September 03, 2011
Real Estate Industry Demonstrates Benefits of Energy Efficiency
by Robert Kropp
The findings of a report by the Global Real Estate Sustainability Benchmark Foundation suggest that
real estate funds and companies have improved their environmental performance since 2009.
The real estate industry sector is responsible for 40% of global greenhouse gas (GHG) emissions.
Thus, as Mindy Lubber, president of Ceres,
stated recently, "If commercial property managers can maintain a three percent reduction in energy
use per year, they will make a significant contribution towards these broader goals" of job
creation and emissions reduction.
Lubber is a member of the Global Real Estate Sustainability Benchmark (GRESB) Foundation, an
initiative which provides institutional investors with a sustainability benchmark for their
commercial real estate property portfolios. This week, GRESB published a report analyzing the
environmental performance of many of the world's largest real estate companies and funds.
Report 2011 argues that by integrating environmental, social, and corporate governance (ESG)
factors into their investment decision-making, institutional investors may well "reduce downside
risk and also help to find better and innovative investment opportunities." In order to effectively
do so, investors must have "qualitative and quantitative information on the sustainability
performance" of the real estate funds and companies in which they invest.
By developing a
comprehensive benchmark for the environmental and social performance of entities in the real estate
sector, GRESB seeks to provide institutional investors with tools for effective engagement with
companies in their portfolios. The report supplies investors with an analysis of the reporting and
performance of 340 of the world's largest real estate companies and funds.
benchmarking framework for the survey consists of 39 metrics. The metrics are subsequently
categorized as either management and policy, or implementation and measurement. Energy efficiency
measures, for example weatherizing and retrofitting, seem particularly applicable to the real
estate sector, and it is worth noting that the survey acknowledges this by deriving 70% of an
entity's score from the latter category. Fully 37% of scores is based on performance indicators
such as use and expenditures of energy, water, waste, and GHG.
Three of the top four
scores awarded by GRESB were gained by companies based in Australia. Noting that Australian
property funds were the strongest performers in its 2009 survey as well, GRESB stated, "The
difference between Australia's overall score and the score of the other regions is still
substantial;" however, the report continued, "There are some very strong European and North
American funds that are catching up with the leaders of 2009."
Overall, 19% of respondents
to the survey were awarded GRESB's Green Star designation in 2011, compared to 10% in 2009.
Thomas Property Group, a Los Angeles-based real estate investment trust (REIT), received the
highest score of US-based companies participating in the survey, with an overall score of 65.
The report concluded, "The numbers presented in this report show a year-on-year reduction
of 1.34 percent in standardized energy consumption," and a reduction in GHG emissions of 1.84%.
"These numbers suggest that commercial property investors are achieving quite significant
reductions in resource consumption – reductions driven primarily by economic considerations," the
report stated. "Creating transparency in these reductions is important for investors to engage with
property funds and companies that have yet to start managing their carbon footprint."