GRESB: SURVEY, SUBMISSION, SUCCESS!

How to prepare your assets and portfolios for success in the GRESB reporting cycle.

Updated January 2018

EVORA Resources | Vol. 1

INTRODUCTION

In its own words, GRESB (formerly the Global Real Estate Sustainability Benchmark) is “…an investor-driven organisation that is transforming the way we assess the environmental, social and governance (ESG) performance of real assets globally, including real estate portfolios and infrastructure assets.”

It’s fascinating and intriguing to see how GRESB, a private enterprise, has managed to mobilise and transform the real estate industry, through a complex and challenging voluntary sustainability benchmark survey.

From 198 participants in 2009 to 850 in 2017, with a gross asset value of $3.7tn, no one can doubt that GRESB dominates the ESG rating industry for commercial real estate, globally.

So, how has GRESB gained such popularity? At a portfolio level, there is little else out there that benchmarks ESG performance. There are plenty of asset ratings, such as LEED, BREEAM, HQE etc., but no consolidated fund level assessment. Although performance is clearly delivered at the asset level, gaining an understanding of overall fund performance, especially when you can benchmark against your peers, is useful. Who doesn’t like to know how they’re performing against their competitors?

Behind all the benchmarking and analysis is GRESB’s ambition to improve the reliability and availability of investment grade data on ESG metrics. Delivering

on this ambition will increase the prominence of incorporating non-financial data into the investment decision-making process, to allow a more holistic view of risks and opportunities that may preserve or enhance returns.

It is widely recognized that addressing sustainability, through identifying and acting on risks and opportunities, is a fiduciary duty of investment managers. Encouraging responsible investment, through benchmarks such as GRESB, should lead to societal, economic and environmental benefits for shareholders, investors and the wider community today and in the future.

In this guide, we intend to prepare you and your portfolio(s) for success in the 2018 GRESB survey, and beyond. In doing so we will help you to:

• Understand the core structure of the GRESB survey

• Identify how you can best implement practical and tailored solutions that will deliver results

• See how technology can help you to seamlessly, but not senselessly monitor, report and benchmark asset and fund performance

• Pre-warn you of key changes for the 2018 survey

I hope you find this guide to be valuable and informative. Should you have any questions, please don’t hesitate to contact me via my details below.

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CONTENTS

Introduction 3

Environmental Management Systems: Plan-Do-Check-Act...Deliver?

4

GRESB Data Automation: Ensuring seamless does not result in senseless

6

How can GRESB help to deliver fund performance?

8

Preparing for GRESB 2018: What, why, when and how?

10

EVORA: Your best choice for GRESB support

12

Discover our brands 13

Ed Gabbitas, Co-Founder & DirectorE: egabbitas@evoraglobal.com T: +44 (0)2033 267 333M: +44 (0)7757 529 106

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The results for our clients are conclusive: if you have an established EMS you are more likely to score better in GRESB than peers who do not have an EMS.

Chasing GRESB points will result in a satisfying Green Star. However, managing risk and enhancing asset value is a fundamental fiduciary duty of a fund manager. Therefore, we looked at quantitative evidence to identify whether the presence of an EMS was delivering results, as recorded through GRESB benchmark reports.

The findings were impressive.

• Average annual like-for-like energy reduction of 10%• Annual like-for-like energy reduction of

17,697MWh• Estimated annual energy saving of £1.3m• Carbon reduction of 9,040 tonnes

Identifying the value of GRESB on fund performance is a complex task with many different interpretations on ‘value’. However, the results we have seen demonstrate two things:

1. If you have an established EMS, you will perform better than the GRESB global average

2. An EMS can and is delivering very notable improvements (to the tune of £1.3m) for our clients

-35% -25% -15% -5% 5% 15% 25% 35%

PERFORMANCE AGAINST GRESB AVERAGE

Funds without an EMS Funds with an EMS

Management

Policy & Disclosure

Risks & Opportunities

Monitoring & EMS

Performance Indicators

Certifications & Energy Ratings

Stakeholder Engagement

Figure 1: Performance against GRESB average for funds with/without an EMS

ENVIRONMENTAL MANAGEMENT SYSTEMS: PLAN-DO-CHECK-ACT...DELIVER?

Both Nils Kok and Sander Paul van Tongeren, the two co-founders of GRESB, have stressed how the structure of a Management System is central to performing well in GRESB and, importantly, to implement practical and tailored sustainability solutions that deliver results.

