Canada has extended its lead as the top GRESB performer in the Americas, outpacing the United States, Mexico and Brazil in management and performance according to 2020 assessment results.
GRESB revealed the results and provided insights into the environmental, social and governance (ESG) performance of major Canadian real estate portfolios during a Nov. 24 online event co-hosted by REALPAC.
GRESB is a mission-driven and investor-led global sustainability benchmarking organization established in 2009 to provide standardized and validated ESG data to capital markets.
“GRESB is now the ESG benchmark for real asset investment portfolios globally,” said GRESB head of Americas Dan Winters. “Through this evolution it has become abundantly clear that a by-the-industry and for-the-industry framework made of best practices has yielded strong business benefits.
“It progresses the industry forward and helps us drive a competitive race to the top.”
Top Canadian GRESB performers
On its five-star ranking system (with five being the best), 11 Canadian participants achieved five GRESB stars, while six others received four stars.
Among sector leaders, Winters said KingSett Capital ranked No. 1 overall in Canada. BentallGreenOak, Brookfield Properties, GWL Realty Advisors, Ivanhoé Cambridge and QuadReal Property Group also scored highly.
“Canada has some really strong leadership when it comes to ESG, emanating from the very top with pension plans,” said Winters.
There were 1,229 global real estate portfolios, covering more than 96,000 assets representing more than U.S.$4.8 trillion in value, which contributed to this year’s GRESB results. That’s up 22 per cent from 2019.
There were 317 North American participants representing almost 43,000 properties worth U.S.$2.11 trillion, with 28 Canadian firms included.
“Many people think of the EU (European Union) as the leader when it comes to ESG, and it is true if you look at the numbers that are in those flags,” said Winters, while explaining a global map of GRESB participation. “But if you look where the capital is, the capital is here in North America.”
In addition to Winters revealing the GRESB results, REALPAC chief executive officer Michael Brooks, QuadReal senior vice-president of sustainability and environmental health and safety Jamie Gray-Donald, RioCan REIT sustainability manager Ridhima Nayyar, and Energy Profiles Limited technology VP Conan O’Connor used the webinar to talk about their organization’s ESG efforts.
REALPAC, which is marking its 50th anniversary this year, is the national industry association dedicated to advancing the long-term vitality of Canada’s real property sector.
REALPAC’s more than 120 members include publicly traded real estate companies, real estate investment trusts, private companies, pension funds, banks and life insurance companies with investment real estate in all asset classes. Membership has increased by more than 20 per cent this year, according to Brooks.
REALPAC’s ESG committee has been holding monthly virtual meetings to discuss topics including heating, ventilation and air-conditioning systems, health and safety best practices, target setting, and a national office green lease plan that will be released publicly early next year.
“Although we’re going through a global pandemic, one thing is certain: ESG is not slowing down,” said Brooks.
QuadReal Property Group
Vancouver-headquartered QuadReal is a global real estate investment, operating and development company that manages a $44.2 billion portfolio spanning 23 cities in 17 countries. That portfolio of office, industrial, retail and residential assets garnered the top spots in both Canada and North America as well as second globally in GRESB’s rankings.
Gray-Donald said QuadReal asks all of its major investment partners to report to GRESB because it wants to work with companies which are aligned with its values.
QuadReal is looking at signing long-term clean power purchasing agreements to reduce its environmental footprint as it aims to reach net-zero energy use with many of its buildings.
The density of office buildings makes it difficult to achieve that goal, according to Gray-Donald, but QuadReal is considering pilot programs for net-zero industrial warehouses.
“New industrial developments are the most viable to go to net-zero,” said Gray-Donald. “They have large roof spaces, simpler mechanical systems and heat pumps to replace rooftop units.”
QuadReal’s multi-family portfolio has been the most resistant to energy efficiency improvements.
“The challenge with multi-family is that the building operators and asset managers feel that they don’t control things,” said Gray-Donald. “We have data going back to 2007 and we’re at zero per cent improvement. On office buildings we can regularly get 30 to 50 per cent savings.”
QuadReal has moved to sub-meter multi-family suites on turnover, since it has seen 30 to 40 per cent reductions in utility costs when tenants have to pay for them.
“Tenant engagement really only works effectively if there’s an incentive alignment,” said Gray-Donald. “That takes multiple years and you can’t do it by law until tenant turnover.”
Toronto-headquartered RioCan is one of Canada’s largest real estate investment trusts. It owns, manages and develops retail-focused and, increasingly, mixed-use properties. As of Sept. 30, its portfolio was comprised of 221 properties with an aggregate net leasable area of approximately 38.4 million square feet, including office, residential rental and 16 development properties.
“We as an organization feel that it is our responsibility to embed sustainability considerations into our decision-making,” said Nayyar. “RioCan has always focused on efforts towards building communities in which we do business. However, ESG has led to a cultural change within RioCan. Gone are those days when we had to explain what sustainability is and how we need to practice it.”
RioCan’s operations, finance, legal and human resources teams have all been integral to the success of multiple ESG initiatives and obtaining impressive GRESB results, including a five-star rating this year, according to Nayyar.
COVID-19 has created a social crisis and Nayyar said RioCan wants to make sure it’s engaging its partners, peers, tenants and communities to communicate its ESG initiatives and let them know that the REIT can’t succeed if they don’t.
“This year is a year of survival definitely, so whatever help and support they need, we’re here to give it to them.”
Energy Profiles Limited
Energy Profiles Limited is a full-service energy engineering/accounting and software services firm focused on driving down energy and water use and costs in building portfolios. It provides custom energy and sustainability data management systems for more than 5,000 properties with $800 million in annual utility costs across North America.
O’Connor said the attention being paid to ESG hasn’t lessened despite the pandemic. His company and others are looking at strategies for driving performance to get to net-zero as opposed to incrementally reducing energy use and emissions, which has been the historical pattern.
There’s a need to continue good building operations and use analytic tools to improve performance and drive down operating costs on an ongoing basis, according to O’Connor. That can be achieved, in part, by the intelligent deployment of capital into projects that will have a significant impact.