Investors and other stakeholders seek to confirm environmental, social, and governance responsibility from real estate partners. Building-level certifications are beneficial for individual properties, but how can a company prove its efforts over many assets? Portfolio-level ESG certifications fulfill this need.
The Importance of Portfolio-Level ESG Certifications
Certifications allow a business to proclaim its ESG rankings to others. A company can boast about its achievements and stand out from competitors.
Reputable institutions award these certifications to companies that display high standards in ESG. A representative reviews the procedures and processes and provides a score. Third-party certification offers a reliable yardstick to compare a business against others. A company can also gauge its progress across its portfolio.
5 Benefits of Portfolio-Level ESG Certifications
Portfolio-level ESG certifications provide five clear advantages.
1. Financial Returns
Following ESG guidelines enhances safety and reduces risks. Insurance premiums decrease due to the lower odds of accidents or injury.
Companies can also recover expenses for environmental initiatives. ESG reduces resource consumption, leading to lower utility bills. Technical failures decrease, meaning fewer repairs and replacements.
Building owners earn more from occupants who gladly pay for the increased security and safe environment. The resale value of assets is typically higher as well.
2. Contented Tenants
Portfolio success results from securing high-caliber tenants. Firms also need to ensure a high occupancy rate. Renters place a premium on properties that respect residents’ rights and care for the environment. Turnover will decrease as tenants see evidence from portfolio-level ESG certifications.
3. Improved Reputation
A strong portfolio boosts a company’s reputation among investors. Individual investors and firms are focusing on ESG in their decisions. They recognize that sustainable properties lead to long-term profits. A high-ranking portfolio brings positive attention and higher valuations.
A company also needs to protect its reputation with the public. Negative publicity over a lack of attention to ESG principles could also drive away high-value tenants and investors.
4. Engaged Employees
People want to work for principled companies. Additionally, employees appreciate working in a healthy environment. Applying ESG principles creates more engaged workers, and an environment that enhances wellness boosts productivity.
Governments worldwide demand compliance with environmental regulations. ESG certifications put companies in a better position to do business in another state or country.
Additionally, various companies have strict rules for partnering with organizations compatible with their ESG goals. Achieving certifications can prevent a business from missing out on a fruitful collaboration.
Portfolio-level ESG certifications offer insights that attract investors, employees, tenants, and partners. A company thus creates outstanding value for itself and others.
Important Portfolio-Level ESG Certifications
Different institutions provide reporting and frameworks at the portfolio level. One stands above the others in real estate: the GRESB.
The Global Real Estate Industry Benchmark score has become the most prominent of the ESG certifications for realty. This score has international recognition, allowing companies to demonstrate ESG performance anywhere.
This benchmark provides investors and managers with a simple way to evaluate ESG metrics. The focus on real estate ensures that measurements deal with issues relevant to the industry.
Relying on an internationally known third party permits objectivity and fair comparison. Also, the score is easy to understand, using a 100-point scale for measurement.
5 Other Certifications To Consider
The GRESB is becoming the clear bellwether among real estate portfolio-level ESG certifications. However, companies will encounter other credentials among investments, collaborations, mergers, and competition, including:
- CDP: The Carbon Disclosure Project is a nonprofit that assists companies in sharing their environmental impact. The organization has programs to reduce greenhouse gas emissions, reduce water consumption, and minimize other ecological risks.
- UNPRI: The United Nations Principles for Responsible Investment is a network of financial institutions. This group believes that ESG issues affect portfolio performance and identifies six principles for responsible investing.
- SASB: Since 2011, the Sustainability Accounting Standards Board has set standards for investors, lenders, and underwriters. Various companies use SASB standards in their financial filings and annual reports.
- GRI: The Global Reporting Initiative is another international group. The GRI Standards have become the most ubiquitous measure for reporting ESG and corporate social responsibility.
- TCFD: The Financial Stability Board formed the Task Force on Climate-Related Financial Disclosures in late 2015. The group provides recommendations on the ESG information companies supply to investors.
A real estate firm or investor often prefers the GRESB. However, understanding these other benchmarks helps with assessing other companies in the course of business.
Assistance for Portfolio-Level ESG Certifications
The effort to attain one of the recognized portfolio-level ESG certifications is worthwhile. However, busy professionals may not have the time to invest in researching and implementing the correct option. Discover workable solutions by contacting ESG Property Consultants.