This is a position that we at EVORA fully support and have seen deliver notable improvements for our clients through protecting and enhancing the performance of their real estate assets and funds.An Environmental Management System (EMS) is structured according to ISO’s Plan-Do-Check-Act methodology.

A defined approach is required to understand issues, such as risk and opportunity, that are relevant to your business and real estate portfolio (PLAN). Actions will need to be taken to mitigate risks and implement opportunities (DO). A robust and structured methodology is required to measure the impact of these actions and track progress against targets (CHECK).

Our proprietary software, SIERA, proved immensely beneficial in supporting the CHECK element of an EMS by reducing errors and improving efficiency in uploading Performance Indicator data through GRESB’s automated data uploader.

Finally, adaption and enhancement of your strategy should be considered based on the outcome of your programmes (ACT).

GRESB addresses several key areas of an EMS within its survey, such as management responsibilities,

communication, training, objectives and, importantly, the results they are delivering. Developing an EMS therefore seems an appropriate approach to score well in GRESB.

EVORA supported 55 GRESB submissions in 2017 alone: we pooled results from a broad range of clients and funds where we have supported the operation of an EMS over several years. We compared results for these clients against the GRESB average, and also against clients who had not implemented an EMS.

Impact of an EMS on GRESB Score

Overall, GRESB scores for EVORA clients with an established EMS1 were 14% higher than the GRESB average. Conversely, EVORA clients operating without an EMS scored 5% lower than the GRESB average. Better than average performance was achieved in each of the seven GRESB aspects for EVORA client funds operating with an EMS, whereas EVORA client funds without an EMS only scored better than average in two aspects.

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Overall, GRESB scores for EVORA clients with an established EMS were 14% higher than the GRESB average

1 EVORA considers an established EMS to be one that is fully aligned with or certified to ISO14001 and which has been oper-ating for at least two years.

by Ed Gabbitas, Co-Founder & Director

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For the last couple of years, a semi-automated approach has been made available, the GRESB Asset Spreadsheet, which provides an Excel template of 159 columns – yes, 159 columns – of required data by asset, which once completed, can be uploaded directly into the GRESB portal saving manual data input. Now this is obviously not for the faint hearted but it does give a good indication of the data collection and analysis requirements to meet the GRESB reporting requirements and achieve a good score. But let’s not write this method off just yet, we’ll come back to it later.

The third option is the latest development from GRESB to achieve seamless transition of data direct from data management software systems such as SIERA, directly into the GRESB portal using clever mapping tools, known as an API or Application Programme Interface. This sounds great, and of course, in many ways it is. But as with any system, dodgy data in means dodgy information out. So, the big risk is to make sure ‘Seamless’ does not equate to ‘Senseless’ through lack of visibility of data flowing directly into GRESB.

As soon as data automation gets involved, audit trail clarity can be lost and this is a potential risk.

Which brings me back to the second option of the 159 column Asset Spreadsheet. The beauty of this approach is that the spreadsheet model can be auto-generated in software platforms, an approach SIERA has taken, and swiftly interfaced into the GRESB portal through an uploader. This process takes less than a minute and populates the Performance Indicator questions for all sectors reported by

a portfolio. Although a hefty spreadsheet, it is clearly structured and provides a great audit trail and visual clarity of all the data before it heads off into the GRESB machine. And it certainly didn’t reduce EVORA’s efficiency in delivering GRESB for our clients, with SIERA processing more than 40 submissions in 2016.

We’re happy to implement the clever mapping tools into SIERA but, as both professional sustainability consultants and software providers, visibility and clear audit trails to ensure quality of data is our number one priority for our clients. We have even replicated the full GRESB Performance Indicator report at fund and sector level to provide additional visibility; SIERA being the only software platform to do this according to Luc van de Boom, Analyst at GRESB.

As soon as data automation gets involved, audit trail clarity can be lost and this is a potential risk

To find out how SIERA completely transforms your data capture and reporting, please contact our experts today and request a demo.

E: info@evoraglobal.com T: +44 (0)2033 267 333

GRESB DATA AUTOMATION: ENSURING SEAMLESS DOES NOT RESULT IN SENSELESS

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In 2016, GRESB Analyst Sacha van Tuijn, posted a blog highlighting the anger and frustration that completion of the GRESB Performance Indicators evokes. I don’t think many will argue with that!

The complexity in pulling together the varied data elements every which way can be enough to want to make you pull your hair out. But, there is no doubt that GRESB is mobilising many organisations to take action to collate and better understand their environmental data, which should lead to performance improvement. That can only be a good thing… despite the pain!

