GRESB Keeps Moving the Goalposts. Here’s How to Win Anyway.

There’s nothing more frustrating than striving towards a goal, only for the rules of the game to change.

That’s how many owners feel about GRESB’s annual scoring updates. This can be especially painful for triple net owners who struggle to collect utility data from tenants.

Last year was no exception. GRESB’s latest scoring tweaks hit harder than usual, impacting owners’ results to such an extent that some of them were rolled back retroactively.

It’s undoubtedly frustrating for portfolio managers and sustainability leads. But here’s the thing: GRESB isn’t trying to mess with us. While the specific changes in any given year can be volatile, the direction isn’t.

Their ultimate goal is clear — to first benchmark the real estate sector from a carbon intensity perspective, and then to incentivize reductions.

In fact, the blueprint for this has already been laid by state and municipal regulators. Every case of building energy performance standards (BEPS) was preceded by benchmarking rules.

Our perspective is that it’s more productive to focus on the “right” things - those that ultimately lead to decarbonization, than to worry about the tweaks year to year. Over time, GRESB will get better and better at rewarding those things (albeit not as fast as some would like, and much faster than others are ready for).

What’s Changing in 2025

While we don’t have specifics yet, we do have broad strokes on what GRESB plans to change this year.

GRESB is adding a new layer to how energy efficiency is scored. While the focus in 2024 was on year-over-year improvements (like-for-like), 2025 will also reward properties that demonstrate operational efficiency.

This is the first attempt by GRESB to measure actual performance rather than just data coverage and the proxy indicators for performance.

There are bound to be missteps. The initial framework will not be as nuanced as it should be.

Still, many professionals that have dedicated themselves to sustainability are saying “about time!”

On the other hand, triple net leased landlords who already struggle with data coverage are asking themselves how they’re supposed to achieve this given that tenants operate the buildings.

The NNN Problem: Data Without Control

When it comes to collecting utility data from tenants, there’s more than one way to skin a cat.

You can ask for it, but that’s manual, ineffective, and can rub tenants the wrong way.

You can get it directly from the utilities, but only certain utilities provide it and those that do are slow and sometimes inaccurate.

You can do manual meter reads, but sometimes meters are inaccessible or there isn’t the man power to do so.

Or you can shadow meter, which carries a cost for hardware but does guarantee 100% data coverage.

Of these options, only in one case, shadow metering, is the data measured in real time.

Utility bills, Excel data dumps, manual meter reads cannot be actioned upon. Real-time interval data can.

Recognizing the direction that GRESB is going, this is a critical factor to consider.

However, being actionable for someone isn’t enough. The trick will be in bridging the gap between owner and tenant.

The Key Insight

The key insight to internalize is that tenants are craving help with their operations.

Many Fortune 500 tenants have aggressive sustainability targets themselves.

DHL said that they were only going to lease industrial spaces that had a credible path to net zero. They had to remove that policy because they couldn’t find enough space…

Talk about a market opportunity.

Even smaller tenants that don’t care about sustainability are worried about their operating expenses.

The trick is to skate to where the puck is and where it’s going simultaneously.

Meaning both maximize data coverage today and position yourself to deliver operational efficiency tomorrow.

In practice, that means installing shadow meters, thereby relieving tenants and property managers from the burden of manual data collection.

While on site, capture a full equipment inventory.

In place of chasing tenants for their bills, take the real-time data from shadow meters and provide insights to tenants, made smarter by the equipment inventory.

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Then, bring energy services to the table such as demand response or energy procurement, creating real value.  

Finally, leverage the real-time data and equipment inventory to create empirical, site-specific decarbonization plans.

GRESB: Looking Ahead

While scoring is definite, meaning based on a set of criteria, ratings are relative to the scores of peers.

This matters because the difference between star ratings can be razor thin, and losing a star can mean losing a significant LP in a fund.

Because of this, there’s a natural inclination to try to pick and choose the scoring factors that will deliver the most points with the least amount of effort.

But taking a step back can relieve a lot of the hand wringing that usually accompanies waiting for results to come back.

We believe that the macro trends are clear:

1. E is getting de-coupled and emphasized over S and G
2. Within E, data coverage will remain highly emphasized
3. At the same time, actual performance (carbon intensity) will play a growing, and eventually commanding role

A strategy that maximizes data coverage today and positions the portfolio to affect operational efficiency and carbon intensity, even in triple net leased properties, will win.

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