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ESG in real estate: Understanding reporting frameworks

We’ve decoded the many acronyms of ESG reporting to help get you started.

By Michelle Kliszewski

As you consider where to begin integrating Environmental, Social, and Governance (ESG) concepts into your portfolio, building, or tenant space, it’s sometimes hard to know where to begin. The growing demand for ESG disclosure has created more than a dozen niche frameworks to serve different industries and stakeholders. Fortunately, each is grounded in the same fundamental concept: data disclosure. Unfortunately, all of the acronyms are enough to send you running.

We’ve identified the most prominent frameworks and outlined their key differences to help you select the reporting structure that’s most relevant to your business.

Common ESG Reporting Frameworks

  • CDP (Carbon Disclosure Project) is a climate impacts disclosure system used by investors, companies, and governments to link environmental integrity to fiduciary duty. Using a standardized questionnaire, the CDP collates and verifies data on climate risk and action. Scores are then applied to enable investors to make more informed decisions.

  • GRESB (Global Real Estate Sustainability Benchmark) measures ESG performance within the global financial real estate sector exclusively. Using an annual survey, GRESB collects data across the ESG spectrum, with an emphasis on qualitative metrics. This data is then checked and graded by GRESB, which publishes all scores for the benefit of investors and the real estate community.

  • GRI is the official reporting standard of the UN Global Compact and its 5,800 members. The framework is modular, with sector specific standards. The RE sector focuses on activity areas within the lifecycle of a building, with required and recommended ESG topics. Organizations can report using the GRI index or with reference to GRI standards. However, the GRI does not audit reporting.

  • The SDGs (Sustainable Development Goals) are 17 UN-generated goals designed to be an interwoven blueprint for global efforts to build a better and more sustainable future for everyone. They organize your sustainability priorities into contributions linked to high-profile global initiatives. For example, efforts to “green” aspects of the commercial real estate sector could be influenced by targets set in SDG 9: “Industry, innovation and infrastructure,” SDG 11: “Sustainable cities and communities,” or SDG 15: “Life on land.”

  • PRI (Principles of Responsible Investment) supports asset managers, investment managers, and service providers to identify investment implications of ESG factors. The PRI encourages companies to become annual voluntary signatories, submitting responsible investment activities for review and assessment reporting.

  • SASB (Sustainability Accounting Standards Board) sets industry-specific sustainability standards for a variety of sectors, including real estate owners, developers, and investment trusts. The real estate (RE) sector focuses primarily on quantitative data in four areas: energy, water, management of tenant sustainability impacts, and climate change adaptation. Like the GRI, the SASB does not independently verify the reporting.

Data Rules

With so many frameworks out there, many of them unverified, the integrity of ESG reporting is not absolute. Often, business owners are making pledges to be more green, without a strategy to support the work. Instances of greenwashing (“green” marketing without proof to support claims) have risen enormously, and there is a worrying trend of funds attracting capital by drastically overstating their ESG credentials.

These disconnects have not gone unnoticed. Investors have been signaling that they want highly accurate ESG reporting, and the ESG reporting community is listening. In response, the SEC commissioned a task force in March 2021 to identify ESG-related misconduct that will audit statements in Private Placement Memorandums (PPMs). Additionally, the PRI has indicated increased expectations for data validation in its new 2021-2024 strategic plan, focusing on C-suite sign-off on internal audits. There has also been a corresponding rise in third-party ESG audits to enhance reporting credibility against GRI, PRI or SASB frameworks.

With investors’ increased scrutiny comes the clear need for verifiable data.Thankfully, you can get started without headcount or expensive capital equipment upgrades.

Mesa Can Help

Amidst the noise, it can be easy to forget that there are many positive reasons to start taking inventory of ESG factors in your business. Gathering real-time data on your buildings and understanding the related GHG emissions can serve a variety of purposes: to benchmark against other buildings, inform operational improvements, align with client sustainability goals, and improve potential investment opportunities.

Make your first ESG step a simple one with accurate and robust data from Mesa. Mesa’s easy-to-install suite of smart sensors and connected devices automatically cuts wasted energy, and its Impact Report provides you with the data needed to show progress on your businesses’ ESG commitments.

Contact the Mesa team to learn more.