So, what is being done to save us all from pulling our hair out and keep our blood pressure at sensible levels?

Well, quite a lot. As Nils Kok, former CEO of GRESB says in his blog, ESG, Real Estate and the Six Stages of Grief, “One of the exciting developments is that GRESB is slowly moving from manual entry of information to seamless data flows between many different data management platforms and our Portal”.

Our proprietary software, SIERA, is one of those sustainability data platforms he refers to, so what’s our take on this?

The original – and still widely used – approach is where participants manually aggregate their consumption data and then enter it per sector, line-by-line, in the standard GRESB Portal. This is time consuming, requires a lot of manual calculations and is subject to human error.

by Chris Bennett, Co-Founder & Managing Director

“GRESB encourages real estate companies and funds to integrate data management solutions for data collection and reporting so that they can use the data to improve the performance of their assets and streamline their GRESB submissions.”

Luc van de Boom, GRESB

EVORA Case Study

THE CHALLENGE

Sustainability has been at the heart of Hines since the company was founded in 1957. The privately owned global real estate investment, development and management firm has an enviable track record in sustainability, however, prior to our engagement, no experience in GRESB.

EVORA successfully won a competitive pitch to lead Hines’ through their first ever GRESB submission for a pan-European portfolio covering six countries.EVORA was selected due to our profound knowledge of GRESB coupled with our market-leading track record on the application of value driven best practices within commercial real estate.

EVORA SUPPORTS HINES TO ACHIEVE

NUMBER ONE RATED GRESB FUND

OUR APPROACHOur first priority was to identify the fund’s potential GRESB score, one year in advance of their first submission. This was completed using our in-house gap analysis scorecard, from which we set out a clear strategy for achieving GRESB excellence.

A framework approach, aligned with the Environmental Management System standard ISO14001, was developed by EVORA to ensure a targeted, consistent and practical sustainability programme was implemented.

EVORA not only developed the GRESB roadmap but also delivered key parts of the strategy including:

• Energy efficiency audits • Green building certification • Data collation and reporting via SIERA • Management of data assurance process

KEY OUTCOMES

The Hines fund achieved a multitude of accolades including:

• GRESB Sector Leader • GRESB Five Star fund• Highest ranked non-listed European fund, scoring

93 out of 100• Highest ranked European fund in Health and

Wellbeing module, scoring 89 out of 100

“The team’s help was invaluable; they always made themselves available to respond to our questions.

They have a very clear understanding of the GRESB survey and what the meaning of the questions was while orientating us in responding to them. The EVORA team was able to work with the various key people in our local and central platform in order to extract the necessary information.

DANIEL CHANG, HINES

”

CLIENT: HinesSERVICE: GRESB Support 1st

Diversified | Europe | non-listed

GRESBsector leader

HHHHH

GRESBfive star fund

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Opinions of the Speakers

1. The Benefits

Paul kicked off by re-enforcing that GRESB is a force for good, driving change and focusing on participation. He also highlighted the alignment of the survey to a best practice management system approach (Plan/Do/Check/Act), which from our own experiences, support in driving performance – see Chapter 2 for more info on this.

Abigail highlighted that GRESB had pushed the industry to improve, whilst enhancing investor insight. Dan and Mathieu also said it supported fund strategy and post-performance evaluation, helping in year-on-year objective and target setting for the funds. Importantly, Erik highlighted that at a more practical level, GRESB had promoted wider utility data collection enabling the funds to better understand performance both at portfolio and asset level.

2. The Challenges

What did the speakers see as the challenges? Paul and Abigail highlighted that scoring rewards the wrong behaviour by being more about coverage of data than efficient buildings, and year-on-year improvements rather than absolute performance. Another key issue was the risk of chasing GRESB points, which may not add value to the fund.

A consistent theme from all the presenters was that one size did not fit all, with specific reference to opportunistic and value add funds that can struggle to perform well in the survey, a key area Sander Paul of GRESB picked up on in the Q&A – keep reading!

A Lively Q&A Session

Presentations were followed by a lively Q&A discussion with a panel that included Sander Paul van Tongeren, co-founder and Managing Director of GRESB, and Olivia Muir, European Analyst at UBS. Olivia, highlighted from an investor perspective the

importance of GRESB to provide a due diligence tool for the capital markets, but accepted that the GRESB performance data had to be re-worked to provide appropriate outputs.

Sander Paul also spoke of the importance of optimising property portfolios to reduce their environmental impacts to counter the significant risks of climate change. He expressed the need for disruptive technologies to help achieve this, including innovative software solutions, an area we have majored on with the development of our unique real estate focused sustainability management software, SIERA.

