The GRESB Regional Insights presentation took place in Paris, on November the 7th. It was an opportunity to take stock of the real estate sector’s progress in terms of real estate issues. The GRESB benchmark is rich in lessons in that regard, especially for the European market, which is reaching surprisingly disappointing results.
The building sector at the core of our sustainability challenges
The building sector plays a crucial role in global sustainability challenges. Collectively, buildings in the EU are responsible for 40% of the energy consumption and 36% of greenhouse gas emissions, which mainly stem from construction, usage, renovation, and demolition. But these activities also significantly impact water management, waste production, artificialisation … It is no understatement to say that the property sector is at the heart of many sustainability challenges.
In order to monitor the evolution of the real estate actors over a panel of sustainable stakes the Global Real Estate Sustainability Benchmark (GRESB) provides a worldwide standard for assessing the environmental, social, and governance (ESG) performance of companies in the real estate sector. Since its launch in 2013, ten years ago, GRESB’s mission has been to produce transparent and comparative assessments of the sustainability of real estate portfolios and infrastructure.
In 2023, the GRESB assessment gathered more than 2,000 participants across 75 markets, and 170,000 assets, painting a quite exhaustive picture of sustainability challenges at the real estate sector scale.
Understating the GRESB rating
In the GRESB rating participants are distributed in two categories: “standing investment” for operation, and “development” for construction. In each category the assets are rated on two main scales. The first one measures the involvement and commitment of management towards sustainability issues: it is the management score. The second one measures the level of performance of the asset regarding concrete indicators: it is the performance score or development score.
In 2023, over 2,000 structures participated in the GRESB evaluation, marking a significant increase from the 539 participants in 2013 and the 1,820 contributing the previous year. Europe was particularly active, submitting 1,013 responses, highlighting the region’s growing commitment to real estate sustainability. The UK accounted for 285 of these European participants, and Germany came second with 115 participants. In France, only 34 structures contributed to the GRESB this year.
The first key takeaway from the benchmark comes from high management scores, meaning that the sustainable issues have now been integrated by management across the sector and the different markets. On the other hand, performance levels for standing investment remain significantly lower, and most of them are staying below 75%. One last lesson seems to be that there is no correlation between management scores and performance scores, which would mean that management commitment still struggles to be converted into progress on the field.
Europe, a ranking that raises questions
Europe seems to be late both in management and performance scores. The GRESB results shows that Europe reaches the second lowest scores in both management and performance for standing and development, the only region behind being the Americas. Africa is not included in this benchmark due to insufficient number of responses.
Fig n°1 : Regional average scores for Development – GRESB 2023
A deeper look into subcategories teaches us that, in Europe, offices score higher than any other typology of building in terms of performance, both in standing investment and development.
Fig n°2 : Average scores for Development, in Europe by typology – GRESB 2023
The progression margin seems to still be considerable for the European market, especially for education, healthcare and retail buildings. It could come across as a disappointment, especially for the European Union, which developed a dense regulation in order to improve building performance and stand out as a sustainability leader in terms of green buildings. At the frontline of this regulation landscape stand the European Performance Building Directive (EPBD), which introduced the EPCs among other tools, and constitutes the core elements of the EU’s ambitions regarding building performance. These ambitions may be too centered on energy and greenhouse gas emissions, categories where Europe seem to perform well according to GRESB, but leaving out other significant challenges.
Yet the significant volumes may also have biased the result since Oceania actually gathered only 143 participants for instance, which paints out a less exhaustive image of the continent building landscape. On last mitigation can also be the influence of UK results in Europe, since they represent a quarter of Europe participants, but are no longer compelled by European ambitions since the Brexit.
Strengths and Weaknesses
The detailed results of GRESB in 2023 highlight specific strengths and weaknesses in the performances of assessed companies.
Regarding strengths, assessed companies demonstrated significant improvement in implementing robust ESG policies, showcasing their commitment to responsible practices. Shareholder involvement, considered a key indicator of corporate social responsibility, was also highlighted as a strength, indicating increased stakeholder awareness of sustainability. Policies related to water and waste management also showed notable progress, indicating a growing awareness among companies of the need to effectively manage these essential resources.
However, gaps persist in other areas. Energy issues remain a major challenge, with uneven performance in reducing energy consumption and adopting renewable energy sources. Real estate companies also face difficulties in material management, with limited attention given to the sustainability of construction materials and construction waste management. Environmental certifications, while increasingly valued, remain a weakness for many assessed companies. This underscores the need for increased awareness and the adoption of stricter standards to ensure that buildings meet high sustainability standards.
Finally net zero ambitions summarize quite well the duality of the participants and their challenges for the upcoming years. In 2023, 72% of global real estate participants have implemented a net-zero policy. Notably, 93% of participants in Oceania have reported having a net-zero policy, followed by Asia and Europe with 78% and 77%, respectively. Despite this positive trend, it is important to highlight that, while the majority of participants have taken steps towards achieving net-zero objectives, only 56% of global participants have publicly committed to net-zero, and 50% have set a specific net-zero target.
The GRESB 2023 results show a deeper commitment on all sectors and markets, which a good sign for real estate sustainability goals. Yet this commitment struggles to be transformed into concrete actions and performance scores are still lagging. Europe stands as an example of this situation and has still progress to make. Progresses that could be boosted by the long-awaited recast of the EPBD directive, which should introduce the Zero Emissions Building (ZEB) standard for new buildings, but also raise the standards for existing ones.
