On GRESB, DJSI, Carbon Disclosure Project… and the big fast train smash driving them all
Coming through the wires this week was the yearly call for companies to join the Global Real Estate Sustainability Benchmark.
Nils Kok, who’s featured often in these pages, co-founded GRESB in 2009 as a way to for institutional property owners to benchmark and then improve their sustainability game, using the logic that what is not measured can’t be managed.
Similar benchmarks, surveys or lists include the FTSE4Good Index, the Dow Jones Sustainability Index, the Carbon Disclosure Project and even the Global 100 produced by Corporate Knights.
But do these things really work? Does the plethora of accolades and anxiously anticipated results reflect more than the ability of the people to fill in the forms and tick the right boxes. What’s the demand for these instruments and what do they signify?
Principal consultant with Energetics Jody Asquith says in recent times she’s noticed demand for voluntary reporting pick up.
“Demand has picked up lately,” she says. “There’s a clear driver coming from investors starting to look at this.”
And that’s a good thing because the drivers on the mandatory front have been fading.
A recent client wanting help with GRESB is a property company with retail and commercial assets that needs some help because it’s not performed so well in one of the surveys and the investors want to know why.
“So it’s using this as a benchmark. Investors are saying, ‘this is not meeting our requirements so we might take our money elsewhere’.”
Asquith says the hardest she’s had to do is for the CDP, which is moving away from carbon disclosure to a broader sustainability measure.
But the GESB too has become tougher in recent times.
In the past participants had to answer questions, now they have to prove what they claim. And that can be hard for companies who’ve been able to “talk the talk” but not necessarily “walk the walk.”
Other work Asquith does is in data management for clients working on their pitch for the Dow Jones Sustainability Index, GRESB or the Carbon Disclosure Project.
- See a list of publications from Dow Jones analysising sustainability indices and drivers and trends
Simon Carter specialises in sustainability strategy for mainly property clients says one of the most popular indices to be part of globally is the Global 100 most sustainable corporations in the world by Corporate Knights. Although he notes that the Aussie groups have “dropped off” that list in recent times.
- See our article, Aussies tumble down top 100 sustainability ranking, while Singapore’s Keppel Land rises
What’s interesting in Australia, he says, is the entry of smaller companies into the GRESB space. Altis Property Partners and Cromwell Pty Ltd, for instance, with market capitalisation of about $1 billion and $1.7 billion respectively, are small fry compared to the giants that typically make up the GREB.
The first year, 2014 is a “year of grace” which means they don’t have to disclose the results. It will be interesting to watch how they adjust to disclosure and how they manage the portfolio so that investors get a chance to compare apples with apples.
Among the current stars of the GRESB top peformers have been the Aussie property companies. They’re the ones that appear in the top right “Green Stars” quadrant but the Brits are gaining fast, Carter says.
But other parts of the world are also edging into that quadrant.
“So the global universe of funds is moving up.”
So what do the companies make of their participation in the GRESB compared with others such as the Carbon Disclosure Project?
Carter says the CDP quite possibly doesn’t provide as much value to some companies.
“GREB provides value because it’s sponsored by investors and investment managers want to be seen as performing well – namely being in that green star quadrant.”
It also singles out benchmarks and what their progress is in areas directly relevant to them – because it’s what investors want to know.
A win win, you might say.
Another person with quite a bit of experience in the reporting frameworks is Terence Jeyaretnam, (pictured above) whose Net Balance was last year acquired by EY.
Among Jeyaretnam’s clients over recent years have been companies such as Lend Lease Charter Hall, and Novion.
Jeyaretnam says the various surveys have two main drivers. There are the investor led surveys such as the Dow Jones Sustainability Index and the FTSE 4 Good that make good sense for companies wanting to attract new capital. Australia doesn’t need new capital so much, so the other major driver kicks in – which is more about benchmarking and improving performance.
Boards and management are particularly fond of benchmarks, he says.
It gives them a sense of “year on year” benchmarking but also peer comparison. “So management and the board get a sense of their work in sustainability, how investment and resources are travelling, at a high level.”
Sometimes the benchmarks can get tougher, a shifting of the goal posts. For instance the CDP and DJSI are moving to more supply chain risks, Jeyaretnam says.
But for some that’s a good thing, especially if they’ve recently identified climate change as a new type of risk.
In this case these corporates will use the questions as a way of “guiding what they need to look at next and identifying opportunities for their own performance”. “So for benchmark improvement opportunities and finally for those who want real accolades.”
Sometimes the sheer scale of work required for these reports can be “quite onerous”, Jeyaretnam says.