Comments were also made that the GRESB scoring had been opaque. Sander Paul advised that the GRESB validation process and scoring model is now available here, and on their website.

A great wrap-up by Sarah Ratcliffe

In summing up, Sarah Ratcliffe provided a fantastic analogy of the evolution of GRESB, comparing it to a child growing up and currently being a teenager; slightly spotty, with a number of imperfections and a bit awkward, but with lots of potential!

Does GRESB affect fund value? “Probably, not” said Dan Grandage. Does GRESB provide comfort to investors that key risks are being addressed? “Probably, yes” said Dan.

EVORA agrees with Sarah’s and Dan’s points and we certainly do believe in GRESB’s potential. However, as an industry, the onus is upon us to ensure that GRESB not only transforms through mobilising the real estate sector, but also that the content – and hence the scoring – is absolutely aligned to material sustainability issues that can impact on fund performance both now and in the future.

HOW CAN GRESB HELP TO DELIVER FUND PERFORMANCE?

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by Chris Bennett, Co-Founder & Managing Director

There is no doubt that GRESB has had a major impact in mobilising the real estate industry to embrace the issues of sustainability. It has created the leading benchmark, which is both complex and challenging to complete. Many in the industry ask the simple question, ‘why should we do this?’

With this in mind, EVORA ran an important industry event chaired by Sarah Ratcliffe, Programme Director at the Better Buildings Partnership (BBP), to develop this question further and ask ‘How Can GRESB Help to Deliver Fund Performance?’.

Great representation from industry leaders

We had five outstanding speakers from the industry, each with their own experiences and opinions of GRESB: Abigail Dean, Head of Sustainability at TH Real Estate; Dan Grandage, Head of Sustainability at Aberdeen Asset Management; Mathieu Elshout, Investment Director at PGGM; Erik Ruane, formerly Head of Development and Head of Sustainability at a leading pan-European, real estate fund management group; and last but by no means least, our own Paul Sutcliffe, co-Founder and Director at EVORA.

The results of our pre-event survey

Paul presented the results from our pre-event survey completed by the participants, which provided some interesting findings.

Firstly, the majority agreed that GRESB is both investor-driven and important to investors, which should be no surprise, since this was the original intention of GRESB.

Of greater note, was the far smaller proportion who thought their GRESB rating fairly reflected their sustainability performance and accurately reflected the key issues, highlighting that many respondents feel that greater alignment is required.

Question: To what extent... Mean Median Range

Is GRESB investor-driven 5.8 6 3 to 7

Is GRESB important to investors 5.1 5 2 to 7

Do you feel that GRESB reflects the Policies and Procedures you have in place

4.9 5 2 to 7

Do you feel the Implementation and Measurement reting is reflective of your sustainability performance

4.8 5 3 to 7

Does GRESB accurately reflect key issues?

4.3 4.5 2 to 5

Scale for all questions: 1-7 (e.g. where 1 is ‘not at all’ and 7 is ‘completely’)

Do your Investors ask other ESG questions?

29%said NO

76%said YES

This was an invitation-only event. To be invited to future EVORA events, please contact Russ Avery, Marketing DirectorE: ravery@evoraglobal.com

Talk to us about GRESB support today.

E: info@evoraglobal.com T: +44 (0)2033 267 333

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PREPARING FOR GRESB 2018:WHAT, WHY, WHEN AND HOW

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by Oliver Pye, Associate Director

With the pre-release of the GRESB 2018 Real Estate survey on the horizon (Thursday 15th February), I have written this blog to quickly remind ourselves of the what, why, when and how of GRESB.

For those who are new to GRESB, my hope is that this blog serves as a useful introduction. For ‘old hands’, I hope that it’s a handy reminder of key aspects, which can be easy to lose sight of when busy working away at the coal face.

What and Why

In their own words, GRESB is “…an investor-driven organization that is transforming the way we assess the environmental, social and governance (ESG) performance of real assets globally, including real estate portfolios and infrastructure assets.”

It is essentially an annual survey assessing the ESG-related policies, programmes and performance of real estate entities (listed and non-listed). Participating entities are awarded various ratings and scores, which are communicated to GRESB’s investor members. These outputs also provide participants with an understanding of their strengths and weaknesses, as well as third-party performance benchmark that can be used in sustainability-related communications.

