The Sustainability Accounting Standards Board (SASB)
SASB was founded in 2011 as an independent non-profit organization dedicated to guiding the disclosure of financially-material ESG information. It is concerned mainly with environmental investments. In 2018, SASB published a set of 77 industry standards, of which three are especially relevant to the built environment: Home Builders, Real Estate, and Real Estate Services. Each of these standards provides a narrow list of metrics (fewer than 20) that are particular to each industry. For example, home builders must disclose the number of lots and homes delivered on redevelopment sites in a given year. Around 500 companies use SASB standards for ESG reporting, and nearly 200 institutional investors use SASB standards to support their investment decision-making.
Visit the SASB homepage
The Global ESG Benchmark for Real Assets (GRESB)
Established in 2009, GRESB is a commercial platform for ESG reporting and benchmarking, focused on real estate, with diverse reporting for management, development and infrastructure activities. The data is inputted by participants on an annual basis, via a detailed questionnaire which looks at both the whole company and its individual assets. This enables GRESB to generate a Scorecard and Benchmark Report for each company. The Scorecard provides a score, rating and summary analysis of performance against industry and climate benchmarks. The Benchmark Report contains more detailed information. With this wealth of data, GRESB produces a set of Public Results, which measure the global progress of the real estate and infrastructure sectors towards sustainability goals. GRESB’s membership comprises around 1,200 property companies, real estate investment trusts, funds and developers. The infrastructure segment includes a further 540 funds and assets. The total number of assets under the ownership of GRESB’s member base exceeds 96,000.
View the GRESB Public Reports for 2020
Even within this small selection of initiatives, there is considerable variation as to how ESG is defined. Scope, detail and coverage levels differ according to the framework. Most initiatives tend to focus on environmental concerns, perhaps reflecting a degree of alignment between environmental initiatives – at least on more established metrics, such as GHG emissions. Most environmental metrics are quantitative and based on natural sciences, and thus more easily measured and benchmarked. Social metrics, on the other hand, are often qualitative, relatively young in terms of development and reliant on subjective interpretations of value.
Most investors are not sustainability experts. As a consequence, there have been attempts to condense ESG performances into one-dimensional score and ranking systems, such as the Dow Jones Sustainability Index or the Refinitiv ESG Score. These measures can be useful for high-level screening, but investors should be wary of using them for the purposes of like-for-like comparison. Sustainability is an intricate, multifaceted concept, and thus a multiplicity of criteria is necessary to capture its totality.
Given the complexity of the landscape, consensus is emerging on the need for a convergent and standardised set of established ESG disclosures. Recent public policy announcements have made a significant push in this direction, with further legislative and regulatory actions expected in future. On the global stage, the EU leads the way with its ambitious plan for sustainable finance, linked to the European Green Deal. The above-referenced EFRAG report forms part of this plan. Further policy initiatives include a Taxonomy for Sustainable Activities, Green Bond Standards, the Non-Financial Reporting Directive (NFRD), and the Regulation on sustainability-related disclosures in the financial services sector (SFDR). The UK Government has committed to introducing mandatory TCFD-aligned disclosures across the economy by 2025.
It has long been said that changes in mindset and practice across the built environment will be essential if climate catastrophe is to be averted. The flourishing ESG market suggests that movement is being made in the right direction.