He says stories we’ve heard that you can game the system, get to know how to tick the right boxes, are not totally off the mark.
However, a new development in GRESB that awards points for assurance is an antidote for that.
Of course practice and improved systems and outcomes means that over time companies can get more sophisticated and knowledgeable about what they’re doing.
Jeyaretnam has been doing this work for a decade and what he’s observed over time is continued improvement, he says.
Banks and really big corporations
This brings us to mind of banks and really big corporations and their role is saving our planet. Or not. Yes many are starting to shift but it’s a bit like turning around well…a giant oil tanker. It takes a lot of time.
Banks for instance have had a poor track record in sustainability but the consensus from several people we’ve spoken to on this issue is that they’re improving. On sustainability Westpac and NAB seem to be neck a neck and the Comm Bank, after a very late start, is coming to the party.
The ANZ which impressed a lot of people when it withdrew funding from the Tasmanian pulp mill proposed by Gunns has slipped in recent times, with its commitment to coal investments.
But then all the banks still have fossil fuel investments, no matter what their avowed profile.
A big problem is that big corporations are “quite big machines to turn around,” one source said.
The sustainability team might be trying hard and there might be fantastic people working within them – it’s a question “cutting through to the rest of the company, trying to break lending activities that have been going on for decades.”
Perhaps international outfits can show the way – such as the three French banks that said they would not lend to Adani ripping up the Gallilee Basin for coal.
It’s a powerful statement.
And the vibe is changing more broadly
What the trends on voluntary reporting really show though, is the underlying broader shifts in society and, by extension, investment sentiment.
An example is the recent BP shareholder resolution in London, which saw more than 98 per cent of shareholders calling for more transparency in the company.
Even AGL in Australia last week signalled it was going greener and removing coal from its power production by 2050. You can be cynical as others were, and say the new chief Andy Vesey simply restated what was on AGL’s agenda – that it would need to close down its dirty coal fired power stations anyway because they have a limited life span.
But the public statement matters a lot, especially when it’s going against the grain of peers such as the aggressively pro-Abbott, Origin Energy. AGL action certainly had cut through. The conservative financial press said the announcement was “fascinating and possibly unprecedented in the world of serious, integrated energy providers”.
Some of the thinking is that Vesey was happy to say the company would be renewable by 2050 because he really thinks unburnable coal is probably much sooner, so he’s given himself a very comfortable margin.
The drivers on renewables
There are big drivers pushing a renewable future.
Among the biggest is technology, linked to growing consumer demand. Jeyaretnam says that there is such a strong appetite to get off the grid that if the technology enables this then it will happen very fast.
For instance if Tesla’s anticipated announcement for 30 April on battery storage for homes is as revolutionary as people expect and want, within five years the landscape on carbon and everyday life will be very different, he says.
And then there is the move to divest from coal that is getting more mainstream by the minute. Jeyaretnam agrees with recent commentary that said the divestment movement is one of the fastest and most spectacular in recent history.
“I think the train wreck might be closer than they think.”
The speed of change in big social movements is not unusual he says. Think of apartheid in South Africa and the US. “Most people didn’t see it coming.”
Behind the divestment movement, the key driver, he says, is not just the risk to assets from climate change and unburnable coal but like the apartheid movement, “doing the right thing”
Pretty simple and when you think about it, a very potent combination.
On the feral government and Bjorn Lomborg
Just when you thought this now feral government couldn’t get any worse or more embarrassing on climate change it spends $4 million bringing to Australia the arch duke of freakonomics-gone-wrong-on-climate, Bjorn Lomborg. This is the man who can’t get a gig in his home country Denmark and relies on mostly secret funding, at least some of which can be traced to fossil fuellers, such as the Koch brothers. See forensic analysis of this by Graham Readfern.
The news that this move has come from the prime minister himself, not the education minister Christopher Pyne, as first thought, is of not much surprise. But how Australian scientists and academic researchers must feel, to see this largesse to Lomborg and his deceptive conniving ideas, while they face an almost McCarthyist regime of terror, is hard to contemplate.
The University of Western Australia on which Lomborg has been foisted is now facing major brand damage. A current head of school at UWA openly questioned UWA’s decision. And you’d not be surprised if UWA credentials dropped off the CV of graduates, or came with an explanatory note that the degree was BL (before Lomborg).
So with a university scalp now tucked under his belt, will our PM go on to demand creationist teaching in schools, and will he start burning all the books on science and climate and throwing the heretics of his dogma in jail?
Nothing any longer surprises.