GRESB and Climate Resilience

GRESB and Climate Resilience

GRESB and Climate Resilience 2713 3962 Greengage Environmental

GRESB was introduced in 2009 by a group of large pension funds as a way to generate access to comparable and reliable data on the ESG performance of their investments. It has subsequently grown to become the leading Environmental, Social and Governance (ESG) benchmark for real estate and infrastructure investments across the world.

GRESB Resilience Module

The GRESB Resilience Module is an optional supplement to the GRESB Real Estate and Infrastructure Assessments. It has been developed in response to organizations that are developing a capacity to assess, manage and adapt in the face of social and environmental shocks and stressors.

The Resilience Module provides investors with information needed to understand how real estate and infrastructure companies and funds are preparing for potentially disruptive events and changing conditions, assessing long-term trends, and becoming more resilient over time. The Module evaluates the organization’s capacity to assess and respond to risks and opportunities related to climate, environmental, social, economic, technological and geopolitical changes through asset resilience and their management capacity.

Resilience Risks

The Resilience Module highlights two fundamental dimensions of climate risk and resilience identified by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) recommendations:

Transition risks are a set of vulnerabilities related to the ongoing shift to a low carbon economy necessary to achieve the goals of the United Nation Paris Agreement. This transition will create new opportunities for companies capable of providing low-carbon solutions, such as energy efficient buildings powered by renewable energy. This transition may also create new liabilities for companies reliant on inefficient, carbon-intensive technologies. Companies with these liabilities may be at risk from future regulation and competitive disadvantages (e.g., U.K. Minimum Energy Efficiency Standards for leased property).

Physical risks are associated with a myriad of shocks and stresses, such as those addressed by the global 100 Resilient Cities program. Resilience to these issues includes both preparation for changing conditions and short-term responses to disruptive shocks (e.g., fire, flood events) and chronic stresses (e.g., changing heating and cooling degree days, precipitation levels)

Other resilience-related factors – While the Resilience Module has a primary focus on climate risk and resilience, it takes a broader perspective than TCFD. The Resilience Module provides opportunities to report and score other resilience-related factors beyond transition and physical climate risk. Notably, the Module provides indicators related to social resilience and physical security, categorized as social risks. Improvements to the Real Estate and Infrastructure Assessments may allow these factors to be removed from the Resilience Module after 2019.

Timeline for Implementation

The GRESB Resilience Module is designed as a three-year effort to improve reporting and benchmarking for climate risk and resilience by property and infrastructure companies. After 2020, selected climate risk and resilience indicators are anticipated to migrate into the core Real Estate and Infrastructure Assessments. The proposed timeline for the implementation of the GRESB resilience module is outlined below:

2019: Build upon the high-level criteria with more rigor with respect to the contents and quality of evidence. Increase alignment with TCFD recommendations. Open Resilience Module for participation by Infrastructure Funds.

2020: Increase stringency of validation, test additional performance indicators, and, where appropriate, align indicators and evidence requirements with industry standards and guidelines. This is the last year a distinct Resilience Module will be offered.

2021: Migrate selected indicators to the core GRESB assessments. Climate risk and resilience will be scored and reported as part of the core GRESB assessments.