Real estate groups join GREEN to align sustainability metrics

A group of the largest real estate investors have joined forces to break down the systemic barriers that hinder adequate climate risk management in the industry and to overcome a key obstacle, which is a lack of access to comparable and high-quality financial material climate data.

A wide range of certifications and industry standards exist, each using different data points and definitions. Many of these frameworks bundle all ESG aspects into a single score, making it difficult for investors to compare metrics and integrate them into investment analysis.

Leading investors and investment managers including APG, ATP, BouwInvest, CBRE IM, Healthcare of Ontario Pension Plan, PGGM, Savills IM, Schroders and Urban Partners have joined forces in a new workstream of the Global Real Estate Engagement Network (GREEN).

They have noticed that the ever-growing ESG reporting burden is increasing costs and preventing managers from focusing on value creation, and they have decided to do something to cut through this complexity and collectively agree, as a global industry, upon meaningful, investor-relevant metrics—enabling better pricing of brown discounts and green premiums.

“Achieving true progress in decarbonising the real estate sector hinges on aligning sustainability metrics, particularly those legislative metrics used by investors, lenders, and valuers,” said Robbie Epsom, head of EMEA sustainability, CBRE Investment Management. “Initiatives like GREEN and the Systemic Workstream are vital in fostering this crucial industry alignment. We must work with industry bodies such as INREV and ULI and build upon existing frameworks, such as the IIGCC-coordinated ARESI initiative, which has already made significant strides in addressing ambiguity in existing Climate Transition Risk metrics in the European market. By ensuring these efforts are considered and integrated, we can streamline our collective approach and accelerate the transition to a more resilient and future-proofed real estate market.”

Members are both new and existing members of GREEN and Leaders of the Urban Future (LOTUF), which recently announced they have joined forces. The goal is to establish a limited set of financially material metrics and definitions that investors and managers actively use—or plan to use once available—in disclosing and assessing risks and opportunities within their portfolios.

Their belief is that only with backing of the full global real estate industry it will be possible to cut this “data spaghetti”, so the group is calling for other investors, industry bodies, and standard setting organisations to join this effort. Already many industry bodies and stakeholders have offered their support and GREEN is calling for all other stakeholders not yet involved to collaborate and support this effort.

This new workstream is open to direct and indirect institutional investors and investment managers and complements GREEN’s existing work in which indirect investors engage with listed and non-listed real estate funds and companies to assess and improve their climate-risk management performance.

“We strongly believe that additional industry engagement and collective action are required to underpin the low-carbon real estate market,” said Eric Plesman, senior managing director and head of global real estate at Healthcare of Ontario Pension Plan. “We believe GREEN will provide the platform to continue this engagement and organise like-minded investors around a common goal: decarbonising global real estate portfolios while driving strong risk-adjusted returns.”