intricacies of GRESB in forthcoming blogs.

04/14/2014 1 comment