GRESB continues to dominate the ESG rating industry for commercial real estate, globally. In 2017, GRESB assessed 850 real estate entities, representing $3.7 trillion in gross asset value. Other key statistics from 2017:

• Participation increased 12% (759 to 850);• Average score increased 5% (from 60% to 63%);

• Performance gap between listed and non-listed entities closed further (4% difference in 2017).

So, in conclusion, GRESB continues to grow in popularity and to be a key driver of sustainability performance improvement and reporting across the industry.

Furthermore, the industry’s understanding of the economic value of sustainability, and more specifically GRESB survey participation, continues to evolve. For example, a recent piece of research identified a premium on total fund returns of up to 3% between the highest and lowest GRESB scores. For more information on the value of GRESB, please refer to our website.

Do not underestimate the importance of planning when it comes to GRESB delivery

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Key Dates

February 15th 2018 Pre-release of Real Estate Assessment

March 1st 2018 Release of:• Real Estate Assessment

Reference Guide• Release of Resilience and

Health & Wellbeing Module andReference Guide

April 1st 2018 GRESB Portal opens

June 15st 2018 Response Check request deadline

July 1st 2018 Assessment deadline

September 5th 2018 Results day

Top Tips for a smooth journey through GRESB 2018

1. Start [and aim to finish] early.

2. At the start of the process and if you responded last year, remind yourself what went well and lesswell during the 2017 submission – consider both the process and individual question responses.

3. Review changes to the survey questions (available from 15th February) and the guidance/scoringdocument (available from 1st March), as soon as they are released. Review these changes in thecontext of your entity/entities and its/their ability to maintain/improve GRESB scores. Thesechanges may also create possible logistical challenges regarding gathering the necessary evidenceand data in time for survey completion – so the earlier the better!

4. Engage and educate people that will support you in delivering GRESB. Keep in regular touch withthese people, particularly if they will be providing you with information.

5. Remember that the survey process doesn’t end on the 1st July as 100% of responses across allassets will now be selected for enhanced validation. Validation takes place from 15th June – 31stJuly, and so we recommend time is kept aside immediately after the survey for further validation.GRESB will now select 100% of entities for enhanced validation, and so it is worth noting that ifyou oversee multiple submissions, you will have to participate in multiple validation checks.

6. Automate data collection – Our propriety software, SIERA, delivered 55 GRESB submissionsin 2017, helping clients to seamlessly acquire and report asset-level sustainability data into theGRESB portal.

7. Seek external support / advice – Our team of sustainability consultants are experts insustainability, real estate and [most relevantly] GRESB.

DISCOVER OUR BRANDS

Find out who we work with: EVORA Clients | EVORA Case Studies

Unparallelled expertise in sustainability consultancy services for commercial real estate firms.

www.evoraglobal.com

EVORA’s proprietary sustainability data management software, designed specifically for the commercial real estate investment market.

www.evoraglobal.com/siera

Cutting-edge technical engineering and M&E consultancy services for the built environment.

www.evoraglobal.com/edge

EVORA:YOUR BEST CHOICE FOR GRESB SUPPORT

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“We chose SIERA because it has been specifically designed for the commercial real estate investment market. It is practical and intuitive to use and helps simplify the many complexities of sustainability analysis and reporting, especially GRESB.”

Charlotte Jacques, Head of Sustainability, Schroder Real Estate

As an independent, Pan-European commercial real estate sustainability consultancy that is driving broad uptake of sustainability best practices in alternative asset classes, it made perfect sense for us to become a GRESB Premier Partner. In 2016 alone, we supported our clients with over 40 GRESB survey submissions.

Our proprietary sustainability management software, SIERA, directly transfers data into the GRESB portal. Sophisticated modelling capabilities in SIERA simplify the GRESB reporting process enormously, pushing out both the Performance Indicator reports in standard GRESB

format, as well as producing the GRESB Asset Report, which can be interfaced directly into the GRESB portal, eliminating the need for laborious and time-consuming manual intervention and data input. SIERA saves you time and stress.

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For support with preparing your assets and portfolios for success in the GRESB reporting cycle, please don’t hesitate to get in touch:

w: evoraglobal.come: info@evoraglobal.comt: +44 (0)20 3326 7333

EVORA Head OfficeThe Hop ExchangeSuite 73-7424 Southwark StreetLondon SE1 1TY

“I have worked with EVORA for five years now. I firmly believe they are leaders in their field, and they have opened my eyes to the value that a proactive approach to sustainability can bring.”

Rob Hall, Managing Director – Epic Property Asset Management Ltd. (EPAM)