Last month GRESB announced that its management had purchased the business from its parent GBCI.
GRESB was established in 2009 as the Global Real Estate Sustainability Benchmark by three pension funds who wanted to assess and benchmark the Environmental, Social and Governance (ESG) and other related performance of real assets, providing standardized data to capital markets.
GBCI, the global certification body for LEED (.. yes, it is the sister organization to the USGBC), TRUE zero waste, PEER, SITES, WELL, EDGE, ICP and RELi, acquired GRESB in 2014.
While under the umbrella of GBCI, the Amsterdam based, previously privately owned, GRESB arguably grew to become a leading ESG benchmark for real estate across the world. GRESB data covers US $5.3 trillion (.. yes, “trillion” which is 1,000 times larger than a billion) in real estate and infrastructure value. Notably, 957 private real estate companies and funds, and 272 publicly traded companies and REITs participated in the 2020 GRESB real estate survey, representing more than 96,000 assets located in 64 countries. Results were released last month.
A criticism has been that GRESB assessment is weighted in favor of portfolios that contain new buildings and that GBCI would not correct for that because its interest were in more new LEED Platinum certified buildings. And, of course there is a cottage industry of ESG consultants who will draft the GRESB questionnaire responses to skew the score. Separating from GBCI will also allow more asset level reporting, versus portfolio level, which would directly compete with LEED building ratings.
The new GRESB Foundation will own and govern the GRESB Standards upon which the GRESB Assessments are based. The Foundation Board will be constituted from GRESB investor members and will be responsible for reviewing and approving the Standards to ensure they remain investor led.
GRESB BV, incorporated in the Netherlands, will be responsible for administering the GRESB Assessments, providing the benchmarks and promoting the GRESB Standards. GRESB BV will become a benefit corporation and seek B-Corp certification, with the aim of demonstrating the separateness of the two organizations and building accountability.
The price of the acquisition from GBCI was not announced, but was significant and financed by Summit Partners that has invested in more than 500 companies in technology, healthcare and other growth industries.
Apparently, negotiations went on for months after the GRESB founders demanded the buy from GBCI, hoping but failing to accomplish the deal for the GRESB tenth anniversary. When the deal was finally made public on November 16, 2020, asset managers in the know suggested the value of GRESB had grown exponentially with the results of the November 5 U.S. Presidential election. GRESB has been “a European thing” with its core mission of assessing ESG data having been “unAmerican” (.. GRESB does have some Canadian investor participation) including with the U.S. Department of Labor’s rule greatly limiting the use of ESG information by retirement plan fiduciaries, and the U.S. Securities and Exchange Commission very public scrutiny of ESG claims as not meeting a threshold of having a material effect, but rather as being “.. at odds with reality.” However, as I wrote in an August blog post, ESG Going the Way of the Dodo?,
“If President Trump is reelected, it appears more likely than not that ESG disclosures in the U.S. will be made extinct like the dodo bird, not unlike as the federal government banned the 100 watt Edison light bulb out of existence, but that course will all be certainly see a polar opposite reversal and ESG will be embraced in a Biden Administration.”
So, the change to a Democratic Administration in Washington DC and its green agenda for financial markets, will include a favorable view of ESG and an overwhelmingly welcoming market for GRESB not only in the EU, but if their Dutch owners can translate it, now in the new world.
ESG has to date relied most heavily on the “E” environmental, but in the U.S. given the last year of calls for social justice, governance will likely be a new emphasis, as evidenced by the new NASDAQ requirement that boards have at least one woman and one director that self identifies as an underrepresented minority or LGBTQ, and a question may be if GRESB can capitalize on that.
And lest you think there is not already a new and exploding market for ESG data in the U.S., the data that GRESB is the leader in and will no doubt move to take advantage of, in the little more than a month since the Presidential election, I have received more inquiries from public companies and their representatives about ESG than year to date before the November 5.
GRESB, separated from GBCI, will no doubt have an opportunity to thrive in the U.S. You should check out their website.